USDA acquires sugar as industry groups differ on impact
September 05, 2013 | 10:39 PM
The Agriculture Department announced today it has “acquired” a preliminary estimate of 85,000 tons of sugar, while the American Sugar Alliance and the Coalition for Sugar Reform issued conflicting statements on the meaning of the announcement.
USDA said that “borrowers repaid their Commodity Credit Corporation (CCC) sugar loans with sugar collateral in lieu of cash as permitted by the sugar loan program.”
“The record U.S. sugar beet crop, the record U.S. and Mexican sugarcane crops, and surplus world sugar production have resulted in domestic prices falling more than 30 percent from a year ago, well below the sugar program support level,” USDA said.
It also noted that “the U.S. sugar program provides a safety net to support farmers when over-abundant crops severely reduce farm income,” and that the forfeitures “represent less than 1 percent of the 9 million tons of sugar expected to be produced in the U.S. in 2013.”
“Most CCC sugar loans mature at the end of September, presenting a substantial risk that borrowers will repay some of these loans with collateral instead of cash,” USDA pointed out. But it said it has attempted to mitigate the taxpayer risk by establishing domestic and non-organic import quotas at the minimum levels permitted by law, waiving the rules of the Refined Sugar Re-export Program to delay imports under that program, and using the Feedstock Flexibility Program to remove more than 7,100 short tons of sugar from the market which could have been forfeited at the end of August.
“A wave of unneeded, subsidized Mexican sugar has sent U.S. prices plummeting since 2010, and as a result, some sugar producers will be unable to repay government-backed operating loans with interest,” said the American Sugar Alliance, which represents cane and beet growers.
“It is unfortunate for America’s farmers and taxpayers that the United States has become a dumping ground for subsidized Mexican sugar, much of which is produced and owned by the Mexican government.”
ASA also noted that in taxpayer terms, “U.S. sugar policy remains, by far, the cheapest major commodity policy. It ran without taxpayer cost from 2002-2012 and has consistently come in well below Congressional Budget Office cost estimates.”
The association also said that current sugar prices are below the average price of the 1980s and that production costs have steadily risen, creating difficulties for U.S. producers, “who are among the most efficient in the world.”
The Coalition for Sugar Reform, which represents processors who want changes to U.S. sugar policy, said that the situation is “dire.” Even though the House and Senate have voted to extend the current sugar program “by narrow margins,” Congress should change the program as the farm bill moves forward, the coalition said.
Bloomberg has analyzed the developments from a market perspective.
USDA said that “borrowers repaid their Commodity Credit Corporation (CCC) sugar loans with sugar collateral in lieu of cash as permitted by the sugar loan program.”
“The record U.S. sugar beet crop, the record U.S. and Mexican sugarcane crops, and surplus world sugar production have resulted in domestic prices falling more than 30 percent from a year ago, well below the sugar program support level,” USDA said.
It also noted that “the U.S. sugar program provides a safety net to support farmers when over-abundant crops severely reduce farm income,” and that the forfeitures “represent less than 1 percent of the 9 million tons of sugar expected to be produced in the U.S. in 2013.”
“Most CCC sugar loans mature at the end of September, presenting a substantial risk that borrowers will repay some of these loans with collateral instead of cash,” USDA pointed out. But it said it has attempted to mitigate the taxpayer risk by establishing domestic and non-organic import quotas at the minimum levels permitted by law, waiving the rules of the Refined Sugar Re-export Program to delay imports under that program, and using the Feedstock Flexibility Program to remove more than 7,100 short tons of sugar from the market which could have been forfeited at the end of August.
“A wave of unneeded, subsidized Mexican sugar has sent U.S. prices plummeting since 2010, and as a result, some sugar producers will be unable to repay government-backed operating loans with interest,” said the American Sugar Alliance, which represents cane and beet growers.
“It is unfortunate for America’s farmers and taxpayers that the United States has become a dumping ground for subsidized Mexican sugar, much of which is produced and owned by the Mexican government.”
ASA also noted that in taxpayer terms, “U.S. sugar policy remains, by far, the cheapest major commodity policy. It ran without taxpayer cost from 2002-2012 and has consistently come in well below Congressional Budget Office cost estimates.”
The association also said that current sugar prices are below the average price of the 1980s and that production costs have steadily risen, creating difficulties for U.S. producers, “who are among the most efficient in the world.”
The Coalition for Sugar Reform, which represents processors who want changes to U.S. sugar policy, said that the situation is “dire.” Even though the House and Senate have voted to extend the current sugar program “by narrow margins,” Congress should change the program as the farm bill moves forward, the coalition said.
Bloomberg has analyzed the developments from a market perspective.
