Sugar Market Update: No Feedstock Flexibility Program for 2010; TRQ Increase Unlikely 
The U.S. Department of Agriculture announced in a recent press release that there will be no sugar-for-ethanol program in FY 2010, which begins October 1, 2009. Also known as the feedstock-flexibility program (FPP), the sugar-for-ethanol program would be used to balance the domestic sugar market when sugar production outweighed sugar consumption.

For IDFA members that manufacture ice cream and flavored milk products, the FPP meant that government surplus purchases would be re-sold at a loss to ethanol plants, making the sugar market increasingly tight when the stocks-to-use ratio is already low. (See previous News Update story, "IDFA Joins Coalition Urging USDA to Address Sugar Shortage.") In addition to putting dangerous pressure on the market, the FPP strains an already overstretched federal budget.

"IDFA is encouraged by USDA's exclusion of the FPP for fiscal year 2010, and we hope that similar programs will be avoided in the future," said Clay Hough, IDFA senior group vice president, who also serves as treasurer of the Sweetener Users Association.

USDA Undersecretary Jim Miller addressed the issue of sugar supplies at an American Sugar Alliance meeting in early August, saying USDA is unlikely to increase the refined sugar tariff rate quota (TRQ) in this marketing year. IDFA has consistently worked with the Sweetener Users Association to advocate increasing the sugar TRQ, since the stocks-to-use ratio for sugar is at its lowest point in several decades. Without an increase in supply, IDFA sugar-users run the risk of increased production costs, which could mean higher consumer costs and potential job losses.

IDFA Co-Signs Letter with Implications for Agricultural Exports to China
A highly politicized trade case soon will force the Obama administration to make its trade policy intentions public.

The United Steelworkers recently filed a complaint with the International Trade Commission, blaming Chinese tire exports for the loss of more than 5,000 American jobs. In response, the ITC recommended imposing three years of step-down tariffs on the Chinese exports as reparation. Because the group has no authority to implement the plan, the recommendation was sent to President Obama for review and action.

The president has until September 17 to either agree or disagree with the ITC decision. If he agrees, the United States would impose a 55 percent tariff on Chinese tire imports during the first year, 45 percent during the second year and 35 percent during the third.

Although this trade issue deals with Chinese tire imports, it is important for other industries, including dairy. Already, pork and soybeans have been mentioned as candidates for retaliatory measures, meaning that any U.S. agricultural product exported to China is vulnerable. During the first six months of 2009 alone, the United States exported $61 million worth of dairy products to China, and the Pacific Rim is one of the industry's key target regions.

IDFA and others believe that implementing the increases would make the United States appear protectionist and make U.S. exports vulnerable to retaliation. This week, IDFA signed onto an industry-wide letter, urging the president to consider the ramifications of agreeing with the ITC and warning against the dangers of protectionist trade policies.