“American sugar policy is working well for American consumers, food manufacturers, and taxpayers. It can provide an adequate economic safety net for American sugar producers, as long as there is an effective response to Mexican subsidizing and dumping.
“These SAs have proven ineffective. The dumping continues and
“We are encouraging the
“As long as an adequate response to foreign subsidies and dumping exists,
“American food manufacturers and consumers depend on a reliable, dynamic, geographically-dispersed domestic sugar-producing industry to provide safe, high-quality, responsibly-produced sugar at a reasonable price. Despite a well-designed sugar policy in the 2014 Farm Bill, the low prices caused by Mexican subsidizing and dumping threaten the economic viability of American sugar producers.
“Foreign governments subsidize their producers so egregiously that many of these countries produce far more sugar than their markets demand. Rather than store these surpluses, or close mills and lose jobs, as
“As a result of these dumped surpluses, the so-called “world price” for sugar has been rendered essentially meaningless. Rarely in the past few decades has the world price reflected the actual cost of producing sugar – a minimal criterion for a meaningful market price.
“The world price is so depressed by subsidies and dumping that, over the past 28 years, the world average cost of producing sugar has averaged nearly 50% more than the world price (Figure 1). 3
“One European market expert noted: “The world market price is a 'dump' price…(it) should never be used as a yardstick to measure what benefits or costs may accrue from free trade in sugar.”4
“And researchers at
“But how can a world sugar industry exist if the price received for the product is just a fraction of the cost of producing it? The answer is twofold:
“1. Only about 20-25% of the sugar produced each year is actually traded at the so-called “world price.”
“2. The other 75-80% of sugar is consumed in the countries where it is produced, at prices considerably higher than the world price, and higher than production costs.
“This, then, explains how we can have a vast world sugar industry: Governments shield their producers from the world dump market sugar and maintain prices high enough – above the dump market and above production costs – to sustain a subsidized domestic industry and generate and defend jobs.
“Further, this explains why we require a
“Recent exposure of the
Damage from Mexican Subsidized Dumping
“Though the Mexican government recently officially divested itself of its mills, the government remains closely involved in the Mexican sugar industry. In addition to government ownership, Mexican growers and processors have benefitted from federal and state cash infusions, debt restructuring and forgiveness, government grant programs to finance inventory, exports, and inputs, and a cane-grower payment system that effectively subsidizes exports.7
“In 2013, Mexican sugar production soared to an all-time high, a stunning 38% higher than the previous year's production. Yet, despite the huge domestic market surplus,
“The subsidized and dumped Mexican surpluses collapsed the
“Unfortunately, the SAs are not working as intended.
* American consumers and food manufacturers continue to have access to high-quality, safe, affordable, responsibly-produced sugar supplies.
* American taxpayers benefit from a policy than has run at zero cost in all but one of the past 14 years and is projected to remain zero cost for years to come if the Mexican dumping problem is resolved.
* American sugar farmers have retained an economic safety net that has helped many, though not all, to survive an extended period of low prices and the catastrophic effects of Mexican dumping.
“American Consumer Benefits. With
“American Taxpayer Benefits. Farm Bills have long instructed the
“With Suspension Agreements in effect the CBO projects zero cost as long as the agreements are in place, with modest costs in the unlikely event the SAs, and/or duties, are terminated in five years and Mexican dumping resumes.
“Sugar policy opponents, led by major sugar-containing product manufacturers, have urged opening the U.S. market to greater quantities of subsidized foreign sugar. But additional, unneeded sugar would threaten
“Sugar Producer Safety Net. With the exception of the year of excessive Mexican dumping, when prices fell below loan forfeiture levels,
“Since the loan support price was established in 1985 at
“Producers who could not reduce production costs enough to keep pace with falling real prices for their product have gone out of business. We have lost 57 beet and cane operations – more than half of all those operating in 1985.
“More closures would certainly have occurred over time if not for vertical integration by beet and cane growers and investment in biotechnology and other breeding and processing advancements.
“Crop insurance is an essential risk management tool for beet growers and is usually a requirement by their bankers. Historically, crop insurance has served beet growers with minimal but adequate coverage. However, this past year many beet growers were plagued by low sugar contents in their beets that insurance needed to cover but did not. Beet growers are assessing the problem and will work with the
“As long as there is an adequate response to Mexican subsidizing and dumping,
“The response to Mexican dumping is most likely to take either of two forms:
“1. Anti-dumping and countervailing duties, as calculated by the
“2. Effective Suspension Agreements, that would permit continued duty-free sugar imports from
“However, to weaken or surrender sugar policy without any foreign concessions, as some critics of
“American sugar producers will work hard for an effective 2018 Farm Bill for all American farmers. And we strongly support
* * *
9 Outlaw and Richardson, op. cit.