America’s sugar farmers today applauded action by the Administration aimed at aiding family sugar farmers in crisis.
Specifically, the Department of Agriculture announced plans Thursday night (May 11) to purchase 150,000 short tons of sugar in an effort to avoid forfeiture of large quantities of sugar under loan, as prices that farmers receive have plunged almost 26 percent since last summer.
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Ray VanDriessche, a sugarbeet farmer from Michigan and president of the American Sugarbeet Growers Association, said, “We are certainly gratified by the Administration’s response to the severe economic crisis faced by American sugar farmers, and we fully recognize and appreciate that this action is taken in the public’s interest. We feel certain, too, that the Administration will take further action, as needed, to avoid costly forfeiture of sugar under loan to the government.”
He pointed out that without the purchase action, the government would be exposed to forfeiture of sugar valued at more than $550 million, with annual storage costs of $30 million. The purchase agreement is a fraction of that cost.
VanDriessche, who represents 12,000 family farmers in 12 states, said a number of factors have contributed to the dramatic price decline in the price farmers receive for their crop. A major factor has been the circumvention of U.S. import quotas through a scheme known as “stuffed molasses.” The scheme takes advantage of an unintentional loophole in the tariff schedule, which the U.S. Customs and the American sugar farmers are trying to correct. The case is currently pending in the courts and is being considered by the U.S. Congress.
USDA has estimated that 125,000 tons of sugar is coming into the United States as molasses syrup, which has no commercial value in this form. After receiving the syrup, the sugar is extracted, which then is used to displace American-grown sugar, causing U.S. sugar prices to drop and requiring the government to purchase domestic production. Because of what it does to the marketplace, this scheme threatens every sugar farmer and sugar factory worker in the country, VanDriessche said.
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By GlobalDataAlan Kennett, president and general manager of Gay & Robinson, Inc. — Hawaii, one of the last remaining sugar companies in Hawaii, testified on the plummeting sugar prices to a House Agriculture Committee field hearing recently in Sacramento, California. He said, “For prices to recover this year, removal of significant quantities of sugar from the market must occur immediately. This would involve purchasing sugar for sale or donation abroad, or for non-food or non-sucrose use.”
Sugar production in Hawaii is down two-thirds from what it was just a few years ago. Kennett said, “Since the demise of sugar on the main island of Hawaii, nothing has replaced sugar as a viable agricultural crop and the former cane lands remain idle, overgrown with weeds. Unemployment is high and drug problems have increased, as have the social problems of dealing with these issues. There is a great deal of concern that both Maui and Kauai will see the same occurrence should we lose our sugar industry.”
Kennett said, “Sugar farmers on Hawaii and the mainland want what all other program crops want, a fair opportunity to farm and make a reasonable living. American sugar producers’ competitiveness and their disastrously low prices parallel the plight of other American farmers. Sugar farmers do not want to be treated more favorably than other farmers are, just equally.”
Warren Harang, a Louisiana sugar farmer and chairman of the American Sugar Cane League, headquartered in Louisiana, emphasized, too, that sugar farmers are not seeking special treatment. “Since the start of the 1996 Farm Bill, the federal government has aided farmers of other crops totaling $64 billion. Another $7 billion has been added for this year. We believe that action was responsible and warranted. And now for the first time in decades, the domestic sugar industry is in crisis.”
Harang noted that since 1991 the domestic sugar industry, saddled with a special marketing tax, has paid into the U.S. Treasury a total of about $279 million. “What we have sought as relief from the current situation is just a fraction of what the industry has paid into the government,” he said.
U.S. sugar policy has run at no cost to taxpayers since 1985, Harang pointed out.
Jack Roney, director of economics for the American Sugar Alliance, a national trade association of domestic growers and processors of natural sweeteners, said that in addition to the “stuffed molasses” scheme, the plunge in sugar prices can also be attributed to:
- * Threat of greatly increased tonnage of sugar coming in from Mexico after October 1, when NAFTA boosts Mexican imports to 250,000 metric tons, a ten-fold increase.
* Expanded acreage devoted to sugar cultivation because of the price crisis in other commodities, causing some farmers to shift to sugar production.
* Extremely favorable weather conditions for two years in a row, along with improved seed varieties and farmer-directed efficiencies that have increased yield.
* A delay by USDA last fall in announcing the import quota for the year, which caused uncertainty in the market, depressing prices.
Roney said, “It is bad enough that the farmers have been hurt, but consumers have not benefited in any manner from the decline in prices farmers receive for sugar. The fact of the matter is that none of these savings-even in sugar at the grocery stores-have been passed on to consumers. In the three-and-a-half years since the start of the Farm Bill, with wholesale-refined sugar prices down 26 percent, the price of ice cream is up more than 9 percent, cookies and cakes are up almost 8 percent, candy is up about 7 percent, as is the price of cereal. The big industrial food processors and adding to their profits while America’s farmers suffer.”
Roney said, “Also, we all need to be aware of how well the American consumer is served by our extremely efficient sugar farmers. When a consumer goes to the supermarket in this country, he or she pays about 20 percent less for sugar than does a consumer in other developed countries around the world. That is something we are justifiably proud of, and something that a viable U.S. sugar policy is designed to keep.”
