The United States (U.S.) current sugar program needs a few changes. That is the message Representatives Joe Pitts of Pennsylvania and Danny Davis of Illinois have recently sent to the House through their proposed Free Market Sugar Act.
About the same time, Senator Richard Lugar of Indiana has also introduced the Free Sugar Act of 2011. In January of this year (2011), Senators Jeanne Shaheen of New Hampshire, Mark Kirk and Richard Durbin of Illinois introduced the SUGAR Act.
Established during the Great Depression, U.S. sugar program has 3 key features:
- Price support in the form of non-recourse loans. Sugar processors are allowed to receive loans by pledging their sugar harvest as collateral. If domestic sugar prices drop below the loan rates, they can forfeit the sugar instead of repaying their loans.
The current price support loan rate for raw cane sugar is 18 cents per pound and for refined beet sugar is 22.9 cents per pound.
- Import restriction through quotas. To regulate the flow of sugar into the U.S., authority uses a tariff-rate quota system. Tariff for imports in excess of quota is discouragingly over 15 cents per pound on, mind you, raw sugar.
- Marketing controls through allotments. The U.S. Department of Agriculture estimates sugar demand for upcoming years, based on previous marketing and other criteria. It then distributes shares of expected demand among producers.
These features have been driving U.S. sugar prices well above world prices, giving small businesses and food manufacturers an incentive to either import sugar-containing products or move manufacturing operations outside the U.S.
The proposed SUGAR Act, Free Market Sugar Act, and Free Sugar Act of 2011 all call for elimination of sugar tariffs, “non-recourse” government loans, and marketing allotments that restrict domestic sugar production.
Supporters are hopeful that these legislations would create a free market and lower the cost of sugar for consumers, in general, and for homemade cookie bakers, in particular. Opponents, on the other hand, warn that these bills would force U.S. cane and beet farmers out-of-business by flooding the U.S. market with foreign sugar.