U.S.D.A. sets final rule on feedstock program

by Ron Sterk
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WASHINGTON — The Farm Service Agency of the U.S. Department of Agriculture on July 26 published its final rule on the Feedstock Flexibility Program (F.F.P.) that will allow the U.S.D.A. to purchase excess sugar to resell for use in ethanol production.

The F.F.P. may be used, if needed, to help the U.S.D.A. take excess domestic sugar off the market to avoid forfeitures of sugar pledged as collateral by processors for short-term commodity loans from the department’s Commodity Credit Corp. The final F.F.P. rule will be published in the July 29 Federal Register, the U.S.D.A. said.

“As part of continuing efforts to manage the surplus, U.S.D.A. is currently operating a purchase of sugar from domestic sugarcane processors under the Cost Reduction Options of the Food Security Act of 1985, and simultaneously will exchange this sugar for credits offered by refiners holding licenses under the Refined Sugar Re-export Program,” the U.S.D.A. said. “If needed, F.F.P. is an additional tool to manage the domestic sugar surplus.”

Because of excess sugar supplies, strong imports of sugar from Mexico, domestic prices at multi-year lows and prices near or below loan forfeiture levels, many in the trade anticipate loan forfeitures this year, the first of which may occur as early as Aug. 1. Some see the F.F.P. as an option of “last resort” for the U.S.D.A. because it is considered more costly to operate than other programs. At the same time, the F.F.P. permanently removes sugar from the market rather than “shuffling” it between locations or into later time periods as do most other options.

“Atypical market conditions have necessitated U.S.D.A. to take a number of actions this crop year to manage the sugar supply at the least cost to the federal government,” the U.S.D.A. said. The last time forfeitures occurred was in 2004, the U.S.D.A. said. Much large quantities were forfeited in 2000 due to excess supplies and low prices.

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