SUGAR PROGRAM 2008 Farm Bill Dan Colacicco United States Department of Agriculture

Sugar Program Implementation “ Bureaucracy is the art of making the possible impossible.“  Regulation revisions have been slow. –Programs were not immediately needed – created to handle market surplus, not the tight market (for refined) we are currently experiencing.

The U.S. Sugar Program Still Has Basic 2 Parts: Price Support – Sugar Loan Program −A nonrecourse loan program provides the support level. Supply Control −Balance supply to demand and reduce program costs. − Domestic – Sugar Marketing Allotments. − Import – Tariffs/Tariff Rate Quotas/Trade Agmts.

But, the Program was modified in several, fundamental ways. Sugar Loan Program −Phased increase in loan rate by 4.2/5.2 % on 2012 raw/refined sugar crop. Marketing Allotment Program −Domestic producers get minimum market share (85%). −Program goals widened - to ensure adequate supplies of raw and refined sugar in the U.S. Tariff Rate Quota Program −Must begin fiscal year with minimum level. −TRQ adjustment mandates.

Program Modifications Surplus Management Mandates Increase in CCC storage payments −50% increase in refined sugar payment. CCC inventory use restrictions −Restriction on returning CCC surplus sugar inventory to domestic human consumption market. Feedstock Flexibility Program −Subsidizes conversion to surplus sugar to ethanol.

Sugar Marketing Allotments  Change in Market Sharing Strategy –2002 Farm bill  Processors received residual domestic (food use) market after fixed import market share (1.532 mil. tons). –2008 Farm bill  Processors guaranteed at least 85% of market.

Sugar Marketing Allotments Minimum Domestic Share of Food Market

Expected FY 2009 Market Share of Domestic Food Use

For the fiscal years, the Secretary shall:  purchase surplus sugar in U.S. market and;  sell to bioenergy producers for the purpose of producing bioenergy So that the Loan Program operates at no cost to the Federal Government due to forfeitures of price support loan collateral. Feedstock Flexibility Program

Public Comment Required  The Feedstock Flexibility Program is in the Energy Title of the 2008 Farm bill.  CCC will issue a Proposed Rule.  CCC doesn’t have a great track record with the prior Sugar-for-Ethanol program, is open for suggestions.

FFP - Major Issues  What is a surplus? CCC must estimate the likelihood of sugar forfeitures by September 1, for the following fiscal year. How should CCC calculate a sugar market surplus? Stocks-to-Use, price, etc.? How should CCC manage uncertainty in surplus estimation?

FFP Issue - Eligible Sugar  What sugar should be eligible to be purchased by CCC? –Sugar must be eligible to be marketed for human consumption in the U.S. –Selling entity must be located in the U.S. –Should CCC require eligible sugar to be located within the U.S., but not necessarily derived from domestically produced sugarcane or sugar beets?

FFP – Contracting Strategy  What contracting strategy should CCC adopt? –CCC must use competitive bids for contracting purchases and sales. –CCC must not pay storage and must deliver sugar within 30 days of purchase.  Thus, CCC will have to know purchaser before surplus sugar purchase. Should CCC maintain a surplus sugar clearinghouse, or require sugar seller to find buyer?