The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Big Sugar's Sweet Deal Gets More Costly

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


For many years, Big Sugar has claimed that the government's sugar program operates at no cost to taxpayers. Citizens Against Government Waste and other opponents of the program have consistently objected to that claim, pointing out that while the sugar processors pay into the program, there is a cost to taxpayers through the bureaucracy that is necessary to administer the program, as well as higher prices to federal feeding programs, which have to pay higher costs for products that contain sugar along with consumers. There is also a cost to the economy through the loss of jobs in companies that use sugar. There is no dispute that sugar prices in the U.S. are at least double the world price. In CAGW's Prime Cuts, the sugar program is described as "an outdated, Soviet-style command-and-control program that uses price supports, tariffs, import quotas, loans, and marketing allotments to artificially inflate the price of sugar." The federal government establishes a minimum price for sugar, and imposes marketing controls that limit how much sugar processors are allowed to sell. The allotments are administered by a small cartel of sugar processors. The import quotas keep less expensive sugar out of the country. The latest details about the sugar program belie the longstanding "no cost" claim. Sugar processors have borrowed $862 billion under the price support program since October 2012, and the Department of Agriculture (USDA) is considering buying 400,000 tons of sugar to prevent defaults that could reach $80 million. One reason for the defaults is an 18 percent drop in the price of U.S. sugar since October. Under the unlikely scenario that prices will rise prior to April 1 and the USDA cancels the purchases, at that time higher prices will start being passed through to consumers for all commodities that use sugar, including baked goods, cereal, candy, dairy products, and snack foods, among hundreds of other products. Consumers already pay about $3.5 billion more each year in artificially inflated prices for these commodities. There will also be a negative impact on employment. As noted in Prime Cuts, "Between 1997 and 2011, nearly 127,000 jobs were lost in sugar-using industries. For every sugar growing job that is protected under the program, about three manufacturing jobs are lost. ... 60 percent of all sugar program benefits go to the wealthiest one percent of farmers." According to a March 12 article by Alexandra Wexler in The Wall Street Journal, the USDA would not identify the name or amount of money provided to any recipients of the loans. The article, however, named three granulated sweetener companies - American Crystal Sugar, Amalgamated Sugar, and U.S. Sugar Corp. - and noted that only U.S. Sugar denied receiving any loans. Ms. Wexler described the complex mechanics of the $80 million cost to taxpayers. The 2008 Farm Bill requires the USDA to sell forfeited sugar to ethanol producers. The USDA will have to take a 10-cent lost on each pound of sugar sold. If 400,000 pounds are purchased, the cost would be $80 million. The last time the USDA had to buy sugar on the open market was 2000, when the agency purchased 132,000 tons of sugar "to raise prices, but the effort was generally considered unsuccessful because borrowers ended up handing over 1 million tons of sugar to the agency instead of repaying the loans. The loan program incurred losses of $295 million that year." In a rare admission that the sugar program does have a cost to taxpayers despite consistent objections to that characterization, Ms. Wexler quoted American Sugar Alliance spokesman Phillip Hayes, who said that USDA "is going to administer sugar policy the way Congress designed. Congress specifically designed sugar policy to run at the lowest possible cost to American taxpayers." That is not "no cost." One of the co-sponsors the Sugar Reform Act of 2013, Sen. Jeanne Shaheen (D-N.H.) told Ms. Wexler that intervention by the USDA would be "unacceptable" because it would "be unfairly leaving consumers and businesses on the hook to foot the bill." The legislation is S. 345 in the Senate and H.R. 693 in the House. The bills would eliminate higher price levels, reform supply restrictions, repeal unnecessary trade restrictions, provide the USDA with flexibility to administer quotas, and repeal the Feedstock Flexibility Program. The co-sponsors plan to offer the language of the bills as amendments to the Farm Bill when it is considered in Congress. Adoption of these reforms would truly be a sweet deal for taxpayers and consumers.

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