WASHINGTON (Reuters) — Sugar processors and biofuels makers “are strongly encouraged” to submit joint bids to divert surplus sugar into the renewable fuels market, the U.S. government said in its latest attempt to avoid the highest sugar subsidy costs in a decade.
The Agriculture Department said it will announce results of its sugar-for-ethanol initiative on Sept. 27, days before it faces potential losses of $258.7 million in the sugar program on top of $34.6 million earlier this month.
Under the so-called Feedstock Flexibility Program, USDA solicited offers from processors to sell sugar to the government, which would sell it at a loss to ethanol distillers.
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“Sugar processors are strongly encouraged to work with bioenergy producers to co-ordinate all activities and submit a joint bid package,” said USDA in a step intended to maximize sales and reduce a surplus that has depressed futures prices.
Processors were given a deadline of Friday to submit offers of at least 5,000 tons of sugar. Bids from biofuels makers will be due by Sept. 26. USDA said it would notify winners by the next afternoon.
Only a small amount of sugar, 7,118 tons of 90,000 offered, was sold in the first use of FFP in August.
A mammoth sugar surplus of 2.2 million tons is forecast on Sept. 30, the end of the marketing year. On the same day, loans written by USDA on 556,650 tons come due. Processors could forfeit the sugar to USDA if market prices are below the 20.9 cents per lb guaranteed by USDA.
Congress created the sugar-for-ethanol program in 2008 as a way to mitigate sugar surpluses and encourage the development of sugar as a feedstock for biofuels.
