Copyright 2001 The Atlanta Constitution  
The Atlanta Journal and Constitution
June 15, 2001 Friday, Home Edition
SECTION: News; Pg. 4E

LENGTH: 1557 words

HEADLINE: Sugar subsidies program again under fire;
Import quota costs weighed

BYLINE: LARRY LIPMAN

SOURCE: Cox Washington Bureau

BODY:
Washington --- The sugar industry is about to wage a bitter battle in the nation's capital.

Sugar users, led by giant food processors, want to end a federal program that supports sugar prices. Sugar producers say that move would destroy the domestic sugar industry and harm the communities dependent on it.

The fight will affect jobs, consumer prices, federal spending, the environment and world trade relations. With so much at stake, interest groups are expected to pour millions of dollars into political contributions.

The problem in the sugar industry is that the world produces more sugar than it consumes. The excess often is traded at one-third or one-half the price of sugar produced in the United States.

The federal program limits sugar imports in order to support the price of domestically produced sugar. But two weeks ago, Reps. Dan Miller (R-Fla.) and George Miller (D-Calif.) introduced a bill to end that program.

In 1996, the last time Congress reauthorized farm programs, Dan Miller came within five votes of ending the sugar program. Since then, he has supported or led efforts that would eliminate or reduce the program.

The House Agriculture Committee is expected to consider the issue as part of a new farm bill this summer, and the Senate is scheduled to consider the bill next year, before the current farm bill expires.

Producers say that eliminating the sugar program will cost them jobs; users say that the current program is costing them jobs.

Some 172,000 farmers, workers, and their families are employed directly or indirectly by the U.S. sugar-producing industry in 27 states. Cane sugar is harvested in Florida, Louisiana, Texas and Hawaii, and sugar beets are harvested in the upper Midwest and Western farm belts. Another 250,000 jobs are tied to corn sweeteners produced in the Midwest.

About 500,000 jobs are in refining or in the use of sugar as an ingredient in food products. The Chicago area is considered the center of U.S. candy production, while bakeries and confectioners are located throughout the nation.

Mayor Richard M. Daley of Chicago sent Dan Miller a letter this month to say that the confection industry has lost 11 percent of its Chicago-based jobs since 1991.

"The continuation of domestic sugar price supports . . . is a key reason these companies are considering leaving Chicago and relocating their facilities outside of U.S. borders," Daley wrote.

Meanwhile, 65 mayors from small towns across the Midwest and West wrote a letter to Daley expressing support for the sugar program.

"Most of us are mayors of one-industry towns, and in many cases that industry is a beet sugar factory and sugar beet farmers," they wrote. "This industry is the backbone of our whole economy and if we lose that industry, we lose jobs, schools, and businesses --- we lose communities."
 
A sweet deal?

Opponents of the sugar program critics point to a U.S. General Accounting Office study a year ago that estimated that the sugar program increased consumer costs by about $1.9 billion in 1998.

Dan Miller calls the high domestic prices a "regressive consumer tax . . . because lower-income people pay a higher portion of their income for food."

Sugar producers argue that the GAO study is flawed because it assumes that food processors will be able to purchase low-cost world sugar indefinitely and will pass on their savings to consumers.

Jack Roney, director of economics and policy analysis for the American Sugar Alliance, says there is no proof that reductions in sugar prices are passed on to consumers.

According to Roney, raw sugar prices dropped 14.8 percent and wholesale refined sugar prices dropped 28.8 percent from 1996 to 2000. Meanwhile, the average retail price of a bag of sugar increased 1.5 percent, while the price of candy jumped 7.7 percent, baked products 8.5 percent and ice cream 13.7 percent.

Jeff Nedelman is a spokesman for the Coalition for Sugar Reform, which includes sugar users, environmental groups and taxpayer watchdogs. Nedelman said no one expects a direct pass-through of savings from lower prices. Instead, he said, the savings are used by manufacturers to hold down or delay price increases caused by other factors, such as higher energy prices and increased labor costs.

Part of the dispute over how consumers would be affected stems from a disagreement over the true cost of sugar on the world market.

Sugar users claim that sugar is regularly available at 9 cents a pound, about half the lowest recent U.S. price.

Sugar producers say world market prices fluctuate wildly, hitting about 40 cents a pound in the early-1980s.

"That supply on the world market is sometimes there, and sometimes not," said Dalton Yancey, executive vice president of the Florida Sugar Cane League and Washington representative of the Texas and Hawaii Sugar Cane Growers.

"It may be 9 cents today, but as soon as that (surplus) is used up then the price goes up," Yancey said, "but in the meantime your (sugar processing) factory here may have gone out of business."

