Oh, How Sweet It Is!
What’s Big Sugar Up To? ...
Mark List

It's the New Year!! With it comes the dry season and fewer water problems created by regular fresh water dumps from the Okeechobee into the St. Lucie and Caloosahachee Rivers. Residents and tourists are less frantic about the red tides, blue-green algae build ups in the rivers and the dying estuaries. It's been weeks since we've watched burly third generation fishermen brought to tears by the lack of living marine life where once there was teeming salt water flats full of shrimp, bait fish and shell fish. There's a sense of "okay, maybe we can get through this another year." Rebellious coastal townships were softening their litigious stance against what was beginning to look like Big Sugar putting blinders over our eyes. Less hacking, less coughing, less watery eyes, less dead fish on our shores, less green scum in the canals … yes, we were beginning to settle down to the 2006 tourist season.

But then in the December 18th edition of the TCPalm, a newspaper that circulates through Indian River, St.Lucie, Martin and North Palm Beach Counties Judy Sanchez wrote as a guest columnist " Water Entering Lake O from North is Real Issue". She started by clarifying misconceptions about who's not responsible for the pollution in Lake O (the farmers in the Everglades Agricultural Area), and that was alright. But then she had to go on and lay down some smoke and mirrors:

"For the record, there are no subsidies to sugar farmers. Read the farm bill. We get our returns from the marketplace, based on supply and demand. What we do have are import limits on foreign sugar producers dumping their surplus sugar here below its production costs.

"In response to hurricane damage to Louisiana and Florida's cane crops, the government significantly increased foreign sugar imports to ensure a stable and affordable price to consumers. That is why you have not seen sugar prices increasing at the supermarket.

"Pointing fingers and filing lawsuits will only prevent finding real solutions and further delay any real progress in dealing with the problems of Lake Okeechobee and the estuaries."

Did she really say no subsidies to sugar farmers? Well now, that seems to contradict readily available information on the internet. For example, according to taxpayer.net, "The vast majority of sugar program beneficiaries are not small farmers. In fact, the General Accounting Office (GAO) estimates that 42 percent of all sugar subsidies go to only one percent of recipients - a group comprised mainly of large and corporate farms . Domestically, sugar cane is mainly grown in southern states, with Florida leading production in 2002 with 2,020 tons of raw sugar; almost double that of other raw sugar producing states."

Judy Sanchez went on to say in her article that "the government's increasing foreign sugar imports to ensure a stable and affordable price to consumers." Now how does that work?

Remember our old friends the Fanjul family? With an enormous sugar empire that dwarfs even the U.S. Sugar Corporation, the Fanjul family's sugar holdings in Florida and the Dominican Republic total more than 400,000 acres, operated by a family of companies under the corporate umbrella of Flo-Sun, Inc. The Fanjuls are Cuban-American descendants of the wealthy Gomez-Mena family of Cuba, which controlled much of the American-dominated sugar industry in Cuba until Fidel Castro seized power, and the New York-based Fanjul family. Unlike U.S. Sugar Corporation, its Florida rival, whose offices are smack in the middle of Clewiston's sugar fields, Flo-Sun is headquartered in a posh complex in Palm Beach. The Fanjuls themselves live in multimillion-dollar mansions set among the palm-tree-lined streets of the town.

According to George Barley, a Florida real estate businessman and chair of Save Our Everglades and several related Everglades preservation organizations, the import part of the U.S. sugar program allows the Fanjuls to import sugar into the United States from the Dominican Republic and sell it at a higher price than they would get on the world market. While the Fanjuls produce sugar in both Florida and the Dominican Republic, the Dominican Republic enjoys the largest U.S. sugar quota-and the Fanjuls are its top producer.

In July of this year Jason Lee Steorts wrote in the National Review about sugar programs and their affect on our economy:

"In a hall of fame for corporate-welfare queens, the sugar industry would occupy a place of special honor. For decades, powerful sugar growers have gotten politicians to enrich them with a protectionist scheme that inflates domestic sugar prices to the detriment of American consumers, American manufacturers, American farmers, and the American economy as a whole. In that congeries of absurdities known as U.S. farm policy, sugar's sweet deal stands out as perhaps the most damaging and least defensible program. Now, more than ever, it needs to be scrapped.

"The program allows sugar processors to take out loans from the USDA by pledging sugar as collateral. The loan rates--18 cents per pound for cane sugar, 22.9 cents per pound for beet sugar--are significantly higher than average world sugar prices. These loans must be repaid within nine months, but processors also have the option of forfeiting their sugar to the government in lieu of repaying their debt.

"This arrangement effectively guarantees that the processors receive a price for their sugar that is no lower than the loan value: If prices fell below that level, they would simply forfeit their sugar and keep the government's money. In order to avoid that scenario, the USDA must prop up the domestic price of sugar. It does this by controlling supply through two mechanisms. First, it sets quotas on how much foreign sugar can be imported without facing prohibitive tariffs; second, it regulates the amount of sugar that domestic processors can sell.

