Procedures used in establishing 1991/92-crop loan rates for sugar and minimum support prices for sugarcane and sugarbeets - U.S. Dept. of Agriculture, Economic Research Service report

Situation and Outlook Report: Sugar and Sweetener, Sept, 1991 by Ron Lord

Area Loan Rates for Raw Sugar and Support Prices for Sugarcane

As with beet sugar, freight cost differentials are used for determining regional loan rates for raw sugar. While only processors who participate in the loan program are required to submit freight cost data, sufficient data are provided to USDA from each area to yield a representative sample for establishing weighted-average freight costs. The 1991/92 crop raw cane sugar regional loan rates are shown in table A-6. Typically, prices received for sugarcane are based on the season average price processors received from the sale of raw sugar, or if the processor forfeits the loan collateral, from the loan proceeds. The grower's share is determined from this price, after taking into account factors such as sucrose content, purity, a revenue-sharing pricing factor, sugar recovery, freight, and other factors that differ among production areas. In addition, sugarcane growers receive their share of the value of the molasses in the sugarcane. Based on a loan rate of 17.93 cents per pound, Florida processors who participate in the price support program must pay growers who deliver sugarcane of 14.61 percent sucrose, $24.61 a net ton of sugarcane. In addition, a molasses payment of 63 cents a net ton is added for a total payment of $25.25 a net ton of sugarcane. The $24.61 is determined by multiplying the 17.93-cents loan rate by a revenue-sharing factor of 1.15 and a quality factor of 1.194. Louisiana processors who do not use a core sampler for testing sugarcane must agree to pay growers not less than $23.41 a net ton for sugarcane testing 13.56 percent sucrose and 83.53 percent purity. For mills using a core sampler, the payment of $22.58 per gross ton is based on 60 percent of the 18.31-cents loan rate or 10.99 cents times the latest 5-year weighted-average sugar recovery of 197.03 pounds per gross ton of sugarcane plus 93 cents per gross ton for molasses.(3/) In Texas, the grower's minimum 60 percent share of the 1991/92-crop loan rate of 18.15 cents is 10.89 cents. Multiplying this by the latest 5-year weighted-average recovery of 171.01 pounds of raw sugar per gross ton yields a grower payment for sugar of $18.63 per gross ton. Adding in the estimated grower molasses share of $1.16 a ton results in a minimum payment for Texas of $19.79 per gross ton. In Hawaii, the grower's minimum 51 percent share (for field delivery point) of the 1991/92-crop loan rate of 17.76 cents is 9.06 cents. Multiplying this by the latest 5-year weighted-average recovery of 247.49 pounds of raw sugar per net ton yields a grower payment for sugar of $22.42 per net ton. Adding in the estimated grower molasses share of $0.64 a ton results in a minimum payment for Hawaii of $23.05 per net ton. For Puerto Rico, the 63.5-percent grower share of the loan rate, 18.41 cents a pound, is 11.69 cents. Multiplying by the latest 5-year weighted-average recovery of 142.72 of sugar pounds per gross ton of cane results in a sugar payment of $16.68, and adding a molasses payment of $1.22 results in the total of $17.90 per gross ton.