Crops Insights

The Farm Bill and your sweet-tooth

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If you’ve got a sweet-tooth, you might want to consider how the sugar industry is affected by the Farm Bill. The United States is the fifth-largest producer and consumer of sugar in the world. Title I houses the Sugar Program, which supports the sugar industry by maintaining a market price for sugar. Its purpose is to protect the income of sugar industry growers of sugar beets and sugarcane and the firms that process sugar from these crops. Sugar producers are looking for a strong program in the upcoming Farm Bill, to ensure the industry doesn’t cost thousands of jobs and closures of refineries across the nation due to increased import and competition.

Groups such as the Coalition for Sugar Reform are demanding reform of the program, which hasn’t been touched in years. They believe it is hurtful to small, family owned businesses and has caused the loss of jobs. In November 2017, U.S. representatives from multiple states introduced new legislation that would aid in the reformation of the Sugar Program, which the coalition applauded.

“The Sugar Policy Modernization Act protects taxpayers and ensures accountability by requiring the sugar industry to pay back any taxpayer dollars they receive when they forfeit on government loans,” the coalition said in a news release. “The bill safeguards taxpayers and also removes a program whereby the Department of Agriculture tells sugar farmers how much sugar they can grow and sell. Reforming the sugar program will lift an existing hidden tax on Americans and make the sugar program work for everyone. Importantly, this legislation will ensure that the sugar program will operate at a true net zero cost to taxpayers.”

According to American Sugar Alliance, “Sugar is the cheapest major commodity program because sugar farmers do not receive subsidy checks. To ensure that sugar policy runs at limited cost to taxpayers, the U.S. Department of Agriculture (USDA) has three tools at its disposal. The agency can 1) slow the flood of foreign imports to those required by our trade agreement obligations (note: Mexican imports are unlimited under NAFTA), 2) limit the amount of sugar American farmers can sell, and 3) divert surpluses caused by excessive imports into non-food use.”

There are three ways the Farm Bill program supports the domestic sugar industry, as explained by American Sugar Alliance:

  • Non-Recourse Loans: “As with virtually all farm programs, government loans are available to U.S. sugar producers. Producers usually repay the loans with interest. But if the USDA lets too much sugar on the market and prices fall below the loan rate, the debt can be satisfied with the crop that was put up as collateral.”
  • Tariff Rate Quota: “Foreign sugar import quotas set at the beginning of the year at the amounts agreed to under international trade agreements. Nearly all enters duty free. If the U.S. market is under-supplied, the USDA can increase the TRQ. America is the world’s largest sugar importer, importing sugar from 41 countries regardless of its needs.”
  • Overall Allotment Quantity: “This is the portion of America’s sugar market allocated each year to U.S. sugar producers. The OAQ, which cannot be set by the USDA at less than 85% of the U.S. market, helps ensure stable prices by avoiding oversupplies. Companies that produce more sugar than they may sell store the surpluses at their own expense, not the government’s.”

Furthermore, there are two other initiatives to protect the sugar industry listed by group, SugarCane.org, these are:

International Trade Agreements: The North American Free Trade Agreement (NAFTA) has provided Mexico with tariff-free sugar exports into the US market since January 1, 2008. The Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) also includes attractive sugar provisions that provide those countries with guaranteed TRQs. The import quotas started at a total of 109,000 tons in 2006, grow to 151,140 tons in 2020, and then increase by 2,640 tons per year into perpetuity.

Sugar-to-Ethanol Program: Under another provision of the 2008 Farm Bill, the U.S. government can sell excess sugar (for instance, unneeded supplies generated by generous price supports) to ethanol producers at a significant loss. With this program, ethanol producers can pay for sugar the equivalent of what they pay for less-expensive corn. This provision further protects the U.S. sugar market.

Many sugar producers appear to want changes to the Sugar Program for the 2018 Farm Bill, however, since this article was published, a communications firm reached out and said their sugar-industry clients would like to see a continuation of current policy. This should be an interesting topic to watch in the upcoming months. As a sweet-tooth myself, I sure want to protect this commodity!

 

Markie Hageman is a senior, majoring in agribusiness, at Fort Hays State University. She is actively involved in her state Cattlemen’s Association, Young Farmers chapter, and National Cattlemen’s Beef Association. Follow her series exploring various parts of the next Farm Bill.

Any views or opinions expressed in this article are those of the author and do not reflect those of AGDAILY. Comments on this article reflect the sole opinions of their writers.
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