NAPA, Calif. -- With Mexican sugar exports to the U.S.surging, the U.S. government goal of a no-cost sugar program is not feasible in the near future. But government officials and grower industry leaders said they are determined to operate the program at as low a cost to taxpayers as possible.
The U.S. sugar program, as authorized under the 2008 farm bill and reauthorized by both the House and Senate in farm bills now under consideration in Congress, attempts to maintain a balance between production and consumption using domestic marketing allotments and import limits.
But growers have the right to take out government loans on their sugar and, if the price falls below certain levels, to forfeit that sugar to the government rather than repay the loans. The 2008 farm bill also provided for programs under which the U.S. Department of Agriculture can buy sugar, including a feedstock flexibility program that permits the government to buy sugar and sell it cheaply to ethanol producers.
Between 2003 and 2012, sugar prices were so high that the government did not incur any significant costs. But under the North American Free Trade Agreement, Mexico has the right to export unlimited amounts of sugar to the U.S., and with a big crop this year, has sent 1.9 million tons northward, causing U.S. prices to fall near forfeiture levels.
USDA has spent $50.7 million to take sugar off the market, and officials are using the feedstock flexibility program to take more sugar off the market. These expenditures have been made to avoid forfeitures, which would be more expensive.
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"Mexico functions almost like an extra state," Michael Scuse, the Agriculture undersecretary for farm and foreign agricultural services, told the International Sweetener Symposium, at an Aug. 2 to 7 conference sponsored by the American Sugar Alliance, the organization of beet and cane growers.
Industrial sugar users, which have long complained that the sugar program forces them to pay higher prices for sugar, have said that the prospect of government expenditures is another reason for Congress to change the program.
Larry Graham, president of the National Confectioners Association, acknowledged at the symposium that the Sweetener Users Association had lost that battle when both the House and the Senate passed reauthorizations of the sugar program. Passage in both houses should mean that the sugar program is not conferenceable, but Graham noted that Congress has not completed the conference report.
Graham said the sweetener users' proposal to revert to a loan price established in 1985 and to make it more difficult for USDA to limit imports was only a "modest reform," but Jack Roney, ASA director of economics and policy analysis, said the proposal would "mandate chronic oversupply" and put many U.S. sugar producers out of business.
But sugar grower officials said the federal expenditures on sugar this year would be minor compared with what the government has spent on other commodities in the past decade.
