The government announced plans Thursday to sell 100,000 tons of surplus sugar for refining into ethanol, an oxygen-boosting gasoline additive normally made from corn.

The Agriculture Department is holding nearly 747,000 tons of sugar that was forfeited by producers last year under a program that supports sugar prices.

Storage for the sugar is costing taxpayers $16.5 million a year.

"Efficient management of the program requires that we try to do something with those crops," said J.B. Penn, USDA's undersecretary for farm and foreign agricultural services.

The planned sale is small enough to keep from reducing corn prices, said Penn said.

The surplus sugar cost the government about 20 cents per pound. Ethanol producers are not expected to pay more than a third of that price.

Last year, the department gave 277,000 tons of surplus sugar to farmers who agreed to destroy some of their crops. USDA may do that again this year, Penn said.

USDA also is stuck with a huge surplus of nonfat dry milk, a food ingredient, that has been sold to the government under a program for supporting milk prices. The department said it would cut the price it pays for the dairy product by 10 cents a pound to encourage processors to sell it overseas instead of dumping it on the government.

The department is holding more than 700 million pounds of the product, roughly the nation's annual consumption.

"We expect (government) purchases to decrease pretty substantially. That's a big step in the right direction," Penn said.

The action is likely to cut farmers' income slightly. However, farmers are getting sharply higher prices for milk this year, about $15 per hundred pounds, compared with $12.33 a year ago, said Larry Salathe, a department economist. Milk sales this year are still likely to exceed the previous record of $24.1 billion.

------

On the Net:

USDA: http://www.usda.gov