The offer is the Agriculture Department's latest bid to shore up U.S. sugar prices, which have sunk to historic lows because of a glut of refined sugar and projections of huge sugar-beet and cane harvests. The department also hopes higher prices will discourage farmers from defaulting on federal sugar-marketing loans and forfeiting as much as 1.4 million tons of sugar to the government.

The department purchased 132,000 tons of refined beet sugar in June at a cost of $54 million to help farmers. But the big purchase failed to boost sugar prices above the government's price-support levels of 18 cents a pound for raw cane sugar and 22.9 cents a pound for refined beet sugar. It now appears that government buying won't head off a wave of sugar-loan forfeitures later this summer. Tuesday, Amalgamated Sugar Corp. decided to forfeit 42,000 tons that it had posted as collateral for a federal loan, which matured on the last day of July.

If market prices had risen above the price-support levels, the company would have paid off the loan and sold the sugar. "I expect we will have more forfeitures" in the next few months, said Larry Corry, chief executive of the Ogden, Utah, beet processor.

Amalgamated's forfeiture swelled the Agriculture Department's stockpiles to 174,000 tons, all left over from the 1999 sugar crop and the equivalent of 2% of this year's projected harvest. The amount of sugar available for the department to give to farmers under the payment-in-kind program is expected to increase as sugar processors and producers forfeit more sugar at the end of August and September. The program is reminiscent of production controls under the Agricultural Adjustment Act of 1933, under which farmers were compensated for plowing under standing crops and killinghogs.

-- (The Wall Street Journal)