Industry urges Congress to reform sugar program
reform the US sugar policy, urging Congress to reject proposals
that would increase the cost of sugar price supports.
In a letter sent yesterday to the House Agriculture Committee, companies including Kraft, Kellogg and ConAgra warned that proposals to increase the sugar loan rate would encourage production increases in both the United States and Mexico, forcing the government to buy even more surplus sugar and driving up costs. "By widening the gap between US and world sugar prices, a higher loan rate would also encourage a further exodus of food manufacturing jobs from the United States, as documented by the US Department of Commerce," wrote the letter. The group also warned that a proposal to divert surplus sugar to ethanol production would force the government to buy even more sugar from American producers and then sell it at a loss to ethanol plants, with taxpayers picking up the difference. The letter was sent by over 30 manufacturers, public interest and consumer groups, which included the American Beverage Association, Cadbury Schweppes, Coca Cola, General Mills, PepsiCo, GMA, Consumer Federation of America, Sweetener Users Association and US Chamber of Commerce. It follows a letter sent last month by the Sweetener Users Association (SUA) to members of the House and Senate Agriculture Committees, urging Congress to seize the opportunity offered by the 2007 Farm Bill to reform the American sugar price support program. The association wants the US sugar regime to be made "more flexible, more market oriented, less costly to American taxpayers, less damaging to American job growth, and more compatible with the nation's global trade obligations"."The 2007 farm bill gives Congress an opportunity to reform this country's increasingly expensive and unworkable sugar program. Increasing loan rates and subsidizing ethanol production from sugar would only take us in the opposite direction," stated yesterday's letter. In a notice published on June 5, the House Agriculture Subcommittee approved a draft outlining the nation's sugar program. This stated that the current sugar program would be extended until 2012, including the non-recourse loan program and the authority for marketing allotments. Loan rates remain at 18¢/lb. for raw cane sugar and 22.9¢/lb. for refined beet sugar. The draft requires that the Secretary of Agriculture continue to operate the program at no cost to the Federal government by avoiding forfeitures of sugar. However, SUA said in a statement to FoodNavigator-USA.com that "we understand that the subcommittee-passed legislation of extending the current program does not match what our group's letter to the Committee was about (loan rate increases and ethanol schemes)". "However, the groups that signed the letter continue to hear reliable reports that the committee is informally considering these objectionable changes and has received proposals in that regard from grower interests. While there are no written documents detailing the proposals, we feel it is likely that loan rate increases and ethanol mandates are possible outcomes of the coming full-committee markup." "Therefore, it is important for the committee to hear from sweetener users, public interest groups and other associations that both such proposals are impractical and costly. " Each year, the US government estimates sugar consumption and subtracts from that the amount of foreign sugar the US is forced to import, while American sugar farmers supply the remainder. According to the American Sugar Alliance, a coalition of sugar farmers and processors, this structure avoids oversupplies and shortages, resulting in sugar prices remaining stable. Consequently, this eliminates the need for government payments to farmers, said ASA. But SUA claims that by imposing government-regulated price floors, marketing quotas and import restrictions, domestic sugar prices are increased. This results in more and more food companies sending their production oversees where sugar is cheaper, said the group, adding that this will eventually hurt domestic producers by undermining long-term demand for their product. The SUA is not alone in calling for changes to the US sugar regime. Georgia's Senate recently passed a resolution urging the state's congressional delegation to reform the sugar policy. The Senate called for "the type of reasonable reform to US sugar policy that will in turn stabilize our foreign trade and domestic economic policies".The European Union was forced to overhaul its sugar regime last year when the World Trade Organization ruled that its regime was incompatible with its international obligations. But the US does not yet have this level of pressure on it to reform its sugar regime and the draft Farm Bill for 2007, tabled by the US Administration earlier this year, suggested that it does not intend to carry out any radical changes to the 2002 bill. The draft farm bill kept the essence of the 2002 bill and suggested little that would significantly reduce US expenditure on farm subsidies or put the US farm business on a more internationally competitive footing.