USDA is offering sugar producers the option of plowing down their crop in exchange for sugar being held by USDA. It’s a payment-in-kind program designed to reduce the domestic sugar supply. Farmers are limited to $20,000 in PIK payments and must bid for the sugar.

An inventory of 174,000 tons of refined sugar in being held by USDA, an amount equivalent to 2% of the total sugar production forecast for the 2000 crop. The inventory was created when sugar was recently forfeited to USDA, and when USDA purchased surplus sugar from producers to reduce the cost of expected loan forfeitures and to help stabilize market prices.

By reducing the size of this year's harvest, the PIK program will help alleviate sugar overproduction, reduce probable crop loan forfeitures, and dispose of government inventory, according to USDA. The amount of sugar available for the PIK program is likely to increase in the coming months as sugar pledged as collateral for loans is forfeited.

The PIK program is authorized under the Cost Reduction Options of the Food Security Act of 1985. Sign up dates will be announced later.