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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

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

u s sugar policy in the 2008 farm bill
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
u s sugar policy in the 2008 farm bill1
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
u s sugar policy in the 2008 farm bill2
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
u s sugar policy in the 2008 farm bill3
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
u s sugar policy in the 2008 farm bill4
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
u s sugar policy in the 2008 farm bill5
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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