The U.S. Department of Agriculture may purchase 400,000 tons of sugar in order to ward off a wave of defaults by sugar processors that borrowed $862 million under a government price-support program.
According to The Wall Street Journal,
the action aims to buoy tumbling U.S. sugar prices, which have taken an 18 percent nosedive since October, when the USDA made the nine-month operations-financing loans.
The purchases could leave the price-support program with an $80 million loss, its biggest since 2000, said Barbara Fecso, an economist at the USDA.
The move would benefit companies that turn sugar beets and sugar cane into granulated sweetener, including American Crystal Sugar Co., Amalgamated Sugar Co., and U.S. Sugar Corp.
The “big three” candy-makers — Mars, Hershey, and Nestlé SA – would be hit with higher prices and that hike could ultimately boost retail food prices, as well.
The USDA makes loans to sugar processors every year as part of a program that began with the 1934 Sugar Act.
The loans are secured with 2.05 million tons of sugar that companies expect to produce from the current harvest.
That comes to almost 25 percent of total U.S. output that the USDA forecasts for this year.
If domestic sugar prices rebound before a final decision is made, the USDA would not make the purchase, Fecso said.
A final decision could come as early as April 1.
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