U.S. sugar processors offer 377,000 tonnes of sugar to USDA for ethanol

(Reuters) – U.S. sugar processors have offered to sell nearly 377,000 tonnes of sugar to the U.S. Department of Agriculture (USDA) for its “sugar-for-ethanol program,” as the government makes a last-ditch effort to reduce an oversupply and boost domestic prices.

The USDA will offer the sugar to ethanol producers, aimed at averting mass forfeitures of sugar that was used as collateral for government-backed loans.

The six companies have offered raw cane and refined beet sugar located in storage facilities in Louisiana, Michigan, Colorado, Idaho, Oregon, Nebraska, Wyoming, Montana, Minnesota, Iowa, and North Dakota, according to a release posted on the USDA website on Friday.

The amount represents the bulk of the 490,000 tonnes of sugar that was used as collateral for $247.6 million worth of loans still outstanding. Those loan repayments are due in less than two weeks.

The companies offering to sell sugar include Alma Plantation, Cora Texas MFG Co, Michigan Sugar Co, Amalgamated Sugar Co, Western Sugar Cooperative, and U.S. Sugar Corp.

The Obama administration inaugurated a program in August to buy unwanted sugar and sell it at a loss to ethanol makers to produce more biofuels and mitigate a costly sugar surplus.

It was the first time the administration used the so-called Feedstock Flexibility Program, created under a 2008 law with the goal of making sugar into a biofuel feedstock such as in Brazil.

The latest effort comes hot on the heels of a fourth round of the re-export credit program announced earlier this week as the USDA tries to manage the country’s sugar balance sheet before the season ends on Sept. 30 and the final wave of loans come due.

As part of that scheme, the government has removed about 486,000 tonnes of imported sugar out of the market as refiners purchase domestic sugar in exchange for their credits to import the sweetener.

So far, those measures have been more successful at reducing excess supplies than the sugar-for-ethanol program, which failed to lure in buyers from the biofuel industry because of logistics concerns and a short timeframe in August.

This time around, the USDA has urged sugar processors and biofuels manufacturers to submit joint bid packages, hoping for better success if the two groups coordinate.

While the government would lose money on the sugar-for-ethanol program, it would be less expensive than the forfeiture of hundreds of millions of dollars of loans issued by the USDA to prop up domestic sugar prices.

Results are expected to be announced on Sept. 27, just ahead of the loan repayment deadline at the end of the month.