Kent Politsch (202) 720-7163
WASHINGTON, Aug. 30, 2013 - The U.S. Department of Agriculture's Commodity Credit Corporation (CCC) today announced the results of the August 2013 Feedstock Flexibility Program (FFP) action; revised fiscal year (FY) 2013 sugar marketing allotments (by sector) and allocations (to companies); initial FY 2014 marketing allotments and allocations; and the first projection for the FY 2014 FFP.
FY 2013 Feedstock Flexibility Program Actions
The Commodity Credit Corporation’s (CCC’s) first use of the FFP drew some interest from bioenergy companies in using sugar to produce ethanol. The FFP authorizes the Secretary of Agriculture to purchase sugar for bioenergy production to avoid the forfeiture of sugar pledged as collateral by processors who borrow from CCC. CCC is required to operate the sugar program at no cost, to the extent practicable, by avoiding forfeitures.
Sugar mill interest was encouraging. Still, transportation, volume of sugar feedstock and other concerns appear to have limited bioenergy company participation. USDA expects greater participation in FFP as these concerns are addressed.
In this first bidding process, CCC purchased 7,118 short tons of refined beet sugar for approximately $3.6 million, which cost CCC the same amount as if that sugar had been forfeited at the end of August. CCC then re-sold those tons to a bioenergy producer for approximately $0.9 million, resulting in a net expenditure to CCC of $2.7 million. The sugar that CCC purchased required the repayment of CCC’s sugar loans, preventing forfeitures of loan collateral. CCC is evaluating options to avoid September forfeitures. To comply with the sequestration order that is currently in place, the amount of sugar purchased for the Feedstock Flexibility Program was reduced by 5.1 percent below the amount that was offered.
Reassignment of FY 2013 Sugar Marketing Allotments and Allocations
The domestic sugar sector cannot fulfill the 85 percent market share allotted to it for FY 2013. The cane sugar sector will not be able to fulfill its allotment, unlike the sugar beet sector. As a result, CCC reassigned some of the FY 2013 cane sugar surplus allotment to a Louisiana cane processor and the remainder to FY 2013 imports, as required by law. Because the market is oversupplied, this marketing allotment reassignment is only to imports that are already expected to enter the U.S. (see table for details).
Initial FY 2014 Sugar Marketing Allotments and Allocations
The CCC also announced the initial FY 2014 overall sugar marketing allotment (OAQ), which is established at 9,843,000 short tons, raw value (STRV) at the minimum level required by law. The OAQ is equal to 85 percent of the estimated human consumption for the crop year of 11,580,000 STRV as forecast in the August 2013 World Agricultural Supply and Demand Estimates report (WASDE). Statute requires that a fixed portion of the OAQ be allotted to the beet sector and the cane sector. CCC allocated the FY 2014 beet sugar allotment of 5,349,671 STRV (54.35 percent of the OAQ) among sugar beet processors and the cane sugar allotment of 4,493,330 STRV (45.65 percent of the OAQ) among sugarcane states and processors (see table for details).
CCC determined that farm level proportionate shares were not necessary in Louisiana in FY 2014, the only state eligible for proportionate shares, because the cane sugar sector was not expected to fulfill its allotment. Proportionate shares refer to sugarcane harvested acreage limitations that are required when Louisiana’s sugar supply is greater than its allotment.
FY 2014 Feedstock Flexibility Program
At this time, CCC determined that it does not expect to purchase sugar using the FFP authority in FY 2014 because sugar market forecasts indicate that the domestic sugar surplus will be less in FY 2014 than in FY 2013. CCC actions in FY 2013 will reduce FY 2014 sugar stocks and help eliminate the potential for forfeitures in FY 2014.
USDA will closely monitor stocks, consumption, imports and all sugar market and program variables on an ongoing basis. USDA will continue to administer the sugar program as transparently as possible using the latest available data.
1/ CCC determined in 2004 that Puerto Rican processors permanently terminated operations because no sugar had been processed for two complete years. The Puerto Rico allocation of 6,356 STRV is reassigned to the State of Hawaii and then further reassigned to the mainland sugarcane-producing states, because Hawaii is not expected to use all of its cane sugar allotment. CCC has determined that a Hawaiian cane processor, Gay and Robinson Inc. permanently terminated operations because it had not processed sugarcane for two consecutive crop years. The Gay and Robinson, Inc. allocation of 73,145 STRV is reassigned to the State of Hawaii and then further reassigned to the mainland sugarcane-producing states, because Hawaii is not expected to use all of its cane sugar allotment.
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