Sugar Program: The Safety Net of Forfeitures

September 5, 2013 11:14 AM
 

via a special arrangement with Informa Economics, Inc.

First time since 2003 crop year for loan forfeitures


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


The U.S. sugar industry is now seeing how a safety net works on the downside, rather than the price-stabilizing if not price-boosting sugar import quota system.

U.S. sugar processors forfeited to USDA some 85,000 tons of sugar that was pledged as collateral for loans rather than repay the loans, the agency said today.

The loans represented about $35 million worth of sugar and had been expected by some to happen given the current sugar market situation.

"The record U.S. sugar beet crop, the record U.S. and Mexican sugar cane 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. Prices have actually fallen closer to 50 percent.


Comments: This marks the first time since the 2003 crop year that sugar processors have forfeited sugar to the government rather than repaying their loans. It also shows that USDA started too late and was not aggressive enough in thwarting forfeitures. Also, USDA waited about two months longer than they should have to begin the sugar-for-ethanol program. When I asked a USDA contact about this, the source said, "The rules weren't written in time." But USDA had since the 2008 Farm BIll to write and announce those rules. "We didn't think they would be needed," was the response from USDA. That errant assumption is costing taxpayers million of dollars now, and likely millions more later.


 

 

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


 


 

 

 

 

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