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WASHINGTON - More than $17 million in government loans to Florida
processors came due Thursday, but the two processors that hold those
loans cannot honor them.
Instead, the government will take ownership of 47,000 tons of raw
sugar in Florida warehouses today as collateral for the defaults.
Until the U.S. Department of Agriculture decides what to do with
the sugar, it will begin paying the processors a total of about
$75,000 a month in storage fees.
The Sugar Cane Growers Cooperative of Florida, based in Belle
Glade, will turn over 11,000 tons of sugar, worth almost $4 million.
Florida Crystals, based in Palm Beach, will forfeit 36,000 tons of
sugar worth $13 million.
The state's third major processor, U.S. Sugar Corp. in Clewiston,
holds more than $30 million worth of government loans on 90,000 tons
of sugar, but the loans are not due until next month. U.S. Sugar
officials predict they will probably forfeit that sugar to the
government as well if prices remain low.
"What is going to happen tonight is what we predicted six
months ago," said Dalton Yancy, a Washington lobbyist for
processors.
In May, the USDA made the controversial step of purchasing
132,000 tons of sugar for $54 million in an effort to restrict
supply and boost prices. The sugar industry had asked the USDA to
buy at least 370,000 tons.
Nevertheless, Agriculture Secretary Dan Glickman said at the time
that the purchase would avoid the forfeitures that are happening
now.
"By buying U.S. sugar now, we expect to save as much as $6
million in administrative costs that the government might otherwise
incur" through loan defaults, Glickman said on May 12.
Administrative costs include storage fee payments, which the
government begins paying today.
"They didn't buy enough," Yancy said. "They were
licking an ice cube when the market was thirsty."
A USDA spokeswoman could not comment on the situation Thursday
night because the agency has not yet decided what it will do with
the new sugar. It has already outlined a plan to help sugar beet
growers, however, by offering incentives for them to plow under
their surplus crops.
In exchange, the USDA will offer each grower up to $20,000 in
sugar to sell from the supply it already purchased this summer.
Industry officials predict the department will do the same thing
with the forfeited sugar.
Processors described the situation as a last resort, since market
prices have fallen below the cost of production. They hope the deal
with the sugar beet growers will further reduce supply and boost
prices in coming months.
"Despite our best efforts to cope with these market
conditions, we have reluctantly decided that we're going to have to
surrender title (to the sugar)," said Jorge Domenicis,
spokesman for Florida Crystals. "I think there's really a farm
crisis throughout America."
Judy Sanchez, a spokeswoman for U.S. Sugar, said she just read
USDA bulletins saying the government is also purchasing $36 million
worth of canned peaches and $36 million worth of processed tomato
products.
"This is a nationwide farming crisis that all of these
commodities are going through," she said. "We hope the
(sugar beet) program will help."
Thursday's forfeitures are the result of a special program where
processors' liability on loan defaults is limited.
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