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International Sweetener Colloquium Orlando, Florida February 9, 2009

International Sweetener Colloquium Orlando, Florida February 9, 2009. U.S. Sugar Policy in the 2008 Farm Bill: Why Congress Made Some Changes Jack Roney Director of Economics and Policy Analysis American Sugar Alliance. U.S. Sugar Policy in the 2008 Farm Bill. Key Changes

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International Sweetener Colloquium Orlando, Florida February 9, 2009

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  1. International Sweetener ColloquiumOrlando, FloridaFebruary 9, 2009 U.S. Sugar Policy in the 2008 Farm Bill: Why Congress Made Some Changes Jack Roney Director of Economics and Policy Analysis American Sugar Alliance

  2. U.S. Sugar Policy in the 2008 Farm Bill Key Changes • Loan rate increase • Minimum share of U.S. consumption • Sugar-to-ethanol mechanism to balance market • Restraint on timing for import quota (TRQ) increases

  3. U.S. Sugar Policy in the 2008 Farm Bill Key Changes • Loan rate increase: • 4.2% increase, phased in over next three years • First increase since 1985 • General inflation since 1985: 104% • Key input cost increases even greater • Sugar losing out to higher-priced competing crops • Beet and cane acreage on steady decline

  4. U.S. Sugar Policy in the 2008 Farm Bill Key Changes • Minimum share of U.S. consumption • WTO, FTA concessions had claimed about 15% of U.S. market; minimum amounts guaranteed whether U.S. needs the imports or not • U.S. producers: Residual suppliers to own market • NAFTA: Mexico’s unlimited access as of 1/1/08 • More concessions in new FTAs, Doha Round? • Congress: Enough is enough. Honor all trade agreements, but preserve some share of U.S. market for competitive, efficient, responsible U.S. producers • 85% share: If production less, increase imports

  5. U.S. Sugar Policy in the 2008 Farm Bill Key Changes • Sugar-to-ethanol program to balance market • Pre-Farm Bill USDA projections of massive oversupplies of sugar from Mexico; CBO projections of high loan forfeitures, government costs • Congress’ aims: • Avoid sugar loan forfeitures • Minimize government costs • Contribute to effort to reduce dependence on foreign oil • Standby program: Only when imports cause oversupply • Buy surplus sugar from lowest bidding sugar producer; sell to highest bidding ethanol producer

  6. U.S. Sugar Policy in the 2008 Farm Bill Key Changes 4. Restraint on timing for import quota (TRQ) increases • Avoid repetition of past disasters: Raising TRQ too early, oversupplying market, depressing price • July 2006: Excessive TRQ of 564,000 short tons – depressed market prices for two years • August 2008: TRQ increase of 300,000 tons – U.S. raw price plunged below loan forfeiture levels, remains there now • Waiting until April 1, unless emergency • Still ample time (half year) for additional imports to enter • By then, vastly more information on U.S. and Mexican sugar production and consumption and Mexican exports • This year as example: Just between September 2008 and January 2009 WASDEs, USDA has found 576,000 more tons of sugar, doubling its 2008/09 ending-stock and stock/use-ratio forecasts

  7. U.S. Sugar Policy in the 2008 Farm Bill Key Goals Achieved • Help ensure American sugar Users and consumers of reliable supplies of nearby, safe, high-quality domestic sugar at reasonable prices • Mitigate dangers of imported sugar: Reliability, safety, quality, timing, practicality • Provide American sugar producers opportunity to survive • Cope with pressures of high input costs and competing crop prices, potential further loss of market share to subsidized imports via trade agreements • Avoid or minimize taxpayer costs • Small step toward reducing American dependence on foreign oil

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