Recourse Loans Likely for Sugar Program, Says USDA

July 26,1999

USDA says recourse loans are likely for sugar in fiscal 2000 given current supply and demand forecasts. Recourse loans cannot be settled by forfeiting the sugar loan collateral; they must be repaid like any commercial loan.

As an alternative, should the current administrative approach result in a TRQ at or below 1.5 million tons -- the trigger for recourse or nonrecourse loans -- USDA is considering two possible administrative options using the current raw sugar TRQ calculation method, the Department said in a press release.

Both the options could allow USDA to set a 1.5-million-ton quota, at least nominally, and avoid the political heat it is sure to take from growers if loans are made recourse.

Option 1, USDA said, is to "sufficiently increase the stocks-to-use trigger, currently at 15.5%, in half-point increments until USDA can establish a raw sugar TRQ greater than 1.5 million tons. Once the raw sugar TRQ level is established, USDA would make available to the U.S. trade representative's office for allocation the minimum quantity required by current trade agreements. The difference between the established TRQ and the quantity allocated by USTR would be put in reserve and allocated using the newly established stocks-to-use trigger in equal quantities in March and May of fiscal year 2000."

Option 2 would "establish the size of the raw sugar TRQ at a level 450,000 metric tons greater than needed to achieve the current stocks-to-use ratio target consistent with current practice. Once the raw sugar TRQ level is established, USDA would release to USTR for allocation the raw sugar quantity needed to achieve the initial stocks-to-use target but not less than the minimum required by current trade agreements."

In addition, under option 2, USDA said it would count only the raw sugar TRQ imports USTR allocated to exporters in the World Agricultural Supply and Demand Estimates (WASDE) report, rather than the announced TRQ currently used in the WASDE. USDA would use the current reserve system with 150,000 ton quantities to be made available for allocation or cancellation in January, March and May of fiscal 2000. USDA would add the relevant quantities for possible allocation with the WASDE import forecast once the WASDE report was released in January, March and May.

When the resulting stocks-to-use ratio was greater than 15.5%, the 150,000 ton reserve would be canceled without further notice. Also, USDA proposes to increase the access for specialty refined sugar under the refined sugar TRQ from 4,656 tons to 14,656 tons. That would mean a refined sugar TRQ of 60,000 tons in fiscal 2000.

Public comment is being sought on the proposal by Aug. 13. Comments should be sent to Stephen Hammond, Import Policies and Programs Division, FAS-USDA, Stop 1021, 1400 Independence Ave. SW, Washington, DC 20250-1021. A final announcement of the raw and refined sugar TRQs and specialty sugar access will be made by mid-September.