UPDATE 2-USDA says sugar loans due end-July repaid, surplus remains
WASHINGTON/NEW YORK Aug 1 (Reuters) - All of the sugar loans owed by processors due at the end of July have been repaid in cash, though a surplus still hangs over the market and risk of future forfeitures is "significant," a U.S. Department of Agriculture spokesman said on Thursday.
The government-backed loans are owed by U.S. sugar processors, and recent low sugar prices have increased the threat that processors would forfeit sugar used as collateral.
The first tranche of loan repayment came due at the end of July, though another $456.6 million, representing about 945,000 tonnes of sugar, shown as still outstanding in USDA data may remain at risk for default.
"All of the outstanding USDA sugar loans that were due at the end of July have been repaid in cash," said Brian Mabry, a USDA spokesman, noting that the USDA has taken "extensive actions" to support prices and reduce forfeiture risk.
The USDA purchased sugar for the first time in over a decade in recent weeks, looking to stave off potential mass forfeitures as domestic sugar prices have tumbled under the weight of hefty U.S. and Mexican supplies.
The U.S. government purchased both raw cane and beet sugar in two rounds of purchases through a re-export credit swap program expected to reduce future imports by sugar refiners.
The second round was targeted at raw cane sugar most at risk of forfeiture, the USDA said when it announced the plans.
Despite the efforts, the surplus continues to weigh on the market and more intervention may be coming.
"USDA will continue to utilize all tools to operate the sugar program at the least cost," Mabry said.
Last month, the USDA unveiled a rule to sell surplus sugar to ethanol makers for feedstock. The "sugar-for-ethanol" program was established by a 2008 law but never implemented.
September No. 16 U.S. domestic raw sugar contract on ICE Futures U.S. closed at 20.05 cents a lb on Thursday.
Earlier this week, the front month rallied to 20.44 cents per lb on expectations the government efforts may boost prices above forfeiture levels. That was the closest prices have risen toward an estimated forfeiture threshold of 20.9 cents since mid-April.
"There's a very serious risk" of forfeitures at the end of August and September when the bulk of the loans come due, said Jack Roney, director of economics and policy analysis at the American Sugar Alliance, noting the loans due at the end of July totaled about $18.9 million.
- Iraqi security forces and Kurds gain ground against Islamic State
- U.S. diplomat travels to West Africa as Ebola quarantine moves take hold |
- U.S. nurse quarantined over Ebola criticizes her treatment |
- Washington state teen shooter's family living in 'nightmare'
- Ukraine votes in poll likely to strengthen president's hand |