The sugar program is not supposed to cost the federal government any money. In fact, the government is supposed to make money from low-interest loans to sugar refiners.

It hasn't worked that way in the past year.

Domestic sugar prices plummeted to a two-decade low of about 17 cents a pound last year --- well below the roughly 19- to 20-cent break-even point for processors to repay their loans plus interest.

"The growers have lost their most potent argument, that this program doesn't cost the federal government a penny," said Nedelman of the Coalition for Sugar Reform.

The Agriculture Department estimated in February that under current trends, the government could lose $2 billion in 10 years on the sugar program.
 
A fight over farms

Opponents of the sugar program also argue that it has encouraged the farming of marginally productive lands and has polluted the environment, particularly the Everglades.

Dan Miller notes that Florida and the federal government have committed to spending more than $8 billion over the next quarter-century to restore the Everglades. Part of that money will be used to buy land used for sugar production.

"What is being hurt is the environment," Dan Miller said. "We're hurting Florida because of overproduction of sugar."

The district of Rep. Mark Foley (R-Fla.) encompasses much of the sugar-producing area around the Everglades. Foley says that any pollution caused by sugar farming is less than would occur from other crops. He also notes that sugar farmers have made great strides --- and paid a hefty price --- to clean up their operations and reduce pollution.

Dan Miller and other sugar critics argue that the United States is at a negotiating disadvantage with the rest of the world if it advocates open markets for other U.S. products while maintaining trade barriers on sugar.

Yancey and Roney counter that American sugar farmers are among the world's most efficient. They say American sugar producers would welcome the opportunity to compete on the world market, but they claim that most foreign nations subsidize the production of sugar, putting U.S. farmers at a disadvantage.
 
PACs of 'Big Sugar'

Florida's Miller says he does not expect to win his fight in the Agriculture Committee. He's gearing for a floor battle later this year or next.

Meanwhile, both sides expect to spend millions of dollars for support in Congress. So far, the Bush administration has not taken a position on the issue.

Critics of the sugar program claim that it has been kept alive in Congress at least in part because of the financial contributions and lobbying efforts of "Big Sugar."

They point in particular to contributions made by Palm Beach County-based Flo-Sun Inc. and its owners, the Fanjul family.

During the 2000 election, the Florida Crystals Inc. political action committee, formerly known as the Flo-Sun Inc. PAC, contributed $690,750 in unrestricted "soft money" contributions to both parties and $78,200 in direct contributions to candidates and political parties.

Members of the Fanjul family contributed more than $148,000 to political candidates, parties and sugar-based political action committees.

In addition, Flo-Sun listed lobbying expenditures of $290,000, according to campaign and financial disclosure reports compiled by FECInfo.com, an independent campaign finance tracking company.

"Sugar should be the poster child for campaign finance reform," Dan Miller said.

But Yancey said sugar users have spent even more money on lobbying and campaign contributions.

For example, Nestle Chocolate spent nearly $2.1 million in lobbying during the past two years, contributed $67,000 in soft money contributions and $61,500 in direct contributions. Hershey Foods Corp. spent $380,000 in lobbying, $32,500 in soft money and $25,800 in direct contributions.

"It's not about consumers," Yancey said. "It's about huge companies, like Kraft, Nabisco, Hershey, Nestle's. All those big users are 100 times bigger than big sugar companies, and what they want to do is buy sugar cheaper."
 
ON THE WEB: American Sugar Alliance: www.sugaralliance.org Coalition for Sugar Reform: www.sugar-reform.org

GRAPHIC: Photo:
Chicago's mayor, Richard M. Daley, says price controls on sugar are eroding his city's strong confectionery industry. Graphic:
HOW THE U.S. SUGAR PROGRAM WORKS
Sugar processors receive loans from the federal government at a rate of 18 cents per pound for raw sugar from cane and 22.9 cents from beets.
To keep retail sugar prices higher than the loan rate, the U.S. Department of Agriculture limits sugar imports from 41 foreign sugar-producing countries. The target retail prices set by USDA are at least 19.1 cents for cane sugar and 23.2 cents for beet sugar.
American sugar farmers produce about 85 percent of the domestic consumption of sugar, with the rest imported. America consumes about 22 million tons of natural sweeteners a year: 10 million tons from sugar and 12 million tons from corn.
Under World Trade Organization commitments, the United States must allow 1.25 million tons of sugar to be imported. At least an additional quarter-million tons must be allowed in from Mexico under the North American Free Trade Agreement.
If sugar prices fall below the loan rate, sugar processors may forfeit as much as 10 percent of their sugar to the government, instead iof repaying the loans, but they pay a penalty of about 1 cent per pound.
The federal government pays rent to processors that store the forfeited loans.

LOAD-DATE: June 15, 2001