Negative Impacts of 2008 Sugar Program Elicit Cries for Reform
A sugar program that came out of the 2008 Farm Bill continues to hurt sugar producers, according to a new report from food and agriculture consultant Agralytica. The report details a number of negative economic effects from the program, which may soon end if legislation reforming the program comes to pass.
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Provisions from the 2008 bill have adversely impacted sugar producers, food and beverage industries, consumers and the job market by destabilizing the sugar market, according to the Agralytica report, titled “Economic Effects of the Sugar Program Since the 2008 Farm Bill & Policy Implications for the 2013 Farm Bill.” Prices have increased to a record high of 46 cents per pound in the first four years of the bill’s passing, costing consumers an average of $3.7 billion per year, the report said.
The current program also sets trade restrictions on sugar by requiring the USDA to set tariff-rate quotas, which the proposed Sugar Reform Act aims to eliminate. Proponents of the reform efforts say the quotas restrict the ability to adapt to shifting market conditions or the need for additional sugar imports, thus limiting the overall sugar supply and raising prices even further. The response to these high prices has been expanded production in both the U.S. and Mexico by 20 to 25 percent in an attempt to increase supply and drive down prices, leading to a surplus, said Thomas Earley, vice president of Agralytica, who spoke at an NFTC event June 3. The NFTC is among groups supporting the reform efforts.
The first alternative to combat this excess has been for the government to sell sugar at a discounted price to ethanol producers through the $239 million Feedstock Flexibility program, which the Sugar Reform Act hopes to eliminate due to its hefty cost, the report said. The Congressional Budget Office estimates the program will cost taxpayers $51 million this year alone. “Elimination of the program would save taxpayers money,” said Bill Reinsch, President of the NFTC. “Reasonable people would think that’s a good thing.” Another possibility is to forfeit excess sugar to the government, which Reinsch said seemed to be the only other option so far. This tactic also has pitfalls, as it could incur storage costs until the sugar was eventually sold back into the market, which Earley said took about a year to accomplish in 2001.
The high prices of sugar have also impacted employment within sugar-using food and beverage industries. Earley said that approximately 127,000 jobs within sugar-using food and beverage industries were lost since 1977, while there was a slight gain in employment for companies that do not primarily use sugar. Reinsch said the Sugar Reform Act may not result in a “massive rehiring” to reverse the unemployment issue, but would help prevent further erosion. “In the short run, what you will see is stabilization, which is the most realistic expectation,” Reinsch said. “But over time, reform could produce more sustained program management and economic recovery in the industry.”
The amendment to reform the Federal Sugar Program was defeated by a vote of 45 to 54 in the Senate on May 22, but Reinsch hopes for a better outcome in the House of Representatives. “Parties that are following this closely have taken on the view that it will do better in the House,” Reinsch said. “There is a chance to pick up more parties there, so we’ll see if that works.” The amendment is tentatively scheduled to reach the House floor during the week of June 17.