US says no immediate plan to buy sugar for ethanol sector

08 April 2013 21:18  [Source: ICIS news]

WASHINGTON (ICIS)--Federal agriculture officials on Monday denied that they plan high-volume purchases of surplus US sugar and to supply it at a loss to ethanol producers, saying they are considering a variety of measures to deal with record-low sugar prices.

A US Department of Agriculture (USDA) spokesman said that the department has asked the White House office of management and budget (OMB) to review a proposed rule that would allow USDA to select from a number of options to intervene in the sugar market.

Earlier press reports said that the department was waiting for White House approval to buy hundreds of thousands of tonnes of sugar in order to absorb some of the record-high sugar crop surplus and counter plummeting sugar prices.

According to the reports, USDA would then sell the surplus sugar to ethanol producers at less than market value in order to entice biofuel makers to take the deal.

US ethanol producers primarily use corn as their biofuel feedstock, although they apparently could convert some ethanol plants to use sugar instead.

Renewable Fuels Association (RFA) president Bob Dinneen said that “ethanol producers are always looking for new and different feedstocks, therefore sugar should be an available option”.

However, he added, switching from corn to sugar as a feedstock “will depend on the economics of production”.

But the USDA spokesman said that the department has no immediate plans to buy up sugar crops and sell surplus supplies at a loss.

“USDA has a number of options it may use to manage a surplus of sugar, including the Feedstock Flexibility Program that was established by the 2008 Farm Bill to dispose of surplus sugar during periods of weak sugar prices,” he said.

He said that the department has sent to OMB a proposal that includes all of those options “to ensure that all tools to manage a surplus of sugar are available should their use be necessary”.

The American Sugar Alliance (ASA), an industry trade group, said that a move by USDA to buy up some of the surplus sugar crop would make sense, even at a cost to taxpayers if the crops were sold at a loss to ethanol producers, because the alternative would be worse.

ASA said that the severely depressed US sugar prices could force many sugar producers to default on USDA crop loans, with resulting costs to taxpayers that some have estimated could be in the hundreds of millions of dollars.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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