Issue Brief: Sugar

August 3, 2011

Sugar is an important ingredient in the U.S. food supply and is found in almost everything we eat.  In addition to desserts and other treats, sugar makes wholesome food more palatable, acts as a bulking agent in baking, and is a key preservative that keeps foods from perishing.

Following massive sugar shortages caused by dependence on imports—namely in WWII and the Cuba Embargo—Congress encouraged more domestic sugarcane and sugarbeet production.  It also implemented policies to ensure the country maintained a reliable supply of homegrown sugar.

Today, sugar is produced in 18 states, employing 146,000 Americans and pumping $10 billion a year into local economies.  Sugar policy has operated without cost to the U.S. taxpayer since 2002 and is projected by the U.S. Department of Agriculture to remain at no cost through at least 2021.

Policy Overview:

Sugar policy operates differently than policies for other crops.  It is based on an inventory management approach rather than an income management one.  In other words, sugar producers don’t benefit from direct payments from the government.   Instead, the USDA attempts to balance supply and demand by managing imports and domestic sales so market prices cover production costs.

The stability provided by this policy is particularly important because sugar is arguably the world’s most volatile agricultural commodity market.  The average sugar price soared to nearly 60 cents in the mid-1970s; 10 years later, the average price was less than five cents.  It recently peaked at all-time highs again—a roller coaster that, without the insulation sugar policy provides, would harm both U.S. grocery shoppers and U.S. sugar producers.

Despite the inventory management approach, the U.S. sugar market is far from closed.   Trade deals have made America the world’s second biggest sugar importer, bringing in sugar from 41 foreign countries, most of which are developing nations that support U.S. sugar policy.

Although sugar policy has been a big success that enjoys widespread support, low profit margins within the industry led to the closure of 33 sugar mills and processing facilities between 1996 and 2008.  This trend appears to have reversed itself under the current sugar policy—only two closures have been reported since enactment of the 2008 Farm Bill.

If U.S. sugar policy was eliminated:

  • America would be swamped with subsidized sugar from the world dump market and would again become dependent on unreliable foreign suppliers.
  • Cautious U.S. lenders would be unlikely to supply farmers and processors the capital they need to continue. The industry would collapse rapidly.
  • As more U.S. demand is thrown onto the volatile world market, world prices would likely continue to rise.
  • American consumers would be vulnerable to less dependable, less safe sugar—likely at higher prices.
  • Food manufacturers would have to replace complicated supply logistic infrastructure and would lose “just-in-time” deliveries – scheduled virtually to the hour when they want their sugar.
  • Meanwhile, more than 100,000 American jobs would likely be lost.

Opponents of Sugar Policy:

Most members of Congress, bankers, labor unions, national farm leaders, and even sugar producers in developing countries back U.S. sugar policy.  In fact, a few large food manufacturers are among the only groups to oppose sugar policy.

That’s because food manufacturers want even cheaper ingredient costs to help boost profits.  During the 2008 Farm Bill, these manufacturers lobbied to replace the inventory management components of sugar policy with an income support model—a change that would have cost taxpayers an estimated $1.3 billion a year.  This time around, food manufacturers are pushing for a policy that would leave the United States completely dependent on foreign producers.

Of course, these industrial sugar users don’t have much reason to complain right now considering they’ve increased production, set sales records, and seen facility expansion and job growth.  Not a bad track record during an economic recession…clearly sugar policy hasn’t hurt them.

What They’re Saying:

America’s sugar producers received accolades from both sides of the aisle—a sign that current no-cost sugar policy is working.  And, as Congress looks to address the country’s budget deficit, sugar farmers are pleased that they’re winning accolades for fiscal responsibility.

Here is what some key legislators in the 2012 Farm Bill debate told sugar producers during their last annual meeting:

House Agriculture Committee Ranking Member Collin Peterson (D-MN):

“I’ve said around the country, and I’ll say again today, We have a no-cost sugar program that’s working exactly the way it should and is being administered correctly.

Senate Budget Committee Chair Kent Conrad (D-ND):

“I think, without question, that because [sugar policy] is no cost it helps in the battle to come.”

Senator Saxby Chambliss (R-GA):

“In these difficult budget times, that’s a huge advantage,” he said of sugar producers’ desire to see a continuation of the no-cost sugar program in the 2012 Farm Bill.

Senator Mike Crapo (R-ID):

“The sugar program is working. We will face serious budget limitations, [but] sugar policy’s emphasis on operating at no cost should help ward off harmful change.”

Other Washington leaders have given sugar policy glowing endorsements, too. The International Sugar Trade Coalition (ISTC), a nonprofit coalition comprised of sugar industries from nearly 20 developing nations, and others have voiced support.

ISTC President Paul Ryberg:

“If there were no U.S. sugar policy… we would see a flood of imports that would depress the price below the cost of producing sugar… developing countries that produce and export sugar could not survive at that price; they would be forced out of business.”

National Farmers Union President Roger Johnson:

“We have a sugar policy in this country that makes sure we have an abundant, affordable supply of an essential ingredient. Why change success?”

The American Public:

By more than a three-to-one margin, Americans favor the current sugar policy that keeps jobs at home and money in taxpayers’ pockets over policy alternatives that would shift production to foreign producers or create expensive subsidies, according to a July 2010 poll by Harris Interactive.

The American Farm Bureau Federation recently passed a resolution in support of the inventory management provisions of the current sugar policy.

Senate Agriculture Chair Debbie Stabenow (D-MI), is a long-time sugar policy supporter and member of the Senate Sweetener Caucus.

And former House Agriculture Committee Chairman Larry Combest (R-TX) had this to say about attacks on sugar: “Eliminate U.S. sugar policy while the rest of the world lavishes protections and subsidies on its producers, and the economic recovery taking place right now will be hurt—and that hurt will be felt from coast to coast.”

Useful Links:

American Sugar Alliance (www.sugaralliance.org)