Penn spells out dairy, sugar prices and loan rate decisions

WASHINGTON – J.B. Penn, newly installed under secretary for farm and foreign agricultural programs at USDA, says the department will sell government-owned sugar to ethanol producers and others to improve domestic prices, manage USDA’s sugar inventory and help meet U.S. energy needs.

He also announced adjustments in the 2001 purchases prices for milk products and said loan rates would remain unchanged for the 2001 crop, but he hoped changes could be made for next year’s production.

USDA will sell up to 100,000 tons of refined sugar to ethanol producers with a 10,000-ton-per-purchaser limit, which could produce a minimum of 15 million gallons of additional fuel, Penn said. Ethanol producers can absorb this sugar without negative impacts on the domestic corn market. Reducing USDA’s inventory also will alleviate a shortage of storage for refined sugar that exists in some areas, he added.

Other sugar sales.

Another 20,000 tons of raw cane sugar will be tendered for direct sale whenever the #14 contract price equals or exceeds 22 cents per pound, and 20,000 tons of refined sugar whenever the market price equals or exceeds 25.25 cents per pound, Midwest. USDA expects eventually to market a portion of the inventory at prices that maximize returns while not oversupplying the domestic sugar market. These sales will assist in the refined sugar price discovery process.

USDA spends about $16.5 million annually to store surplus sugar, Penn said. Currently, USDA holds 746,814 tons of sugar – equivalent to 9 percent of annual sugar production. USDA implemented a payment-in-kind (PIK) diversion program in fiscal year 2000 which gave farmers the option of diverting part of their sugar beet acreage from production in exchange for USDA-held sugar. Last year’s PIK program diverted about 102,000 acres from beet production and reduced USDA’s refined sugar inventory by 277,678 tons.

Another PIK program later this year is possible, Penn added, the goal being to “get market prices to a level where forfeitures (to USDA) won’t happen.”

More price changes.

Penn also announced that USDA will increase the price it pays for butter by 19.99 cents to $0.8548 per pound, and decrease the price of nonfat dry milk by 10.32 cents to $0.9000 per pound. The purchase prices for block cheddar and barrel cheese remain unchanged at $1.1314 and $1.1014 per pound, respectively.

The 2001 appropriations bill extended the price support program through calendar year 2001 at the 2000 support price of $9.90 per hundredweight of milk with an annual average milk fat content of 3.67 percent. The changes are effective May 31.

The decision to change the butter and nonfat dry milk prices was based on an accumulation of nonfat dry milk stocks in quantities well above USDA’s ability to use the product; the level of expenditures to USDA, and significant market distortions, according to Penn. The Agricultural Market Transition Act permits the USDA to adjust the balance between the purchase prices of butter and nonfat dry milk twice each calendar year under the Milk Price Support Program.

Further terms and conditions for purchases of dairy products will be announced later, Penn added.

Penn said he believes the decreased nonfat dry milk price “will shut off the imports” of milk protein concentrate that have bedeviled the U.S. dairy producers “and take care of the problem.”

Loan rates.

Loan rates will remain at the 2000 level for this year’s crops, he said. Loan rates for wheat, corn, grain sorghum, barley, oats, soybeans, minor oilseeds (sunflower seed, flaxseed, canola, rapeseed, safflower seed, and mustard seed), and other oilseeds (crambe and sesame seed) remain unchanged.

For wheat, corn and sorghum, the county loan rates also remain unchanged, but for other crops there could be some changes.

Penn said he hopes changes can be made for the 2002 crop loan rates. “There are some considerable distortions” in the rates, he added. He plans to meet with House and Senate Agriculture Committee members “and see if we can make some substantial progress trying to get the loan rates back into balance.” No adjustments have been made since the 1996 farm bill became law.

The national average loan rates are, for wheat $2.58/bu.; corn $1.89/bu.; grain sorghum $1.71/bu.; barley $1.65/bu., $.03/bu. more than last year; oats $1.21/bu., $.05/bu. more than in 2000; soybeans $5.26/bu.; sunflower seed $9.30/cwt.; flaxseed $9.30/cwt.; canola $9.30/cwt.; rapeseed $9.30/cwt.; safflower seed $9.30/cwt.; mustard seed $9.30/cwt.; crambe $8.77/cwt., and sesame seed $8.77/cwt.

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