Sugar beet harvesting is in full swing in the Red River Valley of northwestern Minnesota and eastern North Dakota.
GLEN STUBBE • firstname.lastname@example.org,
Minnesota is the nation’s largest producer of sugar beets.
Star Tribune file,
Slumping sugar prices cost U.S. taxpayers $53.3 million
- Article by: Jim Spencer and Mike Hughlett
- Star Tribune staff writers
- October 1, 2013 - 6:52 AM
WASHINGTON – Slumping sugar prices cost U.S. taxpayers $53.3 million Monday as the government was forced to buy more than 272 million pounds of refined beet sugar and sell it at a huge loss to biofuel producers.
The transaction sought to limit the amount of sugar that processors give the government to pay off nearly $203 million in government loans, which were due by midnight Monday.
By law, sugar companies may repay government loans with sugar instead of cash if prices fall below certain levels. The government, meanwhile, can cut taxpayer’s losses by buying and selling as much sugar as possible for ethanol rather than paying the costs of storage and disposal.
Among sugar processors owing large amounts to the government is Moorhead-based American Crystal Sugar.
The 4,000-member sugar beet cooperative on the border of Minnesota and North Dakota had borrowed $71,790,000 offering 300 million pounds of beet sugar as collateral. Minnesota is the nation’s largest beet sugar producing state.
Asked Monday whether American Crystal intended to forfeit sugar in lieu of paying its loans, co-op lobbyist Kevin Price declined to comment.
“We are not putting out a statement today,” he said.
The beet sugar loans and biofuel sales are part of the nation’s complicated and controversial sugar price support system. That system guarantees revenues to sugar producers by limiting imports, fixing prices and allowing forfeitures of sugar to pay off loans in depressed markets.
In the purchase announced Monday, the U.S. Department of Agriculture bought 272 million pounds of refined beet sugar “for approximately $65.9 million, then immediately resold that sugar to bioenergy producers for approximately $12.6 million,” the USDA reported.
It was the second time this year that the government has had to head off unwanted sugar inventories by using the sugar-to-biofuel program. But Monday’s loss was huge in comparison to an earlier, smaller purchase that led to a loss of less than $3 million.
Including another USDA sugar buyout initiative, overall losses to taxpayers due to the U.S. sugar program seem likely to top $100 million in 2013. The Minn-Dak sugar beet cooperative that operates on the North Dakota and Minnesota sides of the Red River has already given the government beet sugar in lieu of a loan payment. In August, it handed over 30 million pounds rather than pay the government $7,179,000, USDA statistics show.
“As a sugar beet producer, we are taking advantage of what the [farm] bill instituted,” Minn-Dak CEO Kurt Wickstrom said. “For us economically, it makes sense to forfeit rather than sell into a market with very, very low prices.”
He blamed increased exports of Mexican sugar into the United States under the North American Free Trade Agreement for driving sugar prices down. Mexico “has been exporting record levels of sugar into the U.S.,” Wickstrom said.
U.S. beet producers had a good crop last year, and so did Mexican producers, leaving a lot of sugar on the market. Another good beet sugar crop appears in the offing in Mexico, which could reduce prices even more.
The government put in place the sugar-to-biofuel program to soften the blow of market crashes to taxpayers. But Monday’s loss is sure to reignite a congressional debate about the usefulness of the sugar program, which dates to the 1930s.
Sugar producers and processors won the initial rounds of a fight with candy makers to keep in place supports that leave American consumers paying much more than the world market price for sugar. The sugar lobby spent millions on campaign contributions and lobbying and the program remained in separate five-year farm bills passed by the Senate and House. Supporters insisted that the program has operated for years “at no cost to the taxpayers.”
That was true for more than a decade. Now, as the chambers try to work out differences in their individual farm bills, opponents of the sugar program likely will point to the $53.3 million hit as evidence that taxpayers have always been at risk.
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