Government Buys More Domestic Sugar

USDA Intervenes Second Time in a Month in Market

(The Wall Street Journal) – The U.S. Department of Agriculture bought sugar from domestic sugar-cane growers in the government’s second intervention in the market this month.

The USDA paid $6.87 million for the sugar Tuesday, according to a notice posted on its web site Wednesday. It then exchanged the sugar with domestic refiners for import credits.

The purchase was about a third of what the agency had said it would spend. The USDA said last week that it planned to buy $18.7 million worth of domestic sugar Tuesday, after purchasing $43.8 million worth earlier this month.

The move is the latest in a series to stave off a potential wave of defaults on $466 million in outstanding federal loans to U.S. sugar processors that begin to come due Thursday.

Falling sugar prices have complicated the USDA’s efforts to keep the sugar program—a collection of loans, price supports and import restrictions—from imposing a burden on taxpayers. If sugar processors default on their loans, they will pay the government back with tons of the sweetener instead of cash.

The goal of this month’s purchases is to reduce domestic sugar supplies and thereby boost prices.

Domestic-raw sugar for September delivery on the ICE Futures U.S. exchange ended 0.2% higher Wednesday at 20.13 cents a pound, a more than three-month high. Futures have rallied 4.3% since the USDA announced its intentions for the second sugar purchase on July 23.

Nevertheless, domestic raw-sugar prices on ICE are down 10% this year and below the USDA’s estimated threshold for loan forfeitures, which is 20.9 cents a pound.

The 15,504 metric tons of sugar the USDA bought Tuesday were exchanged for import credits worth 46,559 tons. The 91,238 tons of sugar purchased earlier this month was exchanged for import credits worth 299,153 tons.