PDF _ RL33541 - Background on Sugar Policy Issues
26-Jul-2007; Remy Jurenas; 27 p.

Update: Previous Releases:
September 6, 2006

Abstract: The sugar program, authorized by the 2002 farm bill (P.L. 107-171), is designed to protect the price received by growers of sugarcane and sugar beets, and by firms that process these crops into sugar. To accomplish this, the U.S. Department of Agriculture (USDA) makes loans available at mandated price levels to processors, limits the amount of sugar that processors can sell domestically, and restricts imports. In support of the program, sugar crop growers and processors stress the industry’s importance in providing jobs and income in rural areas. Food and beverage firms that use sugar argue that U.S. sugar policy imposes costs on consumers, and has led some food manufacturers to move jobs overseas where sugar is cheaper.

In a major policy change, the 2002 farm bill reactivated sugar marketing allotments that limit the amount of domestically produced sugar that processors can sell. The level at which USDA sets the national sugar allotment quantity, in turn, has implications for sugar prices. Accordingly, sugar crop producers and processors on one side, and sugar users on the other, have sought to advance their interests by influencing the decisions that USDA makes on allotment and import quota levels.

The issue of additional sugar imports “crowding out” domestic production was divisive when Congress debated the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) in 2005. Since then, attention on sugar trade issues has turned to the potential impact of free trade in sugar and high-fructose corn syrup (HFCS) — a substitute and cheaper sweetener — between the United States and Mexico, which takes effect on January 1, 2008. Unrestricted sugar imports from Mexico are projected to result in budget outlays (estimated at $1.4 billion over 10 years) as U.S. processors default on price support loans. This outlook conflicts with the current objective that the program operate at no cost and has become a key issue in crafting sugar provisions for the 2007 farm bill.

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Topics: Agriculture, Economics & Trade

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