"We're paying storage on a lot of sugar, and also need to make room for the next crop," says George Aldaya, director of the Kansas City Commodity Office of USDA's Farm Service Agency.

USDA sold 7,522.5 tons of sugar Aug. 1 of the 100,000 offered. Two companies were buyers, with Simplot Development Corp. in Idaho taking 7,500 tons and International Ingredient Corp. in Texas getting the rest.

No swaps

More sugar could have been sold two weeks ago if swaps for liquid sugar were allowed, industry members say.

"Some ethanol producers would prefer pre-refined liquid sugar, which is cheaper for them to incorporate in their processing," says Trevor Guthmiller, director of the American Coalition for Ethanol in Sioux Falls, S.D. "But we understand that USDA has refined sugar on hand that it wants to get rid of."

Ethanol producers have asked USDA for a system in which sugar processors can buy refined sugar in CCC auctions and then swap it for liquid sugar for ethanol companies. Ethanol firms would provide certificates vouching for their sugar use.

USDA probably decided to make its second auction for refined sugar, like the first one, for the sake of expediency, industry members say. The U.S. sugar season ends Sept. 30, and the government expects to hold 740,000 short tons in storage at that time.

CCC sugar-for-ethanol sales stemmed from research done by U.S. ethanol producers last year, and "have sparked a lot of interest" here and overseas, Guthmiller says.

In Mexico, officials and companies are considering a sugar-for-ethanol program to address the nation's sugar surplus and growing demand for energy. Brazil, the top sugar exporter, has pursued such a program for years, especially in times of surplus sugar.

In other initiatives, USDA offered sugar to processors for delivery to prisons this month and sold sugar in sucrose swaps for cranberry producers in June.