| What's going to happen to the mountain of sugar the federal
government owns?
No one knows.
That's because the government hasn't decided what to do with most of
the 1.1 million tons growers forfeited this fall to satisfy federal loans.
"The biggest uncertainty in the industry is what is the USDA going
to do with the surplus?" said Daniel Colacicco, a policy analyst with
the U.S. Department of Agriculture.
Sugar industry lobbyists favor using the sugar to produce ethanol, a
gasoline additive. Jack Roney, the American Sugar Alliance's economic and
policy analysis director in Washington, views ethanol as the best
long-term solution to sugar surpluses.
Brazil, where ethanol is used not just as an octane enhancer and
additive capable of reducing air pollution but as a fuel itself, has been
using sugar to make ethanol for years.
The South American nation produces 4 billion gallons of fuel ethanol a
year, according to the Renewable Fuels Association in Washington.
U.S. ethanol production is 1.8 billion gallons a year, with
ethanol-blended fuels representing more than 12 percent of U.S. gasoline
sales.
Ethanol has been touted as a possible replacement for MTBE, a gasoline
additive that is being banned after leaking from underground containers
and polluting ground water.
"The chances are pretty good that the government will decide that
MTBE should be replaced with ethanol," Roney said.
Although increased ethanol use does not mean sugar will be needed to
produce it, Roney said it would make sense if the government chooses a
nonfood use for the surplus.
The USDA became the owner of 1.1 million tons of sugar because of sugar
producers' forfeitures this fall. The companies, including South Florida
sugar cane and Midwestern beet sugar producers, chose forfeiture as a last
resort because sugar was selling below 20 cents a pound.
This week, it has been selling at about 20.6 cents a pound.
Since the forfeitures, the sugar mountain is down to a mere 790,000
tons.
The feds gave nearly one-third of the pile to sugar beet farmers who
volunteered to plow under their crops.
Last week, the USDA announced that the farmers had destroyed about 7
percent of this year's sugar crop. In return, the 5,000 farmers received
title to some surplus sugar the government is holding.
More than 308,000 tons of the surplus sugar, valued at $110 million,
was produced in South Florida's Glades region by U.S. Sugar Corp., Florida
Crystals and the Sugar Cane Growers Cooperative of Florida.
None of the Florida sugar went to the beet farmers.
The glut was caused by production that has increased faster than
consumption, as well as foreign imports, Colacicco said.
Aside from ethanol, options include donating the sugar overseas or
including the sugar among products the United States donates to foreign
countries.
Holding it until prices rise, then selling it back into the market, is
another alternative, Colacicco said.
The government stored forfeited sugar for as long as five years in the
1970s.
Sugar industry lobbyists and officials oppose selling the surplus on
the domestic market, saying that will just cause prices to be depressed
again.
"The best thing for sugar farmers is for the U.S. government not
to dump that sugar back into the marketplace," said Judy Sanchez, a
spokeswoman for Clewiston-based U.S. Sugar Corp. "Even though prices
have inched back up above 20 cents, there is little demand at that price.
"If they put that sugar up for sale, the price plummets back to
the terrible teens."
Dalton Yancey, executive vice president of the Florida Sugar Cane
League in Washington, which represents U.S. Sugar and Palm Beach-based
Florida Crystals, said the government signaled it would not sell the sugar
back into a depressed market.
Yancey agreed using the sugar in ethanol is a possibility, and said the
USDA is considering a pilot program that would use 100,000 tons of sugar
in a corn mill geared for ethanol production.
Meanwhile, the cost of storing the sugar mounts. Nationwide, the
government is paying $1.27 million a month to sugar growers to store the
surplus. That alone should make officials want to act quickly.
But don't count on it, says John Frydenlund, an agricultural policy
analyst for Washington-based Citizens Against Government Waste, a
nonprofit organization.
"Who knows what they will do with it?" Frydenlund said.
"This is evidence we should get rid of the sugar program completely.
It's another example of government run amok." |