01-22940. Sugar Payment-In-Kind (PIK) Diversion Program

AGENCY:

Commodity Credit Corporation, USDA.

ACTION:

Notice of program Implementation.

SUMMARY:

This notice implements section 1009(e) of the Food Security Act of 1985 with respect to existing Commodity Credit Corporation (CCC) inventories of sugar. Based on the combination of relatively low market prices, CCC holding sugar inventory with no other specific disposal plan, and U.S. sugar producers' growing realization of the major market problems facing the sugar sector, CCC is implementing a Sugar Payment-In-Kind (PIK) Diversion Program to help reduce CCC's sugar inventory and related storage costs.

EFFECTIVE DATE:

September 7, 2001.

FOR FURTHER INFORMATION CONTACT:

Thomas W. Bickerton, Economist, Dairy and Sweetener Analysis, Farm Service Agency, USDA, STOP 516, 1400 Independence Avenue, SW., Washington, DC 20250-0516.

SUPPLEMENTARY INFORMATION:

Authority for a Sugar PIK Diversion Program

Authority for CCC to conduct a Sugar PIK Diversion Program is based on section 1009(e) of the Food Security Act of 1985, which provides that when a loan program is in effect, the Secretary may, at any time before harvest, accept bids from producers to convert planted acreage to diverted acreage in return for payment in kind from CCC surplus stocks of the commodity to which the acreage was planted. Subsection (e) also states that no producer may receive over $20,000 worth of in-kind payments. Such action can be taken only if: (1) Changes in domestic or world supply or demand conditions occurred after the announcement of the loan program for the crop and (2) without action to further adjust production, the Government and producers will be faced with a burdensome and costly surplus. Overall, the measures addressed in section 1009(e) and other subsections can be taken under the terms of the statute only if they would reduce direct and indirect costs to the Government without adversely affecting the income of participating small- and medium-size producers.

Basis for Implementing a Sugar PIK Diversion Program

CCC is implementing a Sugar PIK Diversion Program to reduce the cost of the sugar loan program by eliminating up to 200,000 tons of CCC's sugar inventory and related Government storage costs.

Program Design

Administration

This program will be administered by the Executive Vice President, CCC as follows.

1. Bid Submission Procedures

(a) Producers wishing to participate in the program must submit a bid to their local Farm Service Agency Service Center during the period between September 10 and 21, 2001. The bid must be on form CCC-744. The contract will provide for the diversion of acreage planted to sugar beets or sugar cane which are under contract for delivery to a sugar processor. Diverted acreage may not be harvested for sugar or used for any other commercial purposes. In return, producers will receive in-kind payments of sugar from CCC's inventory.

(b) The bid must provide information necessary for conducting the program, including but not limited to, the number of acres that the producer will divert; the producer's 1997-1999 simple average sugar beet or sugar cane yield, the 1997-1999 simple average sugar content of the producer's beets or cane, the processor's 1997-1999 simple average recovery rate, and the value of CCC sugar sought as payment.

(c) Notification of acceptable bids, unless otherwise determined by CCC, will be published on or about September 28, 2001.

2. In-Kind Payments

(a) CCC will, through such methods as CCC deems appropriate, make in-kind payments in the form of sugar held in CCC inventory.

(b) Subject to CCC approval, producers will have the option of receiving either refined beet sugar or raw cane sugar.

(c) The value of CCC-owned inventory is dependent upon the storage location of the sugar and the type of sugar (raw or refined). Accordingly, the quantity of sugar to be paid by CCC as an in-kind payment to a producer will be determined by dividing: (1) The total of the bid amount submitted by the producer and accepted by CCC, by (2) the value per unit of CCC's inventory at the storage location where title will transfer from CCC to the producer, or the producer's assignee.

(d) Producers may assign their in-kind payments only to the processor with whom the producer has a 2001-crop sugar contract.

(e) CCC will transfer title of the sugar to the producer, or the producer's assignee, no earlier than October 1, 2001, and no later than March 31, 2002, as determined by CCC, by notifying the producer or assignee that the sugar is available to them. CCC will stop storage payments on this sugar on the date of transfer.

3. Payment Limitation

(a) A $20,000 payment limitation applies separately to each “producer,” defined as an individual, and each individual member of a joint operation or joint venture. However, minors are combined with their guardian or parent for payment limitation purposes.

(b) This payment limitation is separate and distinct from all other CCC program payment limitations. In the case of current verbal contracts with processors, proof of payment as multiple persons may be required for multiple program eligibilities. Also, husbands and wives may be required to be separate signatories to written contracts in order to be separately eligible for payments.

4. Planting Limitation to the 2001 Crop

(a) Participation in the 2001 PIK Program is open to all producers, regardless of whether or not they participated in the 2000 PIK Program.

(b) Participants in the 2001 PIK Program will be ineligible to participate in any future sugar PIK diversion program if they plant or have an interest in, directly or indirectly, more total acres to sugar beets or sugar cane in future years than in 2001.

5. Bid Rankings

CCC will rank eligible bids on the basis of the bid amount as a percentage of the bid cap, which is CCC's estimate of the value of the diverted sugar production. Eligible bids with the lowest of such percentages will be selected first. In the case of bids with identical ranking, selection will be based on random selection or pro rata shares, as CCC deems appropriate.

Signed in Washington, D.C., on September 7, 2001.

James R. Little,

Acting Executive Vice President, Commodity Credit Corporation.