House Sugar Policy is Lowest Cost Option

Published online: Sep 28, 2007 American Sugar Alliance
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Wash D.C.--With the clock quickly running out on the current Farm Bill, the American Sugar Alliance joined 21 other farm groups and sent a letter to Senate leaders asking for "swift action" on new legislation. This letter, which was sent on Sept. 10, urged Senators to use the popular 2007 Farm Bill passed by the House of Representatives as a template. Alan Welp, a Colorado sugar farmer, said sugar farmers strongly support the House Farm Bill and explained that it is the lowest cost option of any sugar policy proposal being discussed. "The [House] bill continues the decades-old policy of not giving sugar farmers government crop subsidy checks," said Welp, who is chairman of the American Sugarbeet Growers Association's legislative committee. "It also saves taxpayer money by avoiding a train wreck with Mexico next year." The "train wreck" Welp is referring to is a possible glut of Mexican sugar arriving in America when NAFTA allows unlimited sugar shipments from Mexico in 2008. If sugar policy remains unchanged, this mountain of unneeded sugar would force U.S. sugar producers to forfeit on government operating loans. The Congressional Budget Office (CBO) estimated that these forfeitures would cost taxpayers approximately $130 million a year. To avoid this cost and help keep the sugar market balanced in the face of Mexican imports, the House of Representatives designed a plan to turn sugar surpluses into ethanol. "This is a well-designed program that provides some certainty to an uncertain sugar market," Welp explained. "It's a safety valve that would kick in only when imports flood the market, and because it just uses surpluses, food manufacturers and grocery shoppers don't have to worry about having ample sugar supplies." The idea of diverting unneeded sugar into fuel was first floated by USDA Secretary Mike Johanns more than two years ago, and the CBO agrees that it will be far cheaper for the USDA than having to manage the massive loan forfeitures that Mexico could cause. Of course, not everyone is happy with the House Farm Bill or the cost-saving sucrose ethanol program. Lobbyists for large food manufacturers don't mind expensive forfeitures or taxpayer cost if it means slightly cheaper wholesale sugar prices and slightly larger company profits. In fact, the sugar policy proposal trotted out by the food manufacturers last year came in at a whopping $1.3 billion a year. That pricey proposal would have scrapped the current low-cost sugar policy and replaced it with a taxpayer-funded subsidy check system. Not surprisingly, this scheme was quickly shot down by lawmakers on Capitol Hill because of soaring budget deficits. The Senate Agriculture Committee is expected to take up the Farm Bill in October