The American Sugar Alliance (ASA) noted today that economic experts at the U.S. Department of Agriculture sharply criticized the method and findings of a new U.S. General Accounting Office report on U.S. sugar policy.
USDA’s exhaustive 12-page rebuttal is included in the GAO’s report, released today, “Sugar Program: Supporting Producer Prices Has Increased Users’ Costs While Benefiting Producers.” The GAO report was requested by three Members of Congress who are ardent foes of American sugar farmers and are sympathetic to the views of industrial food manufacturers and retailers who oppose U.S sugar policy.
USDA said it had “serious concerns” about the GAO report that it reviewed, which USDA said “suffers in a number of regards relative to both the analytical approach and … the resulting conclusions.” USDA concluded: “GAO has not attempted to realistically model the U.S. sugar industry. The validity of the results are, therefore, suspect and should not be quoted authoritatively.”
Luther Markwart of the American Sugarbeet Growers Association commented: “Anyone looking to this GAO report for insight regarding the U.S. or world sugar economy can save themselves some time and just go straight to the USDA’s devastating rebuttal. The report’s authors, and anyone quoting this report’s absurd findings as a sound measure of the value of U.S. sugar policy, should be ashamed of themselves.”
“As USDA points out, in painstaking detail, the GAO’s analysis is ‘naive’ (page 3), ‘arbitrary’ (pages 4 and 11), ‘in error’ (page 5), ‘inconsistent’ (pages 5 and 10 (twice)), ‘inadequate” and a ‘puzzlement’ (page 6), ‘inflammatory and unprofessional’ (page 8), ‘not well documented’ and ‘incomplete’ (page 2), and ‘unrealistic’ (pages 10 and 11),” Markwart said. “In addition to its analytical sloppiness, the GAO’s anti-grower bias is exposed by such USDA observations as ‘(GAO) clearly overstates program benefits to growers.'”
USDA summarized its concerns: “First, the cost/benefit evaluation methodology … is not adequately developed or justified” and key omissions “obscure or distort the meaning and significance of the results. Second, the report provides poor to non-existent documentation of the economic model used in the analysis. The model description is confused and provides no basis for possible replication or validation. Third, there are a number of inconsistencies between the results presented and the modeling description or alternative data sources that undermine confidence in the results.”
American Sugar Alliance economist Jack Roney noted: “In addition to the scores of methodological errors USDA discerned, the ASA agrees with USDA on two fundamental flaws in the GAO approach. Both USDA and the ASA noted the absurdity of comparing the U.S. producer price to the low world dump market price, and of assuming food manufacturers and retailers would pass along to consumers 100% of their savings on lower producer prices for sugar if they had access to that dump market.” The ASA’s detailed review is also included in the final GAO report.
USDA calls the world market, currently a mere 8 cents per pound of raw sugar, “a dump market by definition” that is “noted for its high level of distortions” and is “significantly below estimates of costs of production for even the major world sugar exporters.” USDA cites studies, ignored by GAO, that predict world prices in the absence of foreign government subsidies “in the 21 to 22 cents per-pound range.”
USDA further notes, “the amount of the pass-through certainly appears to be less than what GAO acknowledges.” Roney concurs and noted that “since 1996, the producer price for sugar has fallen a painful 26%, but consumers have not benefited at all. Grocery store sugar prices are unchanged, prices for candy, cereal, ice cream, cookies and cakes are all up 7-9%. The only group to benefit from the lower producer prices is the food manufacturers and retailers, whose profits are higher.”
“Furthermore,” Roney said, “the GAO ignored the fact that the U.S. consumer price for sugar is fully 20% below the developed country average, that U.S. sugar policy generated revenues for the U.S. Treasury of $279 million during the 1990’s, and that U.S. sugar producers are among the most efficient in the world, with costs of production well below the world average.”
“Despite the GAO’s irresponsible analysis and blatant bias, the fact remains: U.S. sugar policy benefits American consumers and taxpayers and is critical to the survival of unsubsidized American sugar farmers in a highly subsidized world,” Roney said.
The American Sugar Alliance is the national coalition of farmers, processors and refiners of sugarbeets, sugarcane, and corn for sweetener.
(For more information about the American Sugar Alliance, visit http://www.sugaralliance.org).