Ethanol producers could get a sweet deal on sugar for ethanol if the administration approves the sale of up to 400,000 tons of surplus sugar under the 2008 Farm Bill Farm Bill Feedstock Flexibility Program.

The program allows USDA to buy the surplus sugar and then sell it to ethanol producers at a loss in order to keep prices from going below mandated levels, but it has never been used. With large crops in the United States and Mexico causing sugar futures prices to fall below 21 cents a pound, USDA last week a proposal to the White House budget office to implement the program. “We’re doing it because it’s the law,” said Agriculture Secretary Tom Vilsack on Monday during a meeting of agricultural journalists.

However, Vilsack said it is not yet decided how much, if any of it will be used. “We’ll make that decision following a review of all the circumstances,” he said. “This is an issue where we have a significant oversupply and we have some issues that need to be resolved fairly quickly.” Those issues include storage challenges and minimizing the cost to taxpayers.

Listen to Vilsack comments here: Secretary Vilsack on sugar-to-ethanol