USDA unveils rule to sell surplus sugar

WASHINGTON/BANGKOK: Faced with a huge sugar surplus, the US government published a rule on Friday that allows it to sell excess amounts at a loss to ethanol companies for making biofuels for cars and trucks.

The Agriculture Department said the ‘‘sugar-for-ethanol’’ programme, authorised by a 2008 law, would be ‘‘if needed . . . an additional tool to manage the domestic sugar surplus.’’

A sugar industry source said the government would probably implement the sugar-for-ethanol initiative in August or September if prices stay low despite the USDA’s efforts to boost them. A USDA spokeswoman declined to say when or if the program will start.

Earlier this week, the USDA announced a second round of sugar purchases that would be used to retire re-export credits, reducing the domestic supply.

A sugar surplus of 2 million tonnes is forecast for the Sept 30 end of this marketing year, compared with usage of nearly 12 million tonnes. That is a stocks-to-use ratio of 16.8% by USDA calculations, but a 15% carryover is the goal.

Some $405 million in sugar loans, issued by the USDA to guarantee a minimum price to growers, will mature in coming weeks. If market prices remain low, processors will forfeit the sugar to the USDA and keep the loan money.

The USDA is required by law to operate the sugar programme at the lowest possible cost to taxpayers.

Under the sugar-for-ethanol rule, the USDA could buy sugar not needed for human consumption and sell it to bioenergy producers, with the buyer taking possession in 30 days.

Congress enacted the provision to give sugar a chance to become a raw material for biofuels, as it is in Brazil. At the time, there were expectations that the then-booming biofuels industry would use all sorts of feedstocks, from corn to crop residue to woody plants.

Meanwhile, rubber fell for a second day on Friday to close at a one-week low as Japan’s currency strengthened on speculation that the US Federal Reserve will maintain bond purchases, cutting the appeal of yen-denominated contracts.

The most-active contract dropped 2.2% to 250.3 yen a kilogramme ($2,532 a tonne) on the Tokyo Commodity Exchange, the lowest settlement since July 18. The price lost 0.5% last week, bringing this year’s drop to 17%. The January contract, which started trade today, ended at 251.5 yen.

Rubber for January delivery fell 2.1% to close at 18,165 yuan ($2,963) a tonne on the Shanghai Futures Exchange. Thai rubber free-on-board fell 0.4% to 79 baht a kg, according to the Rubber Research Institute of Thailand.