U.S. Sugar Program

The U.S. Sugar program is the federal commodity support program that maintains a minimum price for sugar, authorized by the 2002 farm bill (P.L. 107-171, Sec. 1401-1403) to cover the 2002-2007 crops of sugar beets and sugarcane.

Producer cooperatives give US farmers more control over prices.... Farmers in the United States have formed cooperatives that enable farmers to own their processing facilities and build them near sugar production sites.[8] This process of vertical integration also enable farmers in the US to move closer to economies of scale. While the formation of cooperatives decrease processing and transportation costs, they give US farmers more power over the price of sugar.[8] For example, in 2002, cooperatives controlled 82% of sugar beet production in the United States, giving them significant power over the selling process.[15] Combined with strict government policies, sugar producer cooperatives have kept sugar prices in the United States two to three times prices within other countries. Cooperatives also play an important role in deciding the course of sugar-to-ethanol commercialization since they have control over initial processing stages.[8]

Designed to protect the incomes of growers of sugarcane and sugar beets, and firms that process each crop into sugar, the program supports domestic sugar prices by:

(1) making available nonrecourse loans to processors (not less than 18¢/lb. for raw cane sugar, or 22.9¢/lb. for refined beet sugar);

(2) restricting sugar imports using an tariff rate quota, and

(3) limiting the amount of sugar that processors can sell domestically (under marketing allotments) when imports are below 1.532 million short tons.

Import restrictions are intended to meet U.S. commitments under the North American Free Trade Agreement (NAFTA) and Uruguay Round Agreement on Agriculture. Processor and refiner marketing allotments are set by USDA according to statutory requirements. Marketing allotments and new payment-in-kind authority are designed to help the USDA meet the no-cost-requirement to the federal government by avoiding the forfeiture of sugar put under loan. Other parts of the new program include a storage loan program for sugar processors, and reduced (by 1%) the USDA interest rate charged on sugar loans. In the U.S., sugar beets are grown year-round and account for 60% of total sugar production, while sugar canes are grown perennially and account for 40% of US total production.[8] Both production processes yield the same sugar product.[8] Sugar production in the United States generates $10B in economic activity annually, and the sugar/corn sweetener industries generate $21.1B in economic activity.[9]

Sugar is used in food products to sweeten and add texture and color.[9] On average, each American consumes 45 pounds of sugar, 45 pounds of high fructose corn syrup (HFCS) and 2 pounds of honey/syrup yearly.[9] In total, Americans consume 10,000 tons of sugar every year.[9] Sugar end products are raw cane sugar, wholesale and retail refined sugar, cereal, candy, baed goods, and ethanol.[9]

Around the world, sugar is one of the most heavily-subsidized commodities. 80% of foreign sugar market prices are subsidized by their respective governments to match the price of sugar in the United States, a value that is lower than production costs for sugar in those countries.[9] This practice, called dumping, enables foreign manufacturers to eliminate sugar surpluses and gain market share. In response to price dumping, Congress has enacted legislation (the Farm Bill in 2002) that imposes foreign import restrictions on sugar.[10] Such legislation helps US sugar farmers compete with foreign producers, but hurts the consumer and US food companies since they have kept domestic sugar prices more than twice as high as world prices.[1] Therefore, the various political influences on the federal government, such as lobbying by sugar farmers, are a key determinant of sugar prices in the United States.

References

•  This article incorporates public domain material from Jasper Womach. Report for Congress: Agriculture: A Glossary of Terms, Programs, and Laws, 2005 Edition (PDF). Congressional Research Service. Edited by Jim Hatzis