(The Wall Street Journal) – The U.S. government said Monday that it intends to buy sugar on the domestic market as prices for the sweetener continue to hover near a four-year low, putting processors at risk of defaulting on federal loans.
Under the plan, the U.S. Department of Agriculture would purchase the sweetener from sugar-cane and sugar-beet processors and sell it to sugar refiners at an estimated cost to the government of $38 million.
The agency said the action could remove 300,000 tons of sugar from the U.S. market, which could boost prices and help avoid forfeitures by processors on government loans. If a processor defaults, it pays the government back with sugar put up as collateral for the loan.
The USDA said it would continue to monitor the surplus situation and determine if additional actions are necessary to prevent forfeitures.
Raw-sugar futures prices are down 14% and domestic sugar prices are down 18% this year on the ICE Futures U.S. exchange. U.S. sugar prices recently traded at 19.35 cents a pound on ICE.
