Governors' Biofuels Coalition

The Agriculture Department yesterday invited producers to sell their sugar to the federal government as part of a program that authorizes the government to turn around and sell it to ethanol producers.

USDA is using the Feedstock Flexibility Program for the first time since its creation in 2008 to combat sugar prices that have fallen more than 10 percent in the last six months. The department is soliciting bids for the program through its Commodity Credit Corp., which will sell any of the sugar gained through the program in a competitive process to both U.S. and foreign biofuel producers.

In its announcement yesterday afternoon, USDA said it has been forced to use the program because of “atypical market conditions.” It is one of several initiatives this year that the department has put into place through a broader federal support program to boost the domestic sugar industry.

Under the sugar program created by the 2008 farm bill, which has many foes on Capitol Hill, the Commodity Credit Corp. is required to maintain a domestic supply of sugar that keeps prices at or above specific levels. The program allows sugar processors to borrow from the Commodity Credit Corp. when the sugar harvest begins and requires them to pay the money back in full or forfeit their sugar as collateral to the government.

The Commodity Credit Corp. is required by law to operate the program at no cost to the federal government wherever possible. Falling sugar prices this year, though, mean sugar producers are in danger of loan forfeiture for the first time since 2004.

USDA in late July said it would roll out the Feedstock Flexibility Program until prices are brought back to a target level (Greenwire, July 26). In a May report, the Congressional Budget Office projected that using the program would cost $51 million this fiscal year and nearly $240 million over the next 10 years.

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