The U.S. Department of Agriculture said Monday it plans to stave off possible sugar loan forfeitures by purchasing approximately 300,000 tons of sugar from the U.S. market.
While the move is expected to bolster sagging U.S. sugar prices for producers, it is unlikely to impact what consumers pay for sugar or sugar-containing products such as cookies and candy.
“It won’t mean a thing in terms of what people pay for sugar off the grocery shelf,” said Jack Roney, director of economics and policy analysis for the American Sugar Alliance.
Record-breaking yields of sugar crops and a global surplus have driven down U.S. sugar prices. When transportation costs for imported sugar are figured in, both domestic and foreign sugar are going for slightly less than 20 cents a pound.
Under the program, the USDA will spend roughly $38 million to buy 300,000 tons of sugar from U.S. sugar cane and sugar beet processors. U.S. sugar refiners which normally import some sugar from foreign countries will be given an import credit when they buy the domestic sugar from the government.
“Today’s actions are designed to manage the sugar program while minimizing federal sugar program expenditures,” the USDA said.
In a Federal Register notice, the USDA said that loan forfeitures could have cost taxpayers up to $320 million. Sugar farmers can take out federal loans to finance their crops, with the crop as collateral.
Roney said it is hoped that the initiative will move domestic sugar out from under loan and result in the importation of less foreign sugar and the export of more domestic sugar.
“We applaud any actions aimed at reducing the dangerously oversupplied market flooded by imported, subsidized Mexican sugar,”said Clewiston-based U.S. Sugar spokeswoman Judy Sanchez.
The value of the refined and raw sugar from cane grown in Palm Beach County in 2011/2012 crop year was approximately $900 million, said Arthur Kirstein, agricultural economist for the University of Florida/Palm Beach County.
“Under NAFTA Mexico has an open border on sugar imported into the U.S.,” said Kirstein. “Mexico alone will import into the U.S approximately the production of sugar in Florida.”
U.S. Sugar and Florida’s two other sugar companies produced 1.86 million tons in the season that wrapped up this spring. The others are Florida Crystals Corp. in West Palm Beach and the Sugar Cane Growers of Florida in Belle Glade.
The value of the most recent production has not been determined yet, but it is expected to be considerably lower than other recent years, Kirstein said.
Every country in the world subsidizes its sugar crop, and the U.S. sugar program is designed to help Florida and other U.S. farmers compete. The program exists to ensure a steady and balanced domestic sugar supply and to support jobs.