USDA Expects Domestic Sugar Stockpiles to Reach Record in 2014

September 13th, 2013

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Category: Sugar

(The Wall Street Journal) – The U.S. government is expecting a record amount of domestic sugar to be left over at the end of next season, after it spent millions of dollars to try to stem a glut of the sweetener this year.

U.S. sugar stockpiles are likely to reach 2.333 million short tons when the 2013-14 season ends next September, the U.S. Department of Agriculture said Thursday, pointing to higher domestic production. According to figures from the agency, the amount of sugar left over would be a record.

Sugar prices have dropped 20% this year as high U.S. production and record tariff-free imports of the sweetener have weighed on prices.

The sagging prices sparked a wave of defaults on federal sugar loans, the first since 2005, putting the spotlight on the U.S. government’s sugar program, which requires it to guarantee domestic processors a minimum price through loans and import restrictions.

Last month, the USDA also made the first use of a sugar-to-ethanol program from the 2008 farm bill, which requires the agency to buy the sweetener and sell it to domestic ethanol producers if the USDA believes U.S. sugar processors might default on their operating loans. It bought sugar from a domestic processor and sold it to an ethanol producer at a loss of $2.7 million in an effort to stave off defaults on federal loans.

But U.S. sugar processors defaulted on some outstanding federal loans that were due in August and have forfeited about 85,000 tons of sugar to the USDA.

The outlook for supplies of the sweetener next year could mean more USDA intervention, analysts say.

“It’s going to force them to … absorb more sugar,” said Michael McDougall, a senior vice president at brokerage Newedge. “The situation is burdensome now. I definitely think the USDA has to act quickly.”

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