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The U.S. Sugar Regime: Options for Reform

This study delves into two scenarios regarding duty-free sugar imports from Mexico, assessing their impact on the U.S. sugar program and proposing a shift to a standard commodity program. The key elements, including elimination of marketing allotments and reduction in loan rates, are thoroughly examined. Data projections for sugar prices, producer returns, and government outlays are analyzed to determine the feasibility of the proposed reforms.

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The U.S. Sugar Regime: Options for Reform

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  1. The U.S. Sugar Regime: Options for Reform David Blandford Penn State University German Marshall Fund Luncheon Washington, DC. November 16, 2005

  2. Two scenarios examined • Focus on impact of duty-free imports of sugar from Mexico from 2007/08 • Low imports – increase in duty-free imports of roughly 200,000 short tons • High imports – increase in duty-free imports of sugar of over 1.3 million short tons (use of HFCS in Mexican beverages is a key factor) Note: all the numbers for future years (FY2006 – 2015) are projections not forecasts!

  3. U.S. sugar prices:the two scenarios

  4. Bottom line… • A significant increase in imports from Mexico would mean that the sugar program could not operate on a no-cost basis • Would a shift to a “standard” commodity program be feasible? • Key elements - elimination of marketing allotments, reduction in loan rates, use of direct payments

  5. Parameters for the standard program scenario *Except for loan rates, beet sugar provisions are expressed in raw sugar equivalents. Counter-cyclical payment rates for both cane and beet sugar are determined by the following formula: max(0, (Target price - Direct payment rate - NY raw sugar price)

  6. Sugar and sweetener prices(high import assumption FY 2008-15 average)

  7. Producer returns ($)(high import assumptionFY 2008-15 average)

  8. Sugar payments(high import assumption FY 2008-15 average, mill. $) * With no payment limitations; $224 million with payment limitations?

  9. Government outlays(high import assumption FY 2008-15 average, mill. $) • With no payment limitations; $64 million with payment limitations? • Approximate “break-even” direct payments gives net cost of $100 million

  10. Environment and natural resources Community economic development The full AFBF sugar study can be found at http://dblandford.aers.psu.edu Food and agricultural systems

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