After more than a year and a half of collapsed sugar prices – the result of oversupply – US sugar producers, processors and food manufacturers are gearing up for a sugar review. Diverse interest groups will fight hard to protect their position – Pam Ahlberg reports.

Authorised through FY2003 by the 1996 Farm Bill, the current sugar program was designed to protect sugarcane and sugar beet growers and those firms that process the crops into sugar. To accomplish this, the US Department of Agriculture (USDA) has supported domestic prices by making available loans at minimum price levels to sugar processors and by restricting sugar imports.

However, the recent oversupply prompted the USDA in May 2000 to purchase sugar in an effort to boost prices and reduce the likelihood of forfeitures of sugar loans. In August, the agency paid growers to plough under some of their sugar beet crop in order to reduce sugar output. The US market could have absorbed the additional production by reducing the import quota, but international trade commitments eliminated that option.

Response to the USDA’s handling of the problem characterised the conflicting interests of the sugar production sector, and users (primarily food manufacturers) and cane refiners.

While both sides agree that the problems surrounding US sugar policy are complex – involving developments with other commodity prices, environmental policy decisions, import-quota disputes and international and regional trade agreements – there is considerable disagreement over what US sugar policy should be.

Sugar policy debate

Debate over future US sugar policy began in July 2000, when the Senate Agriculture Committee held a hearing on the topic. The Commission on 21st Century Production Agriculture, in a report submitted to Congress in January 2001, concluded that the combination of current market conditions and existing international commitments ”

“create the need for serious consideration of alternatives to the current sugar program”

create the need for serious consideration of alternatives to the current sugar program.”

Those in favour of radical sugar policy reform include candy makers and groups such as the Coalition for Sugar Reform (CSR), who maintain that the program burdens taxpayers, keeps the cost of sugar high, benefits a few wealthy growers, and supports sugar cane production in Florida with adverse environmental consequences.

“The federal sugar program is an economic disaster for producers, consumers, workers in urban centres who are losing their jobs and the food manufacturing industry. This dinosaur should be extinct,” said Larry Graham, CSR Steering Committee chairman and president of the Chocolate Manufacturers Association.”

“Last year the federal government spent US$465m to buy sugar that it now stores at a cost of more than US$1m a month. USDA and the Congressional Budget Office now estimate the program will cost taxpayers from US$900m to US$1.8bn during the next decade,” added Graham.

In addition, candy makers charge that the current policy puts them at a competitive disadvantage with foreign manufacturers who buy their sugar in the world market and send the final product into the United States.

John Brooks, president of California-based Adam and Brooks Inc., said his company has moved some operations to Tijuana, Mexico, seeking cheaper sugar. “And we’re going to see more of this unless the government eliminates or changes the sugar policy,” said Brooks.

At a candy trade show in Chicago earlier this month, Mayor Richard Daley and executives of Chicago’s candy industry said federal price supports are dealing a serious blow to businesses that depend heavily on sugar.

Sugar producers disagree

The American Sugar Alliance (ASA), a Washington-based umbrella group that represents sugar cane and beet growers, contends that sugar accounts for a fraction of the cost of most candy and that candy makers are confusing the facts.

The group accuses the manufacturers of using the subsidies issue to deflect attention from the real reasons for their moves out of the United States: to find cheaper labour, better foreign exchange rates and lower environmental costs.

Sugar producers acknowledge a need for sugar policy reform in the long run. However, they argue that with no significant progress in global sugar trade liberalisation likely within the next few years, the policy needs to be maintained as a buffer against the flooding of US markets by subsidised foreign sugar.

“The United States must retain the minimal sugar policy now in place to prevent foreign subsidized ‘dump market’ sugar from displacing American production”

In November 1999, at WTO talks in Seattle, Jack Roney, senior economist of the American Sugar Alliance, issued a statement saying, “American sugar farmers would welcome the opportunity to compete with foreign farmers. Unfortunately, the extreme distortion of the world sugar markets makes any such free trade competition impossible. The United States must retain the minimal sugar policy now in place to prevent foreign subsidized ‘dump market’ sugar from displacing American production.”

ASA believes that radical policy reform would damage the US sugar industry by driving producers out of business. No sugar subsidies, they say, would doom troubled beet sugar factories and the many local economies where they are located.

As the battle over future US sugar policy heats up, both sides will continue to push hard for their own sweetest interests.

By Pam Ahlberg
Pam can be reached by email at: pahlberg@bellatlantic.net