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Sugar Could Boost Ethanol

House Farm Bill includes trigger to sop up excess imports.

Sugar could be used to boost ethanol production in the future.

The Farm Bill recently passed by the U.S. House of Representatives includes a provision that will permit the government to channel some surplus sugar to ethanol production.

According to Luther Markwart, executive director of the American Sugarbeet Growers Association, the provision would be a win for ethanol producers, sugarbeet growers and taxpayers.

Here's how Markwart says the House program would work:

If USDA estimates that foreign sugar will oversupply the U.S. market, USDA will invite bids from ethanol producers to purchase that amount. USDA would then elicit bids from domestic producers to supply the sugar.

Ethanol producers win because sugar speeds up the corn fermentation process. Corn refiners can get more corn in the front door of their plants and more ethanol out the back.

Sugarbeet growers win because it keeps excess imports from depressing the market. Excess imports could become a more serious problem in 2008. Under the Northern American Free Trade Agreement rules, Mexico will have unlimited access to the U.S. sugar market in 2008, and could ship far more sugar than the U.S market needs. This would be on top of large quantities of sugar the U.S. is also required to import under other trade agreements.

Taxpayers win because they avoid the cost of sugar loan forfeitures if the market remains in balance.

"This is not a huge program, by any means," Markwart says. "But it's a step in the right direction for the U.S. energy market. Americans want to reduce our dependence on foreign oil, and sugar can do its bit to help boost U.S. ethanol supplies."

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