USDA asks White House to approve plan for government to boost sugar prices by buying excess inventory, selling it to ethanol plants; prices for domestic sugar down 37% in past year as stockpiles climb to highest level in a decade

Nevin Barich

WASHINGTON , April 9, 2013 (Bloomberg LP) – The U.S. Department of Agriculture has asked the White House to approve a plan for the government to boost sugar prices by buying excess inventory and selling it to ethanol plants.

Agriculture Secretary Tom Vilsack said no decision has been made on the plan, which the agency said went to President Barack Obama’s budget office last week. Prices for domestic sugar fell 37 percent in the past year as stockpiles climbed to the highest level in a decade. The surplus may trigger federal purchases under an unused program created in a 2008 agriculture bill. Sugar-to-ethanol is one of several options the government is weighing to steady prices, Vilsack said.

“We will make a decision following a review of all circumstances,” Vilsack told reporters today at a conference in Washington.

The USDA will update its sugar-supply forecast on April 10. The White House budget office has 90 days to review any proposed regulations. The department is required to manage sugar supplies under federal law. Use in biofuels is one tool that can help prop up prices that are near levels that would require the government to buy excess inventories.

The department would need to purchase 534,000 short tons (484,000 metric tons), or 5.8 percent of this year’s estimated production, to reduce the surplus to the government’s desired level, according to Frank Jenkins, president of Jenkins Sugar Group in Wilton, Connecticut, the largest broker of U.S. sugar.

--With assistance from Marvin Perez in New York. Editors: Steve Geimann, Ted Bunker

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.