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Dairy Facts 2016
 
 

USDA Moves Closer to Costly Sugar Bailout

Jul 31, 2013

The U.S. Department of Agriculture’s Farm Service Agency published its final rule on the Feedstock Flexibility Program (FFP) on Monday. Congress created the FFP in the 2008 Farm Bill, allowing the government to purchase excess sugar and sell it for ethanol production as a way to help sugar processors avoid forfeiting on short-term loans from USDA’s Commodity Credit Corporation (CCC).

Federal law allows sugar processors to obtain loans from the CCC with maturities of up to nine months when the sugarcane or sugar beet harvest begins. When the loan matures, the sugar processor may repay in full or forfeit the sugar they pledged as collateral to the government to satisfy the loan. Although sugar forfeitures haven’t happened since 2004, atypical market conditions have forced USDA to take a number of actions this crop year to manage the sugar supply. If needed, the Feedstock Flexibility Plan will be used as an additional tool to manage the domestic surplus.

The loan bailout, however, could cost the federal government $80 million to $100 million.

“This potential cost to the taxpayer undercuts the argument that the sugar program operates at no net cost to the federal government,” said Clay Hough, IDFA senior group vice president.

IDFA remains opposed to the U.S. sugar program because it manipulates sugar supplies, creating unnecessary instability in sugar markets. The program also leads to higher costs for processors and increased prices for consumers and represents unnecessary and inefficient governmental intrusion into private sector buying, selling and importing decisions.

Also on Monday, USDA announced plans to hold a second sugar purchase and exchange for re-export program credits. This program allows USDA to purchase sugar from domestic sugarcane processors and exchange it for credits offered by refiners holding licenses under the Refined Sugar Re-export Program.

For more information, contact Hough at chough@idfa.org.

 

 
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