The Try and Try Again Approach to Reforming US Sugar Policy Is Not Working

The Fair Sugar Policy Act, a bipartisan initiative meant to reform the existing US sugar program, was recently reintroduced by Senators Pat Toomey (R-PA) and Jeanne Shaheen (D-NH). Similar legislation was proposed by Representative Virginia Fox (R-NC) in the House, with bipartisan support from 37 other members. Versions of this bill have been introduced in every Congress since 2011; all have been shelved by the Senate and House agricultural committees. The new initiative’s fate is unlikely to be different, even though its changes to the costly and wasteful US sugar program are modest.

The new bill would reduce the floor price paid by the US Department of Agriculture to farmers for raw cane sugar — on the rare occasions when US market prices fall that low — from 19.75 to 18.75 cents a pound. The last time many farmers used that program was in 2013.

It would also allow foreign countries with only partially used sugar import quotas to let other countries fill their quotas. That provision’s impact on domestic sugar prices would be tiny but would create a more stable supply chain for food processors.

The bill would also end the federal government’s obligation to sell sugar acquired though the floor price program to ethanol plants at a loss. That provision cost US taxpayers over $200 million in 2013, but subsequently has cost almost nothing because US sugar prices have been “too high.” This change would also have minimal impacts on the price of sugar, or the benefits enjoyed by the US sugar industry through the program.

The current program restricts the total supply of sugar in the United States by placing strict limits on domestic production and imports from other countries. It also forces the government to buy “surplus sugar” through a price support program when US sugar prices fall below levels acceptable to farmers. This causes US sugar prices to be more than 50 percent higher than world prices in most years.

On average, the sugar program generates about $3.5 billion in additional revenues and $1.2 billion in increased profits annually for the approximately 4,100 US farmers who grow sugar beets and sugar cane. That amounts to an annual average net benefit of $290,000 per farm. These benefits all come at the expense of US consumers. The program is also responsible for substantial employment losses in the US confectionary industry, ranging from 17,000 to 20,000 jobs, a far larger number than any job gains from US sugar processing.

The US sugar lobby has fought hard to persuade Congress to protect their “entitlements.” According to Open Secrets, an organization which tracks money and its influence in politics, in 2020 US sugar producers and processors gave over $6 million in campaign contributions to congressional members from all but two states, almost equally divided between Republican and Democrat candidates. While most of these politicians come from states that do not raise sugar beets or sugar cane, many are members of the House and Senate agricultural committees.

Similar machinations are sure to be going on now behind the scenes. The Sugar Alliance and other lobbying groups have already claimed that the existing program involves no cost taxpayers. That’s not true: US taxpayers pay a hidden tax on every muffin, cake slice, and serving of baked beans they enjoy.

The industry claims that US sugar farmers will suffer severe financial losses even from minor changes to the program, but that argument is implausible, particularly with respect to the 3,500 sugar beet farmers. Sugar beets can only be planted in the same field once every four or five years because of their impact on the soil, and farmers grow different high-valued crops such as malt barley in other years. Ending the existing program would not lead to widespread farm bankruptcies, and the Fair Sugar Act’s limited reforms would have almost no impact.

The 600 farms raising sugar cane in Florida and the Mississippi delta states might be more affected. Though an end to sugar cane production would not be a terrible outcome. The well-documented environmental consequences from nitrogen and phosphorous fertilizer run off in Lake Okeechobee, the Everglades and other Gulf Coast wet lands have been severe. And much of the land currently planted with sugar cane has other valuable uses.

Despite the fact that the Fair Sugar Policy Act would have a modest impact on US sugar producers, and is supported by a substantial number of members of Congress, it has little chance of becoming law. Sugar growers believe that any adjustment to the program would usher in substantial reductions in the benefits they now harvest from consumers. Thus, they are willing to pay lobbyists handsomely to prevent any change to a government program they truly embrace, no matter how modest and sensible the proposed reforms may be.

Vincent H. Smith is Director of Agricultural Studies at the American Enterprise Institute and professor of economics at Montana State University