Crystal Sugar used its own product to pay off $46.6 million on a federal loan debt, probably costing taxpayers tens of millions.
WASHINGTON – Minnesota’s biggest sugar beet cooperative gave the U.S. government 195 million pounds of its product Tuesday to pay back $46.6 million in federal loans.
An official at Moorhead-based American Crystal Sugar Co. said depressed sugar prices made forfeiture of its product a better deal than selling it for cash to repay the loan.
“It was the best outlet at this time,” said Kevin Price, lobbyist for the 4,000-member co-op.
The move likely will cost taxpayers tens of millions of dollars as the U.S. Department of Agriculture tries to unload the sugar in a market where supply far exceeds demand. Because of the government shutdown, it was not clear how many other companies across the country paid back loans in sugar instead of dollars.
Crystal Sugar’s decision came a day after the government announced that it had lost $53.3 million buying sugar from companies across the country and selling it to biofuel producers. The $53.3 million loss was considered necessary to limit the amount of sugar borrowers would use to pay back loans.
All the moves have focused a harsh glare on the country’s complex and controversial sugar support program, which protects producers and refiners by limiting imports and letting companies repay federal loans with sugar when prices dip below certain levels.
The program’s supporters have pushed it as operating “at no cost to taxpayers.” But this fiscal year taxpayers appear to be on the hook for more than $100 million due to a combination of government buybacks and forfeitures.
In Minnesota, Crystal Sugar had to resort to forfeitures for the first time in more than a decade. Paying off its loans in sugar instead of cash was necessary, said Price, because the country is “terribly oversupplied with sugar.”
Crystal Sugar had borrowed $71,790,000 from the USDA in fiscal 2013 to run its sugar processing plants, putting up 300 million pounds of sugar as collateral. Before Tuesday’s forfeiture, the co-op sold the USDA 105 million pounds of beet sugar for more than $25 million. The government immediately resold that sugar to biofuel producers for about $5 million, a $20 million loss to the government.
The nation’s arcane sugar price support program, which dates to the 1930s, usually makes U.S. sugar users pay well above the world market price. But the North American Free Trade Agreement has expanded imports from Mexico.
Increased Mexican imports along with bumper sugar crops around the globe have combined to drive down prices everywhere, with no relief in sight.
“The oversupply that is in place doesn’t seem to be easing anytime soon,” said Price.
He could not say if Crystal Sugar would take a government loan in fiscal 2014 that could be paid back in sugar. But the law allows it.
That fact has moved a coalition of candy makers, open market advocates and consumer groups to urge the U.S. House of Representatives to pass a motion to reopen negotiations on the sugar program.
Sugar lobby’s success
Spending millions of dollars on lobbying and campaign contributions, the sugar lobby succeeded in convincing the House and Senate to include the sugar program in separate five-year farm bills passed in each chamber.
Now opponents hope a House vote can make a conference committee that will work out differences between the bills consider changes to the sugar program, too.
What happened the past two days “underscores what’s wrong with the program,” said Jennifer Cummings, a spokeswoman for the Coalition for Sugar Reform. “We think this is the perfect time to talk about reform.”