U.S. Sugar Policy Not So Sweet for Food Companies, Consumers

By Catherine Boudreau
Nov. 27 — Two Republican lawmakers opposed to U.S. sugar policy want to use a year-end government spending measure to limit loans administered through the program, one of the only farm programs that hasn't had a major overhaul for decades.

Reps. Bob Goodlatte (R-Va.) and Joseph Pitts (R-Pa.) are soliciting support for an amendment to the fiscal year 2016 appropriations package that would cap how much a sugar processor can borrow each year from the Agriculture Department. Processors that turn sugar cane or sugar beets into the sweetener can take out loans from the USDA for unlimited amounts as long as their commodity is offered as collateral, and typically pay them back with interest after sugar is sold on the market.

In a letter to House colleagues, the legislators said that voting for their amendment could start the process of changing an outdated federal program before it leads to additional job losses among companies that use sugar, including the Hershey Co. and Mars Inc. based in Pennsylvania and Virginia, respectively.

“The Sugar Lobby has so effectively limited access to sugar in the United States that the price of sugar is now nearly double the price paid by our international competitors,” the letter said. As of October, the U.S. price of sugar stood at 25 cents per pound, while the world price was 14 cents per pound.

The USDA keeps domestic prices high by limiting what each processor can sell and enforcing import quotas to control how much enters the U.S., a program rooted in the 1981 farm law and retained in 2014 (Pub. L. No. 113-79). These tools guarantee prices don't dip below loan forfeiture levels so the program can operate at no cost to taxpayers, a key factor in its longevity and the main argument of advocates.

There have been exceptions, including the 2013 crop year when prices dropped due to huge harvests worldwide and an increase in imports from Mexico, according to an April 2015 report by the Congressional Research Service. U.S. processors forfeited hundreds of thousands of tons of sugar instead of paying back their loans, costing the USDA $259 million when it had to get rid of the sugar.

Recurring Attempts at Change
Goodlatte and Pitts' strategy to change the program is nothing new. Proposals to end federal sugar supports have repeatedly failed to muster enough support in Congress, including five amendments that were voted down during the most recent farm law negotiations lasting from 2012-2014.

Critics include taxpayer watchdog organizations, free-trade groups and the food and beverage companies that use sugar, all of which are represented by the Coalition for Sugar Reform (CSR). They say artificially inflated prices impose a hidden tax on consumers and incentivize moving facilities abroad to access cheaper sweetener. They also point to a Congressional Budget Office (CBO) score of the 2014 farm law that estimated U.S. sugar policy would cost the government $188 million over 10 years, solely from a sugar-to-ethanol program if prices are too low.

Phillip Hayes, spokesman for the American Sugar Alliance (ASA) that represents thousands of sugar farmers and grower-owned processing cooperatives, said he doesn't think the Goodlatte-Pitts amendment will go anywhere. Congressional leadership is unlikely to allow amendments to the sweeping government spending package that must be passed before Dec. 11, when current funding expires, and they have already agreed not to reopen the farm law through the appropriations process (See previous story, 10/30/15).

The ASA has long held that the sugar program shields U.S. producers from unfair competition. Foreign countries including Brazil, India, Mexico and Thailand heavily subsidize their sugar industry, then dump surpluses on the world market at prices below-production costs.

“We are more efficient than our foreign competitors, and we would thrive in a free market,” Hayes told Bloomberg BNA. “So, let's go to the [World Trade Organization] and figure out a way to get rid of subsidies that are distorting the market.”

Reducing agricultural subsidies became the most contentious issue during the WTO Doha Round of negotiations that began in 2001, and caused talks to stall several years later. The future of the Doha Round remains uncertain (See previous story, 11/19/15)

Sugar Industry Lobby
Republican presidential candidate Sen. Marco Rubio (R-Fla.) echoed the sentiments of ASA following a Nov. 10 debate, when Sen. Ted Cruz (R-Texas), another presidential contender, called the U.S. sugar program “corporate welfare.”

Large amounts of sugar cane is grown in Florida, which calls attention to campaign donations he's received from the industry. The sugar industry has a long history of campaign contributions to both Democrats and Republicans, as well as spending millions to lobby Congress.

Lawmakers from Florida, Louisiana and Texas, where the majority of sugar cane is produced, and those from states in California, the upper Midwest and Oregon where sugar beets are grown, all have a stake in the industry.

So far in 2015, the sugar industry has spent almost $8.2 million lobbying Congress, according to the Center for Responsive Politics. And in the 2016 election cycle to date, the industry donated $1.67 million to lawmakers such as Sen. Jerry Moran (R-Kan.), who leads the appropriations subcommittee overseeing USDA and Food and Drug Administration spending, and Rep. Collin Peterson (D-Minn.), top Democrat on the House Agriculture Committee.

Opposition Continues
Recent panel discussions on Capitol Hill and lobbying recruits by opponents of the U.S. sugar program signal the fight to overhaul it will continue, with the goal of finalizing something before the current farm law expires in 2019.

The CSR and its allies on Nov. 17 briefed legislative staff on its agenda. In June, the Corn Refiners Association, which represents companies producing high-fructose corn syrup frequently used as an alternative to sugar, hired 10 outside lobbyists to challenge the federal policy through the appropriations process.

“We're coming closer and closer with votes, and this program is less and less sustainable, partly because most of the other farm programs have been reformed,” Grover Norquist, president of Americans for Tax Reform, which advocates reducing taxes, said during the Nov. 17 event held by the CSR.

To contact the reporter on this story: Catherine Boudreau in Washington at cboudreau@bna.com
To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com