Sugaronline Editorial - Looking down the barrel of a gun By Meghan Sapp

Published: 03/23/2018, 2:49:00 PM

Sugar programme reform in the US is yet again on the docket but who will win in the new Farm Bill?

Sugar programme reform in the US is yet again on the docket but who will win in the new Farm Bill?


Every four years, like clockwork, food manufacturers in the US team up with their powerful government/tax reform buddies to angle a way around the sugar programme as part of Farm Bill negotiations. Sometimes they try through separate legislation in between, but Farm Bill time is “the big show”. Convinced that eliminating the programme will reduce their sugar costs that will allow them to improve their margins—lowering retail prices for consumers isn’t really part of the deal—they never seem to make much headway.

Like all US-style lobbying efforts, the “Alliance for Fair Sugar Policy” launched this week a “fact-filled” campaign aimed at supporting the The Sugar Policy Modernization Act (H.R. 4265 / S. 2086), the latest reincarnation of sugar programme reform in Congress that happened to be written by the Sweetener Users Association and key member of the Alliance. Referred to by sugar farmers as the Sugar Farmer Bankruptcy Bill, farmers spent the first two weeks of March in Washington meeting with lawmakers to get them to understand what these proposed changes really mean—and none of it’s good for them.

The House of Representatives bill is co-sponsored by nearly 70 Congressmen from predominantly manufacturing states, nearly a third of which were later add on’s as the debate heats up on Capital Hill. It’s currently waiting to be heard in the Agricultural and Ways and Means committees. The Senate’s sister bill submitted the same day as the House version last November has 19 co-sponsors, all of whom come from manufacturing states and led by Senator Jeanne Shaheen from New Hampshire who has sponsored similar legislation no less than four times—in 2017, 2015, 2013 and 2011.

What’s interesting about the Senate version is that there’s only one new sponsor to the bill since it was presented, indicating there might not be momentum building in that chamber as in the House of Representatives. It’s an early sign there could be resistance, or that Senators are tired of dealing with the same old proposal that doesn’t get anywhere or changes enough to get buy in from farm states. That buy in is key because the power farm states aren’t going to throw their voter base under the bus, the reason that reform hasn’t come before now.

For food manufacturers, the key is lower sugar prices. The Alliance supports the bill (not just because they wrote it) because they want an end to production quotas. For sugar companies who want to boost their production but can’t due to quota restrictions, this could be a way to try to get their support for the reforms, making way for industry consolidation as has been seen in Europe as that market phased out its own long-standing quota system.

But they also want an end to minimum tariff rate quota levels that sought to balance the market with quota-controlled domestic production, in essence opening the door to significant imports. Giving the USDA this “flexibility,” as they call it, seeks to reverse the safeguards put in place as part of the 2008 Farm Bill that were meant to provide more price and supply stability in the market. But anything that keeps prices stable above world market prices is a no-no for this group and one certain to bury sugar farmers who would lose their price supports as a result of the bill.

As a bone to throw to their powerful tax reform partners, the bill also seeks to eliminate the feedstock flexibility programme introduced in 2008 to allow sugar forfeited under the Commodity Credit Corp loan programme to be sold at a deep discount to ethanol producers. It was used only once, in 2013, and cost US$249 million in taxpayer funds—just enough to “prove” the sugar programme isn’t “no cost” to taxpayers. But as the bill looks to eliminate the price supports via the commodity loan programme anyway, the feedstock bit becomes moot.

The current attempt at reform is pretty much the same as in years past, but the legislative mood might be different enough to push it through. It’s far too soon to tell, however.

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