Congress’ Tinkering With Sugar Policy Worries Cane Growers

By Susan Salisbury, The Palm Beach Post, Fla.

May 28–When it comes to the sugar rationing Americans had to live with during World Wars I and II, sugar cane grower Wayne Boynton figures pictures tell the story best.

Boynton, 61, of Loxahatchee uses his vintage poster collection from the two eras to convey his message, which is simple: The country has forgotten lessons it once learned about the consequences of depending on foreign-produced refined sugar.

“There is a misunderstanding of our sugar program and the purpose of it,” he said. “Its purpose is to provide a stable, safe domestic supply of sugar.”

Boynton’s posters are particularly pertinent now.

The U.S. sugar program — which includes import quotas and tariffs, limits on how much sugar cane and sugar beet producers are allowed to market and a loan plan — is under attack from members of Congress who have begun work on the new farm bill, which will take effect in October.

That means Florida’s sugar industry is under attack, growers say. Boynton is a member of the Sugar Cane Growers Cooperative of Florida in Belle Glade, one of the state’s three sugar companies, all of which grow cane in Palm Beach County. The other two are Florida Crystals Corp. of West Palm Beach and U.S. Sugar Corp. of Clewiston.

Florida is the nation’s largest producer of sugar cane. Its industry directly and indirectly supports 23,528 jobs and has an annual economic impact of more than $2 billion, according to New York-based analysts LMC International Ltd.

Opposition to federal sugar policy, which allows U.S. sugar producers and refiners to operate in a protected market, has been around for decades and usually grows more vocal every five years when Congress debates the agriculture spending bill.

Foes of the policy include businesses that require sweeteners, primarily candy makers. Companies such as The Hershey Co. argue that they can save money and jobs by using cheaper sugar. The world price of sugar is about 18 cents a pound, while the U.S. sugar price is about 23 cents, according to the latest U.S. Department of Agriculture figures.

“We believe that a more market-oriented approach will best serve future sugar-policy needs,” Joe Goehring, director of commodity operations for Hershey, testified recently before the Senate Agriculture Committee.

This time around, opponents of the program are calling for making direct income-support payments to sugar growers, bringing the program in line with the procedures for wheat and corn. They argue that those subsidies, which sugar farmers do not currently receive, will help keep the industry alive as it faces new competition under the North American Free Trade Agreement.

“Events are coming together that will make it difficult to maintain the program in its current form,” said Randy Green, president of the Washington-based Sweetener Users Association.

Under NAFTA, Mexico will be able to ship an unlimited amount of duty-free sugar into the United States as of Jan. 1, 2008, Green said.

“We, as users, need a healthy producing and processing industry of both beet and cane sugar,” he said. “We are open to a direct payment approach for sugar.”

It isn’t just NAFTA that has altered the sweetener industry’s position. Hurricane Katrina also had something to do with it.

When Katrina hit the Gulf Coast on Aug. 29, it caused extensive damage to sugar-producing facilities, leading to the shutdown of two refineries. One of those was the Domino Sugar refinery in Chalmette, La., owned by Florida Crystals and the co-op.

Because of Katrina, U.S. manufacturers found out just how much they need refined American sugar, argues Margaret Blamberg, executive director of the American Cane Sugar Refiners’ Association.

Sugar from Mexico, brought in to fill the gap, had to be refined all over again to remove small pieces of metal left by the machinery used in Mexican refineries, Blamberg said. The foreign sugar also was delayed by shipping and inspection problems.

Despite all that, Blamberg told the Senate committee, Americans had an ample supply of sugar.

“That’s because of sugar policy,” she said in testimony. “No-cost sugar policy gives the USDA the flexibility it needs to meet demand during times of emergency by tapping an industry-funded sugar reserve and by increasing imports.”

The sugar program works through federal control of imports and setting how much domestic sugar producers are allowed to market at any given time. Farmers can plant and process as much sugar cane as they wish, but if the government decides the sugar is not needed, the producers must withhold that sugar.

Another problem with the current program looms in the crisis over global energy prices. More sugar-producing countries are exploring growing cane and beets to make ethanol, and that will drive up world prices, said J.B. Penn, USDA undersecretary for farm and foreign agricultural services.

Higher prices will mean other countries will be less willing to fill in U.S. gaps in sugar production should another hurricane or other natural disaster strike, Penn told the Senate committee.

Andy Fisher, a spokesman for Sen. Richard Lugar, R-Ind., a longtime foe of the sugar program, said the allotment system keeps new producers from entering the arena, thus discouraging those who may want to grow sugar cane for ethanol.

“Ethanol is cheaper from sugar than from corn. What we are seeing in Indiana and throughout the Midwest is dozens of ethanol plants using corn,” Fisher said. “If sugar is truly more efficient than corn, it would stand to bear that ethanol plants could go in equally rapidly in sugar-growing areas.”

Brian Riedl, a federal budget analyst with the conservative Heritage Foundation, says it’s time the program was reformed.

“My main concern on sugar is that the free market sets most other prices in our economy,” Riedl said. “There is no reason the free market should not set the price of sugar, especially when inflated sugar prices are driving candy makers out of the country.”

But U.S. Rep. Mark Foley, R-Fort Pierce, contends that sugar users are simply seeking cheaper prices at the expense of taxpayers and farmers.

“Everything seems to be working appropriately,” Foley said. “Growers in our region have had a difficult year with the hurricanes. They have had enough shock to their systems. If we can sustain the current system under the new farm bill, we will all be better off.”

So far, those who support the current sugar program appear to have won the first round. Tuesday, the House of Representatives defeated, by a vote of 281-135, an amendment that would have reduced the sugar program loan rate by 6 percent.

U.S. Sugar Senior Vice President Robert Coker says he does not think Congress will go for a direct payment plan.

“To take a program that is no-cost and convert it to a $2 billion government-cost program makes no sense,” Coker said. “The existing sugar policy for American is working. It working very well for the consumer and for the producers.”

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