WASHINGTON, D.C.—USDA has projected the nation’s sugar program will operate at no cost to taxpayers for the next decade.
The program provides loans to co-ops and processors that are used to buy farmers’ crops, and places quotas on imports from many countries. The program only costs the treasury if the price of sugar falls to the point where the crop is forfeited to repay the loan.
In Fiscal Year 2013 the agency invested $259 million to help growers cope with prices well below production costs. Agency actions included purchases of sugar for ethanol production, thereby removing a glut from the food supply chain, and accepting forfeited sugar in lieu of loan repayments.
USDA officials say the positive sugar outlook, included in an annual report to support the president’s federal budget proposal, was made possible by recent agreements between the U.S. and Mexican governments and the Mexican sugar industry to resolve the dumping of subsidized Mexican sugar onto the U.S. market.
The U.S. sugar industry advocated for duties on Mexican sugar imports last winter to address the flooding of the U.S. market. Temporary tariffs were enacted in response, but were suspended in December 2014 due to the agreements, which set minimum prices and export limits on Mexican sugar.
The suspension agreements are under appeal.
“We strongly support the suspension agreements so that we do not repeat the costs of 2013,” Michael Scuse, USDA under secretary for Food and Foreign Agricultural Services, said in a press release.
Under the 2012 Farm Bill, Congress directed USDA to operate the sugar program at no cost to taxpayers. Sugar is on a short list of commodities projected by the agency to have a revenue-neutral program, including honey, tobacco, extra long staple cotton, wool, mohair and pelts.
American Sugar Alliance economist Jack Roney said U.S. sugar will have operated at no cost for 22 or 23 years, if USDA’s projection proves to be true.
ASA spokesman Phillip Hayes believes USDA’s intervention averted “massive forfeitures.”
“Now that there is a suspension agreement in place, the USDA assumes the policy will return to no cost for the next 10 years,” Hayes said. “The no-cost component to sugar policy is one of its main attributes.”
Hayes said the projection also sends a signal that prices paid to sugar farmers will remain above forfeiture levels. At 36 cents per pound, Aberdeen, Idaho, farmer Andy Povey said the sugar price isn’t much better than break-even. But he said it sure beats losing money.
“It looks like there are positives compared to what there has been in the last two or three years,” Povey said.
Jennifer Cummings, a spokeswoman for sweetened product manufacturers with the Sweetener Users Association, noted the most recent Congressional Budget Office forecast anticipated the sugar program will cost taxpayers $163 million over 10 years.
Hayes said CBO’s projection is based on outdated information, and he expects it will change when CBO makes a revised projection in March.
Cummings contends the suspension agreements have created uncertainty in the sugar market regarding supply.
“Congress should fix the sugar program the sugar lobby has engineered, which is characterized by tight government-imposed limits on imported and domestic sugar supplies, distorting the market and leading to severe fluctuations in supply and price,” Cummings said.
Source: www.capitalpress.com