USDA mulls use of sugar-purchase program

Source: Amanda Peterka, E&E reporter • Posted: Wednesday, April 10, 2013

The Agriculture Department may use a little-known farm bill program to buy up sugar from the market and sell it to ethanol producers.

Agriculture officials late last week sent a rule to the White House that would set into motion the program, which was created in 2008 but has never been used. Low sugar prices appear to have prompted the agency to take steps to help out sugar producers.

U.S. sugar prices have dropped about 10 percent since September 2012 because of an oversupply in the market, according to commodity price indexes.

Under the Feedstock Flexibility Program, a complex mechanism that is part of the larger federal sugar-support program, USDA would buy up extra sugar in the market until prices reach a target level. The department would then sell that sugar to U.S. ethanol producers that could use the feedstock to qualify for advanced biofuel targets under the renewable fuel standard.

Since it has never been used before, it’s unclear what effects the program would have on the market. Just a handful of companies in the United States, though, are exploring sugar cane ethanol production. The bulk of sugar cane ethanol used in the United States has been imported from Brazil (see related story).

The federal sugar program in general has been criticized over the years by sugar end-users who argue that it artificially boosts the sugar industry. Sen. Jeanne Shaheen (D-N.H.) has led several attempts to pass legislation repealing the sugar program, including a recent failed attempt to include it as an amendment in the Senate budget resolution.

According to AgriPulse, a publication based in Washington, D.C., Agriculture Secretary Tom Vilsack told reporters at an event yesterday that the department has not yet made a decision on whether to use the feedstock program.

“We’ll make that decision following a review of all circumstances,” he said. “This is an issue obviously where we have a significant oversupply; issues that need to get resolved fairly quickly, like the oversupply and storage shortage we have in Louisiana.”