About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (May 15, 2018)

handle is hein.crs/govzdw0001 and id is 1 raw text is: Updated May 15, 2018 Farm Bill Primer: Sugar Progra Congress reauthorized the sugar program in the 2014 farm bill (P.L. 113-79) with no changes from the version it authorized in the 2008 farm bill (P.L. 110-246), making it an anomaly among major commodity programs. The U.S. sugar program also stands out compared with other farm bill commodity programs in that it combines a price support feature with a supply management structure that limits both sugar production for domestic human use and imports. The objectives behind this market intervention are to support domestic sugar prices without incurring budgetary costs to the federal government while also ensuring that adequate supplies of beet and cane sugar are available to sugar users. A significant development that occurred after Congress reauthorized the sugar program is two bilateral agreements with Mexico that limit imports of Mexican sugar. These exist outside of the sugar program but have had significant implications for the sugar market, as Mexican sugar represents a significant share of U.S. sugar needs. Four Pillars of the Sugar Program The U.S. Department of Agriculture (USDA) employs four basic mechanisms to keep domestic sugar prices above support levels in order to avoid incurring program costs as directed by Congress. These are price support loans, marketing allotments, import quotas, and various policy mechanisms to counter low prices. 1. Price support loans. USDA price support loans are available to processors of a sugar crop, not to producers. They provide short-term, low-cost financing until a raw sugar cane mill or sugar beet processor sells the refined sugar while also supporting sugar prices. The loans are made at statutory rates of 18.75 cents/lb. for raw sugar cane and 24.09 cents/lb. for refined beet, pledging sugar as the collateral against the loan. The loans are nonrecourse, meaning that when the loan comes due, the sugar processor has the option of forfeiting the sugar to USDA. Forfeitures would typically occur when market prices fall below the effective support level (i.e., the sum of the loan rate plus accrued interest over the nine-month term of the loan plus certain marketing costs). In this circumstance, USDA would incur a budgetary cost (i.e., an outlay), gain title to the sugar, and be responsible for disposing of it. 2. Marketing allotments. Each year, USDA establishes marketing allotments that limit the quantity of sugar that U.S. processors can sell for domestic human use. The allotments do not limit how much sugar beet and cane that growers can produce, nor do they limit how much sugar beet refiners and raw cane sugar mills can process. Sugar produced in excess of a processor's allotment may be sold for export or to another processor to allow it to meet its allocation for domestic human use. The farm bill directs that USDA calculate an overall allotment quantity (OAQ) of not less than 85% of estimated U.S. human consumption of sugar for food. The OAQ is divided between the beet and cane sectors and is then allocated among processors based on previous sales and processing capacity. Any shortfalls between the OAQ and what processors are able to supply may be reassigned to imports. Such shortfalls have been a regular feature of the sugar program, averaging 26% of U.S. sugar consumption between FY2015 and FY2017. 3. Import quotas. In recent years (FY2015-FY2017), domestic production of sugar has met about 74% of U.S. food use of sugar on average, with the balance supplied by imports. The quantity of foreign sugar entering the U.S. market reflects U.S. tariff rate quota (TRQ) imports under various trade agreements, as well as duty-free sugar from Mexico under bilateral suspension agreements. TRQ sugar imported under various trade agreements at low or zero tariff rates is shown in Table 1 below. In addition, for FY2017, Panama and Peru have TRQs of 7,628 and 2,205 short tons, raw value, respectively. High tariffs are applied to non-TRQ sugar, amounting to 15.36 cents/lb. for raw sugar and 16.21 cents/lb. for refined sugar. The tariffs effectively discourage over-quota imports, thus supporting market prices and facilitating the farm bill objective of avoiding program costs as a result of loan forfeitures. Table I. Major U.S. Tariff-Rate Quota Commitments (Quantities are in short tons, raw value) Trade Agreement FY2018 Quantity World Trade Organization 1,432,118 CAFTA-DR 149,319 Colombia 60,076 Source: U.S. Customs and Border Protection. Notes: CAFTA-DR includes Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. 4. Policy tools for countering low prices. In the event that price support loans, marketing allotments, and import quotas and tariffs are insufficient to prevent the government from incurring costs through loan forfeitures, the farm bill provides several mechanisms that USDA can employ to remove price-depressing surpluses of sugar. USDA may offer processors sugar owned by the Commodity Credit Corporation in exchange for surrendering rights to TRQ sugar. USDA may also purchase sugar from processors in exchange for giving up TRQ sugar. Under the Feedstock Flexibility Program, USDA may purchase sugar for domestic human use from processors for resale to ethanol producers for fuel ethanol production. Program outlays have been essentially zero over the past 10 years with the exception of the 2012/2013 crop year, when a supply glut depressed prices, triggering loan forfeitures and government intervention measures costing $259 million.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Already a HeinOnline Subscriber?

Log In

profiles profiles most