WASHINGTON -- Slumping sugar prices cost U.S. taxpayers $53.3 million last week as the government was forced to buy more than 272 million pounds of refined beet sugar and sell it at a huge loss to biofuel producers.
By law, sugar companies may repay government loans with sugar instead of cash if prices fall below certain levels. The government, meanwhile, can cut taxpayers’ losses by buying and selling as much sugar as possible for ethanol rather than paying the costs of storage and disposal.
Among sugar processors owing large amounts to the government is American Crystal Sugar. The 4,000-member sugar beet cooperative on the border of Minnesota and North Dakota had borrowed $71,790,000, offering 300 million pounds of beet sugar as collateral. Minnesota is the nation’s largest beet sugar producing state.
Asked whether American Crystal intended to forfeit sugar in lieu of paying its loans, co-op lobbyist Kevin Price declined to comment.
The beet sugar loans and biofuel sales are part of the nation’s complicated and controversial sugar price support system. That system guarantees revenues to sugar producers by limiting imports, fixing prices and allowing forfeitures of sugar to pay off loans in depressed markets.
In the purchase announced lastMonday, the U.S. Department of Agriculture bought 272 million pounds of refined beet sugar “for approximately $65.9 million, then immediately resold that sugar to bioenergy producers for approximately $12.6 million,” the USDA reported.
It was the second time this year that the government has had to head off unwanted sugar inventories by using the sugar-to-biofuel program. But Monday’s loss was huge in comparison to an earlier, smaller purchase that led to a loss of less than $3 million.
Including another USDA sugar buyout initiative, overall losses to taxpayers due to the U.S. sugar program seem likely to top $100 million in 2013.
Kurt Wickstrom, CEO of the Minn-Dak Farmers Cooperative of sugar beet growers in Minnesota and the Dakotas, blamed increased exports of Mexican sugar into the United States under the North American Free Trade Agreement for driving down sugar prices. Mexico “has been exporting record levels of sugar into the U.S.,” Wickstrom said.
U.S. beet producers had a good crop last year, and so did Mexican producers, leaving a lot of sugar on the market. Another good beet sugar crop appears in the offing in Mexico, which could reduce prices even more.
The government put in place the sugar-to-biofuel program to soften the blow of market crashes to taxpayers. But Monday’s loss is sure to reignite a congressional debate about the usefulness of the sugar program, which dates to the 1930s and leaves American consumers paying much more than the world market price for sugar.
Contact Star Tribune reporters at email@example.com and firstname.lastname@example.org. Distributed by Scripps Howard News Service, www.shns.com.