Rule implementing U.S. sugar purchases under OMB review
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Washington, April 8, 2013 - USDA appears to be readying itself to implement the Flexible Feedstocks Program (FFP) to sell surplus domestic sugar supplies to ethanol producers.
A rule to implement the FFP has been submitted by USDA to the White House Office of Information and Regulatory Affairs, which has 90 days to review the measure.
The program was authorized by the 2008 Farm Bill to help avoid forfeitures to the Commodity Credit Corporation. Never before used, the program authorizes USDA to purchase as much U.S.-produced sugar as necessary to maintain market prices above support levels, and then sell the excess sugar to bioenergy producers for processing into ethanol.
Analysts say sugar prices have declined by 30 percent over the past two years due to an abundant U.S. sugar supply, which producers say has been pressured by low-cost Mexican imports.
Agriculture Secretary Tom Vilsack said no decision has been made to implement the program, but suggested the action needed to be taken.
“We'll make that decision following a review of all circumstances,” the secretary told reporters Monday. “This is an issue obviously where we have a significant oversupply; issues that need to get resolved fairly quickly, like the oversupply and storage shortage we have in Louisiana.” He added that any action would be taken in a way as to “minimize the cost to taxpayers.”
The FFP has drawn fire from lawmakers who have charged the overarching U.S. sugar program authorized by the farm bill is providing operating loans to some in the industry that are causing the program to exceed cost projections.
EPA earlier this year set a volumetric requirement for 2013 of 2.75 billion gallons in advanced biofuels to be blended into the national transportation fuel supply as required by the federal Renewable Fuels Standard (RFS). Ethanol made from sugar is considered by EPA to be an “advanced” biofuel because its emission levels are 50 percent below their petroleum-based equivalent.
While U.S. biodiesel producers are expected to meet a fair share of that 2.75-billion-gallon requirement with nearly 1.3 billion gallons, EPA expects only 14 million gallons of cellulosic ethanol to be produced this year, far less than the 1 billion anticipated when the RFS was updated by the 2007 Energy Independence and Security Act (EISA).
The agency estimates that about 666 million gallons of sugar ethanol will need to be imported to meet the remainder of the advanced biofuel volume requirement for 2013. That amounts to more than 50 percent more than the 422 million gallons of sugar ethanol imported from Brazil in 2012, putting the Flexible Feedstocks Program into possible play.
February baseline estimates for farm programs submitted by the Congressional Budget Office show the FFP would require some $16 million in funding in fiscal 2016, increasing gradually to $35 million by 2023.
Sugar producers say implementing the program is necessary because of big crops and cheap imports from Mexico they say are allowed due to faulty language in the North American Free Trade Agreement. Sugar users, including candy manufacturers and others, oppose the program, arguing that it uses taxpayer money to prop up sugar prices that they must pass along to consumers.
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