"The consequence is that sugar in the U.S. has, over the past decade, cost two to three times the average world price. The sugar industry likes to point out that the program requires no government outlays, since processors repay their loans each year (assuming the government keeps sugar prices sufficiently high). This argument is sound if one regards the sugar program as a question of federal bookkeeping, but that is only because, in this case, the government does an uncharacteristically efficient job of plundering taxpayers to pay off a special interest: It simply cuts itself out as middleman. Each time you buy sugar or a product made with sugar, the difference between the price you pay and the lower price you would pay (absent the governments influence) can be thought of as a sugar tax. Unlike most taxes, this tax never finds its way to government accounts. Instead, it passes directly from your pocket to the sugar industry's profit statements. "

It's also interesting to note that Steorts claims that "a study commissioned by the Sweetener Users Association found that between 7,500 and 10,000 jobs were lost from 1997 to 2003 as a result of high sugar prices. Seven thousand candy-making jobs have been lost in Chicago alone over the past decade." He later states that the sugar industry "employs only 62,000 people and comprises less than 0.5 percent of U.S. farms."

Sanchez later in her article said, "Read the farm bill." Well, I did. I went onto the International Dairy Foods Association website and read the Farm Bill, specifically for Sugar Provisions (www.idfa.org/leg/issuepap/sugprov.cfm).

The opening statement says it all:

" FARM BILL: Sugar Provisions

"The "Farm Security and Rural Investment Act of 2002", which passed the House 280 to 141 and the Senate 64 to 35, is a major disappointment to sugar users because it not only continues the protection for domestic sugar growers but will also likely result in higher sugar prices.”

What follows on the website is a detailed description of the sugar provisions in the 2002-passed farm bill. Some points of note are:

"Extension of Sugar Program

"The sugar program is extended through the 2007 sugar crops.

"Loan Rate and Term

"The sugar loan rate is 18 cents per pound of raw cane sugar and 22.9 cents per pound of refined beet sugar, unchanged from the Federal Agriculture Improvement and Reform Act (FAIR Act) of 1996. Loans mature after nine months or at the end of the fiscal year, whichever is sooner. Loans maturing at the end of the fiscal year may, in effect, be "rolled over" into the next fiscal year so that the total loan term is still nine months - a provision unchanged from the FAIR Act.

"Forfeiture Penalty

"The forfeiture penalty is repealed, effective immediately. The penalty under the FAIR Act was 1 cent per pound of raw cane sugar and an equivalent amount for refined beet sugar. This will have the effect of increasing sugar prices.

"No-Cost Requirement; Payment in Kind

"The Secretary is required to operate the sugar program at no cost to the federal government by avoiding forfeitures. To prevent forfeitures, the Secretary may accept bids for CCC-owned stocks in exchange for production cutbacks - a policy often called a "pre- PIK," a payment-in-kind that may be offered before planting.

"Interest Rate

"An existing 100-basis-point surcharge on CCC interest rates will not apply to sugar.

What's happening here is that for years fiscal conservatives have attacked U.S. sugar subsidies on the basis that they inflate consumer costs and waste taxpayer money. Economists at the U.S. Department of Agriculture (USDA) estimate that federal sugar subsides cost taxpayers an estimated $1 billion annually. Major sugar purchasers - including the soft drink industry and other food manufactures - oppose sugar price guarantees because they inflate the cost of sugar, making sugar-based products more costly to produce.

Reforming the federal sugar program has become increasingly difficult as states expand their sugar crops and corporate sugar interests continue to grease the political wheels by doling out significant campaign contributions to both the Republican and Democrat parties.

The vast majority of sugar program beneficiaries are not small farmers. In fact, the General Accounting Office (GAO) estimates that 42 percent of all sugar subsidies go to only one percent of recipients - a group comprised mainly of large and corporate farms.

Domestically, sugar cane is mainly grown in southern states, with Florida leading production in 2002 with 2,020 tons of raw sugar; almost double that of other raw sugar producing states.

So how does the subsidy work?

According to www.taxpayer.net, "The federal sugar subsidy program is comprised of government-backed loans, price supports, and import quotas. The non-recourse loan program allows sugar processors to post sugar as collateral for a loan. Unlike most other commodity programs, sugar loans are made to processors, not producers, due to the highly perishable nature of both sugar cane and sugar beets.

"Under the sugar program, processors receive non-recourse loans, which allow processors to use their sugar stocks as collateral for securing a loan. If the

market price of sugar drops below the set loan rate ($0.18/lbs for cane sugar and $0.22/lbs for beet sugar), processors can forfeit their sugar as loan repayment, or repay the government at a reduced rate, which would be the market price at the time of repayment. The forfeiture option ultimately sticks the federal government with the high cost of storing forfeited sugar.

"Other sugar subsidies include: 1) A floor price for raw cane and refined beet sugar at no less than 20.1¢-21.1¢ per lb. and 23.0¢-25.9¢, respectively; 2) Import-tariff quotas that limit the amount of foreign sugar that can enter the U.S.; 3) Marketing allotments that limit the sale of domestic sugar; and 4) Exchange of USDA-stored sugar for a producer's commitment to reduce production.

These subsidies create an artificially high price for sugar - sometimes up to three times the price of sugar sold on the world market. As a result, the GAO estimates that U.S. consumers pay an additional $2 billion a year for sugar-rich foods.

"The aforementioned loan programs, price supports and import quotas are contained in the 2002 Farm Bill. Additionally, the bill eliminated penalties formerly charged to producers who forfeited sugar to the CCC through the non-recourse loan program.

"The federal government is expected to lose $500 million dollars as a result…."

So whereas Judy Sanchez claims there are no subsidies to sugar a little investigation clearly shows her statement leaves a lot of unanswered questions - questions that Big Sugar would rather not have bantered about. After all when it comes to the small farmers things tend to look bleak. But for a few conglomerates a whole bunch of government and private money is involved.

And that's just too sweet to pass up.

Mark List