Department officials said the sale, which will have a 10,000-ton-per-purchaser limit, will help to improve the domestic sugar market, to manage the government-owned sugar inventory and to help meet the nation’s energy needs.
The Department believes ethanol producers can absorb this sugar without negative impacts on the domestic corn market. Reducing USDA’s inventory also will alleviate a shortage of storage for refined sugar that exists in some areas.
USDA also will tender 20,000 tons of raw cane sugar for direct sale whenever the #14 contract price equals or exceeds 22 cents per pound, and 20,000 tons of refined sugar whenever the market price equals or exceeds 25.25 cents per pound, Midwest. USDA expects eventually to market a portion of the inventory at prices that maximize returns while not oversupplying the domestic sugar market. These sales will assist in the refined sugar price discovery process.
USDA spends about $16.5 million annually to store surplus sugar. Currently, USDA holds 746,814 tons of sugar — equivalent to 9 percent of annual sugar production. USDA implemented a PIK Diversion Program in fiscal year 2000, which gave farmers the option of diverting part of their sugar beet acreage from production in exchange for USDA-held sugar. Last year’s payment-in-kind program diverted about 102,000 acres from beet production and reduced USDA’s refined sugar inventory by 277,678 tons.