USDA takes 80% loss in sugar sale to bioenergy producers

Source: Amanda Peterka, E&E reporter • Posted: Wednesday, October 2, 2013

The Agriculture Department purchased $65.9 million worth of sugar and sold it to biofuel producers for a $53.3 million loss in its second use of the federal sugar-to-ethanol program.

USDA said yesterday that it purchased the 136,026 short tons of refined beet sugar in September through a competitive bidding process under the Feedstock Flexibility Program, a 2008 initiative meant to help boost falling sugar prices. The department’s Commodity Credit Corp. immediately sold the sugar to bioenergy producers for $12.6 million.

The sale represents a loss of more than 80 percent for the government.

Under the broader federal sugar program put in place under the 2008 farm bill, 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 CCC when the sugar harvest begins and requires them to pay it back in full or forfeit their sugar as collateral to the government.

The CCC is required by law to operate the sugar program at no cost to the federal government whenever possible. But falling sugar prices this year led sugar producers to be in danger of loan forfeiture for months.

USDA, which ceased most of its functions at midnight because of the government shutdown, did not say how much in loan forfeitures it avoided by purchasing the sugar through Feedstock Flexibility.

In the first use of the program in the month of August, USDA purchased $3.6 million worth of sugar and sold it to a single bioenergy producer for $900,000 (Greenwire, Sept. 3).

The Coalition for Sugar Reform, a group of beverage makers, candy manufacturers and other sugar users, yesterday slammed the latest use of the program.

“American taxpayers cannot afford to continue bailing out the already profitable sugar industry,” the coalition said. “Reform is needed as soon as possible this year.”