A Sweet Deal

Latest Farm Bill Ups Sugar Price Supports, Adds Ethanol Production

Posted May 2, 2008 at 5:00pm

While most agriculture industries are nervously waiting to see what the final draft of the farm bill looks like, Big Sugar is sitting pretty.

That is, as long as Congress can finish a bill that will survive a presidential veto. Lawmakers requested their sixth extension from President Bush on Friday as they continue to negotiate the details of the farm and nutrition program that expired in September. They now have until May 16 to pass a new law.

Despite calls from Bush for extensive reforms to farm subsidies, one area that hasn’t been cut back is sugar. Sugar cane and sugar beet growers actually increased their share of the pie in the proposed farm bill, upping the industry’s price support floor, or loan rate, with the U.S. government and securing a new provision that would create a sugar-to-ethanol program.

If adopted, the controversial price-support system that sets the rates for U.S. sugar prices, which often are higher than rates on the world market, would increase for the first time in 23 years.

The sugar-to-ethanol program would create a new market for sugar producers who are looking to soften the blow from free-trade agreements that put more foreign sugar into the U.S. market.

The ethanol program would ensure that excess domestic sugar would go toward making ethanol, with the U.S. government helping broker deals between the ethanol market and sugar producers.

Sugar’s stealth lobbying during a period of record farm incomes has led to frustration among ag lobbyists pushing for reforms in the system.

“It was a rather brash move on the part of the American sugar industry to get increases in their safety net [and] protection of an ethanol conversion,” said former Agriculture Secretary Clayton Yeutter, now a senior adviser at Hogan & Hartson who has lobbied for agricultural subsidy reform for Oxfam International.

Though lawmakers continue to hash out the details of the farm bill, Jack Roney of the American Sugar Alliance said he’s confident the provisions will stick.

“The ethanol program saves money relative to the cost of having producers having to forfeit all of the sugar that is made surplus because of imports,” said Roney, director of economics and policy analysis at the group, which serves as the umbrella lobbying organization for sugar cane and sugar beet growers and producers.

Should the programs be enacted, it would be a huge victory for an industry that hasn’t had much legislative success in recent years.

“It is one of the most successful lobbying groups in Washington, considering it’s a relatively small industry compared to other agricultural and nonagricultural industries,” Yeutter said. “What they’ve been able to do in the legislative process is remarkable, not only in this farm bill.”

While sugar has been a largely protected industry for years, it has been rebuilding its base on Capitol Hill after losing its fight in the 2005 Central American Free Trade Agreement, which opened the U.S. sugar market to Central American sugar producers, thus putting it at odds with agribusiness, lawmakers and the Bush administration.

Since that defeat, sugar lobbyists said, they have worked to calm ruffled feathers while continuing to play the money game. In the 2008 election cycle, sugar is the top contributor to federal candidates among agribusiness; American Crystal Sugar Co., for example, doled out $905,300, according to the Center for Responsive Politics.

Roney said the industry did not take an active lobbying position on either the Panama or Peru free-trade agreements.

The Congressional gavel change to Democrats also aided sugar interests. Rep. Collin Peterson (D-Minn.), chairman of the Agriculture Committee, and Sen. Kent Conrad (D-N.D.), a member of the Agriculture, Nutrition and Forestry Committee, both of whom have large sugar beet-grower constituencies, carried the water in their chambers. Minnesota Sen. Norm Coleman (R), who is up for re-election this fall, also has played a large role in the sugar-to-ethanol program.

Not everyone is happy with the expected sugar provisions. Sugar users, led by the Sweetener Users Association, actively opposed the measures, calling for a complete overhaul of the system.

“We favor policies that provide adequate supplies to the marketplace, whereas current sugar policy is designed to keep supplies inadequate in order to force up prices,” said Christy Moran, a spokeswoman for the sweeteners association.

Scott Farber, vice president for federal affairs for the Grocery Manufacturers Association, said consumers are going to feel the pain of the sugar provisions in their pocketbook.

“Ultimately, the program will increase the price of food when food prices are going through the roof,” Farber said.

The American Sugar Alliance defended the sugar provisions in the farm bill and said it was actually hoping for a larger increase in the loan rate. The alliance said the ethanol program will help with the continued demand for energy.

“We anticipate that major corn ethanol producers would buy sugar either to complement or supplement the corn feed stock,” Roney said.