RL34103
Sugar Policy and the 2007 Farm Bill
August 13, 2007

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Summary

Congress is expected to decide the future of the U.S. sugar program in the omnibus farm bill this year. Growers of sugar beets and sugarcane, and processors of these crops, favor continuing the structure of the current sugar price support program but seek changes. Food and beverage manufacturers that use sugar want Congress to address their concerns about the impact of sugar prices and those program features that restrict supplies. The sugar program is designed to guarantee the price received by sugar crop growers and processors, but to operate at "no cost" to the U.S. Treasury. To accomplish this, the U.S. Department of Agriculture (USDA) limits the amount of sugar that processors can sell domestically under "marketing allotments" and restricts imports while at the same time seeks to ensure that supplies of sugar are adequate to meet domestic demand. No cost is achieved if USDA applies these tools in a way that maintains market prices above minimum price support levels. Should prices fall, processors that take out loans have the right to hand over as payment sugar that has been pledged as collateral, which USDA treats as a cost. With free trade in sugar with Mexico set to take effect in 2008, and the prospect of additional sugar imports under four other negotiated free trade agreements, both sugar producers and users agree that the program cannot be sustained without change. If the sugar program were to be continued without change, USDA and the Congressional Budget Office (CBO) project that prices below support levels because of imports would result in program costs of up to $1.4 billion over the next 10 years. This contrasts with USDA's success in recent years in operating the program at no cost and even generating revenue. The House-passed farm bill (H.R. 2419) would mandate a sugar-for-ethanol provision intended to address any sugar surplus caused by imports. USDA would be required to purchase as much U.S.-produced sugar as necessary to maintain market prices above support levels. Purchased sugar would be sold to bioenergy producers for processing into ethanol. USDA funding would be open-ended. The bill also would increase minimum guaranteed prices for raw sugar and refined beet sugar by almost 3%, and tighten the rules (i.e., remove discretionary authority) that USDA follows to implement marketing allotments and administer import quotas. These provisions reflect the recommendations made by sugar crop producers and processors. CBO projects that this bill's sugar-related provisions would cost about $660 million over the five-year farm bill period and $1.2 billion over 10 years. Food and beverage manufacturers that use sugar oppose the House-passed sugar provisions, arguing that costs to consumers would increase by $100 million annually and that new requirements would restrict the flow of sugar for food use in the domestic market. This report will be updated to reflect key developments. For additional information, see CRS Report RL33541, Background on Sugar Policy Issues, by Remy Jurenas.

    Related Legislation:
  • H.R.2419

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