Updated 3 yearss ago
After sticking taxpayers with a $100-million tab, growers are bracing for changes in federal farm policy.
By David Villano
The vast fields of sugar cane south of Lake Okeechobee -- more than 425,000 acres in all -- are a testament to both the region's rich, fertile lands and, perhaps even more, to the generosity of federal lawmakers. Sugar remains one of farming's most highly subsidized commodities.
That fact was never more apparent than late last summer, when the industry's three major producers -- U.S. Sugar, Florida Crystals and the Florida Sugar Cane Growers Cooperative -- forfeited more than $100 million in raw sugar to the federal government rather than pay back their crop loans. U.S. taxpayers now are left holding a 270,000-ton bowl of unwanted sugar. Add similar forfeitures by Western-state sugar beet growers, and the federal inventory of sugar, as of early October, topped 800,000 tons, about 12% of total sugar production last year.
To sugar producers, the forfeiture decision was a no-brainer. Industry officials say it costs them about 19.5 cents to produce and ship a pound of sugar. But last summer, the spot futures price of domestic sugar dropped below 17 cents, its lowest in nearly a quarter-century. As a result, it made more sense to pay off their collateralized loans using raw sugar, which the U.S. Commodity Credit Corp. -- the federal government's agricultural lending agency -- values at 18 cents a pound.
Sugar prices are low because there's too much of it. An unusually good growing season, coupled with increased imports, poured excess sugar into the market. Meanwhile, farmers continue to be attracted to both sugar cane and sugar beets because of their price supports. The price of domestic sugar is propped up to about twice the price on the world market. As a result, Western sugar beet production has increased for the past four years in a row.
But critics of federal sugar policy are pointing to the recent forfeitures as evidence of a broken system. "The problem with our sugar program is that it encourages overproduction," says U.S. Rep. Dan Miller, a Republican from Bradenton. "The government is encouraging farmers to grow sugar whether the market can absorb it or not."
When the current federal farm program is up for renewal in 2002, Miller and a growing number of other free-market advocates will propose eliminating the price supports and other subsidies long enjoyed by sugar growers. The changes won't come easy. The industry's lobbyists are legendary for cajoling lawmakers. Indeed, U.S. Sugar Executive Vice President Jim Terrill won't even entertain the possibility of Congress changing the policy. "That's really a hypothetical situation," he says, "but I will say the likelihood of (moving to) a free market is not very high."
With or without subsidies, the price of sugar is not expected to rise much above 20 cents a pound anytime soon. That could be troubling with a long-term crop such as sugar, which remains in the ground up to five years.
Some growers are preparing for tough times. Last September, U.S. Sugar eliminated 318 jobs, or about 9% of its workforce. It also reorganized into two divisions -- sugar and citrus.
"There will always be a place in Florida for sugar," says Miller. "It just needs to learn to compete freely and openly like other industries are doing."
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