In response to a tightening domestic refined sugar market, the U.S. Department of Agriculture today increased the 2007 crop year sugar Overall Allotment Quantity by 500,000 short tons, raw value.

The Overall Allotment Quantity (OAQ) is the quantity of sugar that may be marketed in the United States without being subject to penalties. USDA expects this action to effectively eliminate marketing allotment program restrictions on domestic sugar beet and sugarcane processors and increase the 2007 crop year marketable sugar supply by 100,000 to 200,000 tons.

The domestic refined sugar market has tightened considerably in recent months. Refined sugar supplies have been severely reduced by the tragic explosion at a major sugar refinery and by lower 2008 sugar beet acreage due to high grain prices and poor planting conditions. In addition, domestic deliveries of sugar for food use are projected to increase by 3 percent in fiscal year (FY) 2008.

Under the law applicable to 2007 crop year sugar, 45.65 percent of the OAQ increase, or 228,250 tons, must be allocated to the cane sector, which cannot use the increase since all of the 2007 crop year cane supply is currently available to the domestic sugar market. Of the increase, 54.35 percent in the OAQ is allocated to the sugar beet sector, or 271,750 tons, but only 100,000 to 200,000 tons is expected to be marketed through the end of FY 2008 -- September 30, 2008.

Since the cane sector cannot use its portion of the OAQ increase, the cane sector's portion of the additional allotment must be reassigned to the Commodity Credit Corporation (CCC) as required by law. As a result, cane state allotments and processor allocations are unchanged from those announced in the June 23, 2008 USDA News Release. Since CCC also has no sugar, the additional cane sugar allotment of 228,250 tons is reassigned to imports, and in this case is reassigned specifically to sugar from Mexico. Such imports are already anticipated, however, and therefore no increase to U.S. sugar supply from this reassignment is expected.

USDA is committed to providing an adequate supply of sugar to meet domestic needs, within the bounds of the current sugar program. Sugar and sweetener market conditions are closely monitored and further adjustments will be made if warranted.