Farm bill improves sugar program

By Scott Kraus Ag Weekly correspondent
Friday, May 23, 2008 11:30 AM CDT

The proposed 2008 U.S. farm bill - approved recently by near veto-proof margins in the House and Senate - includes important provisions for sugar producers, officials said.

“It addresses most of the issues we wanted addressed,” said Mark Duffin, executive director of the Idaho Sugar Beet Growers Association in Boise. “We didn’t get everything we wanted, but we’re pleased with what’s in there.”

Key provisions - according to the American Sugar Alliance in Arlington, Va. - are as follows:

- The first increase in the loan rate since 1985. The rate for raw sugar will increase ¾ of a cent per pound by 2011. The increase will amount to ¼ cent a pound per year. The loan rate tends to set the market price. That’s because once the market price falls below the loan rate, companies can forfeit sugar to the government to cover federal operating loans, which are still part of the program.

- A program to send excess imported sugar, which would otherwise depress prices, to U.S. ethanol plants. The program can’t be used for “blocked stocks,” which are excess supplies of U.S. sugar that producers have to store at their own cost. They can’t be sold until they wouldn’t oversupply the market. That’s because the existing U.S. sugar program, which uses no taxpayer subsidies, relies on the government regulating sales to match demand. The cost of the ethanol program is uncertain since it depends largely on how much sugar comes from Mexico. On Jan. 1, Mexico was allowed to send unlimited amounts of sugar into the U.S. under the North American Free Trade Agreement.

- Allotting at least 85 percent of the U.S. sugar market to American producers. That’s consistent with their 86 percent share of the market during the six years of the 2002 farm law. The U.S. would likely remain the world’s second-largest buyer of foreign sugar.

- Changing the date to calculate U.S. demand for sugar from Oct. 1 to April 1. That would allow more exact knowledge of demand, rather than estimating it. So on Oct. 1, imports will only come in at the minimum rate guaranteed by treaties. That reduces the possibility of depressed prices if a mistaken estimate allowed too much foreign sugar. Adjustments could be made sooner in case of a crop emergency.

The increase in the loan rate is welcome, said Perry Meuleman, a retired sugar beet farmer in the Rupert area who serves on the board of the American Sugarbeet Growers Association in Washington, D.C.

Producers had hoped for a boost of 1 cent a pound to help cover rising costs. But the ¾ cent hike is a step in the right direction, Meuleman said.

It will help cover dramatically higher costs. For instance, inflation has increased by 93 percent since 1985, according to the American Sugar Alliance. Fuel costs have risen 177 percent, and equipment and chemical costs are up 64 percent.

For refined sugar, the hike will take the loan rate from 22.9 cents a pound now to 24.09 cents a pound in 2011, said Luther Markwart, executive vice president of the American Sugarbeet Growers Association. The rate for refined sugar is calculated differently than for raw sugar.

That change is important, “when you’re looking and fuel and fertilizer costs, and haven’t had a raise in 23 years,” Markwart said.

Changing the date to April 1 to figure U.S. sugar demand is also vital. Particularly since Mexico can now send unlimited amounts of sugar into the U.S. The new estimate date can account for about six months of actual Mexican imports. As opposed to trying to estimate them in advance.

“This way they’ve got facts. It takes the guesswork out of it,” Markwart said. “It makes it much easier to run the program.”

Of course, it’s still important how the program would get administered, according to Meuleman.

“Overall, sugar came out of it fairly well,” he said. “It remains to be seen how they implement it.”

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