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Don't Misunderstand higher priced sugar

by: Brad Wilson

Fri Jan 08, 2010 at 10:07:45 AM PST

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The sugar program came up here:

I raised a point that needs further clarification, so here it is, just below this general introduction.


First, generally, the sugar program has price floors and supply management, like traditional farm programs.  No subsidies are needed if it's run well (ie. enough supply management).

This is a special case however, as sugar is not storable in raw form, so the program ties in the processors.  It also involves some foreign supply management as I understand it.  Also the price floor is probably too low, but remember, grains have zero price floors since 1996.

One implication is that corn, with no price floors, then came on with cheap high fructose corn syrup to compete against sugar, placing an unnecessary burden on the sugar program.  So this relates to cheap liquid sweeteners in soda pop, and other sweeteners on down the grocery isle.

See IATP's analysis here for more information (see appendix, etc.):  "Sweet or Sour,"

Being Wrong on the Farm Bill:  The Sugar Example

The free traders at the CATO institute (with help from Diane Feinstein) bash the sugar program here: (scroll down to "Sugar Protection")

Here's my rebuttal (below).  Basically I argue that CATO's arguments are false and antibusiness.

1.  The sugar price supports are not "subsidized."  Farmers pay the interest on the loans.  

2.  The sugar program insures that America makes a profit on exports of sugar.  That is a positive stimulus on the economy.  Repeal of the program would mean losses on exports most years.  It would change an economic stimulus into an economic loss.  That benefits all of America.  CATOs claim that we lose sales omits the fact that we would usually lose money on those sales under free trade.

3.  It is not a "hidden tax" to sell products in our domestic economy at above cost rather than at a loss, as in the case of corn, wheat, cotton, rice, soybeans, sorghum grain, barley, oats (most of the time, in terms of full costs, 1981-2006:  USDA, ERS).  The real hidden tax is when farmers lose money and get off farm jobs to subsidize domestic and foreign consumers, processors and CAFOs, as happens when subsidies don't cover full costs, (as in the five, five year studies by USDA ERS) here: (scroll down to "Effects of Government Programs on Costs and Returns."

4.  Price supports are loans that are paid back with interest.  There is no net cost.  The government can make a profit on the programs.  When we had these programs for grains (with no subsidies) 1942-1952 the government netted $13 million in the black, according to one analysis, as farmers paid interest on the loans.  We  only have expensive farm subsidy programs to subsidize processors and CAFOs with below cost raw materials in a hidden way, (so farmers get bashed and agbiz is left hidden, off the hook, as was usually the case in the mainstream media and among progressives in the lead up to the 2008 farm bill). They don't care that we lose money on exports as our taxpayers pay subsidies on those exports.

5.  Users pay prices for the product above the cost of production.  This makes perfect sense.  In contrast, every other commodity measure introduced in congress this time around involved America losing money on exports and partly giving away farmers commodities to "consumers and manufacturers" (at below cost).  It forced farmers to subsidize consumers, as we have for other program crops every year 1981-2006, and many other years as well.

6.  Free trade ideology is considered more important to this group than the central business practice of making a profit.  This is rabidly anti-business.

Is this too hard for people to understand in our movements and in the mainstream media?  Let us hope not.

Brad Wilson :: Don't Misunderstand higher priced sugar
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Sugar policy correction. (4.00 / 1)
This comment contains an error.  The US does not export sugar (unlike other commodities where we are global export leaders).  Point 2 should be changed to focus on giving farmers, rural communities and rural states and regions profits (or reduced reductions and losses) from sugar farming.  You could say that tese regions "export" into other US regions.  Also we give other countries, poor countries, the chance to export into the US at these higher prices, which are above global prices of severe dumping, but not up to fair trade price levels.  

Sugar price floors are still out there, but they're very low, probably well below 50% of parity.  (I may post some of that data soon.  What I have now is partial.)

ERS data on sugar costs and returns shows huge losses in recent decades.  ERS may have quite computing this data.  

"We're trying to warn this nation of a tidal wave ..., and it's coming your way, whether you want to know it or not...!"  female family farm activist in Iowa warning against agribusiness, Donahue Show, 1985

Sugar: Correcting #4 (4.00 / 1)
Item number 4 is also different for sugar, as I understand the program. Because sugar is not storable unless it's processed, price floors are handled through the companies, and companies are required to pay certain prices.  This then is not a price floor loan program, like the other farm commodity programs were.

Again, sugar prices have not always been above the cost of production as #5 suggests, but they are held up somewhat.  Corn prices fell to 7ยข here during the Great Depression, prior to the price floor programs.  That can't happen for sugar.

"We're trying to warn this nation of a tidal wave ..., and it's coming your way, whether you want to know it or not...!"  female family farm activist in Iowa warning against agribusiness, Donahue Show, 1985

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