Juiced-up Frankenstein

13 March 2013 By Robert Cyran Follow @rob_cyran

Washington may buy 400,000 tons of sugar to raise prices so producers don’t default on cheap government debt, selling the hoard to ethanol producers at a loss. It would make for a distasteful blend of crony capitalism, socialism and nationalism. And consumers would be the losers.

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The U.S. Department of Agriculture is considering buying 400,000 tons of sugar, according to the Wall Street Journal. The move would be aimed at helping sugar producers avoid default on $862 million of debt issued under a government program last year after being hit by an 18 percent drop in sugar prices since October.
The hope is that buying the sugar would raise the domestic price of the commodity. The DoA would then sell it to ethanol producers in line with the terms set out in the 2008 Farm Bill. If loans default, the borrower may pay in sugar - which would also be sold to ethanol producers.
Sugar imports to the United States are restricted under law.

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