How Sweet It Ain’t: U.S. Sugar Policy

—by Emma Onawa

Sugar! Admit it, we all love it, even though it can wreak havoc on our bodies. Sugar sweetens our lives in many ways, but there’s an aspect to sugar that’s not so sweet. The U.S. agricultural policy on sugar is anachronistic and expensive, yet surprisingly resistant to reform.

The U.S. produces sugar from two primary sources: cane and beets. Cane and beet sugar are essentially indistinguishable. Sugar cane is produced primarily in four southern states, as well as Hawaii, with Florida the leader in sugar cane production. Beet sugar is grown in 11 states, with Minnesota the leader in production.

Both cane and beet sugar must be processed quickly after harvest to prevent sucrose deterioration. Despite its domestic sugar production, however, the U.S. still imports sugar from around the world. These imports come in raw form that must be refined domestically.

U.S. sugar policy

United States sugar policy1 dates back to the Great Depression when the Sugar Act of 1934 defined beet and cane sugar as commodities and put quotas on domestic and imported sugar, imposed marketing allotments and labor provisions, and paid a direct subsidy to sugar farmers. Since then sugar policy has morphed in various ways to become the current law, which costs American consumers an estimated $3.5 billion annually and leads to job losses.

Current U.S. sugar policy has four basic components:

  • Price Supports and Loans: enforces a minimum price for domestic sugar and loans to producers;
  • Marketing allotments: designed to prevent surplus sugar in the domestic market, which requires sugar processors and cane mills to limit the amount of sugar they can sell annually;
  • Import Quotas: also known as Tarriff Rate Quotas, these limit how much sugar can be shipped to the U.S. every year and imposes an extremely high tariff on imports above this level;
  • Feedstock Flexibility Program: mandates that when there’s surplus sugar the U.S. must buy producer’s forfeited sugar (some in payment for federal loans) and sell it at a loss to ethanol plants.

Policy and sugar prices

The most immediate impact of this policy has been a refined sugar price in the U.S. that’s great for sugar producers but, by 2012, was much higher than the price world-wide2, averaging 42¢/lb. in the U.S. to 26¢/lb. world-wide.

Since sugar is a ubiquitous ingredient in foods made in the U.S., manufacturers of a wide variety of foods have had to pay a premium for their sugar. Bakers, confectioners, and other industries that use a lot of sugar have been particularly hard hit. Many have either closed or moved operations overseas to reduce costs, resulting in an estimated 127,000 lost jobs between 1997 and 2007.3

Attempts at reform

With the passage of the North American Free Trade Agreement (NAFTA), Mexican sugar began to flow into the United States without traditional tariffs. Combined with a record crop in both Mexico and the U.S., a glut of sugar was produced in 2013. Sugar prices have plummeted.4 For example, Minnesota’s American Crystal Sugar Co., the largest sugar beet processor in the U.S. and a key part of the Red River Valley ecomony, is expected to get an estimated $38/ton in 2013, versus $68/ton in 2012 and $55–$70/ton over the four preceding years.

Pursuant to U.S. sugar policy, the U.S. government is obligated to buy excess sugar, often in lieu of loans to producers. In October 2013 Minnesota and Dakota growers forfeited approximately 225 million pounds of sugar in payment of almost $54.2 million in government loans.

In response to this crisis, the Sugar Reform Act of 2013 was introduced with refreshingly bipartisan support of 90 co-signers. This legislation seeks to reform existing law by authorizing the Secretary of Agriculture to suspend or modify marketing allotments and revise sugar tariffs.

Congress also passed a Concurrent Resolution to seek elimination of all direct and indirect subsidies benefiting the production or export of sugar by various governments world-wide. Unfortunately, neither measure made it out of committee. The 2013 farm bill did not propose any changes to current law. So for now, the outdated U.S. sugar policy continues to reign.

Sources
1. Coalition for Sugar Reform, http://www.sugarreform.org.
2. USDA, http://www.ers.usda.gov/topics/crops/sugar-sweeteners.gov.
3. Find several articles on sugar at http://www.evergladestrust.org.
4. “U.S. Sugar Program,” http://www.en.wikipedia.org/wiki/U.S._Sugar_Program.
5. “U.S. government is buying up $300-million sugar glut,” http://www.grist.org/news/u-s-government-is-buying-up-300-million-sugar-..., October 9, 2013.
6. “Soft Year for Sugar Beet Growers,” Minneapolis Star/Tribune, November 6, 2013, p. D1
7. “Government Takes Big Hit on Sugar,” Minneapolis Star/Tribune, October 1, 2013, p. D1.
8. “Sugar Supports Could Hit Taxpayers,” Minneapolis Star/Tribune, March 3, 2013, p. D1.
9. https://www.govtrack.us/ congress/bills.

References
1. Like other commodity programs, U.S. sugar policy was designed to ensure domestic production of sugar but, unlike other commodity programs, sugar policy uses import restrictions and marketing allotments that artificially inflate the cost of sugar in the U.S.
2. In the past few years U.S. refined sugar prices have ranged from 64% to 92% higher than on the world market.
3. As of 2007, the U.S. industries that rely heavily on sugar (primarily manufacturing and bakeries) employed approximately 627,996. Of those, 17,010–19,257 are estimated to be employed in Minnesota.
4. According to the USDA, refined beet sugar sold for 28.5¢/lb in February 2013, versus 51¢/lb. in February 2012. Raw cane sugar sold for 20.72¢/lb. in February 2013 versus 33.57¢/lb. in February 2012.

[Emma Onawa has been a veteran co-op member for more than 30 years and has never met a cheese or a cat she doesn't like.]