House and Senate negotiators are working out details of a big farm bill that may pass this year. No industry in America is as coddled as farming, and no industry is as centrally planned from Washington. The federal sugar program is perhaps the most Soviet of all. Here’s a sketch of the sugar program, which the supposedly conservative, tea party-dominated lower chamber may soon ratify:
- Purpose. The federal sugar program is designed to enrich sugar producers, such as the wealthy Fanjuls, and rip off sugar consumers by keeping domestic prices artificially high. In recent decades, U.S. sugar prices have often been two or more times world prices. The federal government achieves that result by price guarantees, trade restrictions, production quotas, and ethanol giveaways.
- Guaranteed Prices. The Department of Agriculture runs a complex loan program to support sugar prices. Essentially, the government promises to buy sugar from processors at a set price per pound. Processors can sell to the government, or they can sell in the marketplace if the (manipulated) market price is higher.
- Trade Restrictions. Complex import barriers called “tariff rate quotas” help to maintain high domestic sugar prices. Imports are restricted to about one quarter of the U.S. market, and each foreign country (except Mexico) is allocated a particular share of imports.
- Production Quotas. The government imposes quotas, or “marketing allotments,” on U.S. producers. The United States Department of Agriculture decides what total U.S. sugar production ought to be and then allots quotas to beet and cane sugar producers. Most sugar beet production is in Minnesota, Idaho, North Dakota, Michigan, and California. Most sugar cane production is in Florida and Louisiana.
- Ethanol Giveaway. If prices fall below certain levels, the USDA is required to fire up a sugar-for-ethanol program to channel sugar away from the food industry.
The USDA is supposed to run the sugar program at no taxpayer cost, which makes the central planning even trickier. The agency must fiddle to adjust imports, quotas, and the ethanol giveaway to optimally fatten the wallets of sugar producers, while not allowing the domestic (manipulated) market price to fall so low as to impose taxpayer costs.
A possible wrench in the works of the current farm bill is that the sugar program is on track to cost taxpayers perhaps hundreds of millions of dollars this year (see here and here). So if conservatives in Congress vote for an unreformed sugar program this year, they would be not only voting for central planning, corporate welfare, higher consumer prices, harm to U.S. food manufacturers, and environmental damage, they would be voting for higher taxes as well.
The Congressional Research Service gives a brief overview of the central planning here. You can see that sugar beets are allotted exactly 54.35 percent of production (definitely not 54.34 or 54.36), and that federal planners have decreed that the just price (“loan rate”) for sugar cane is 18.75 cents per pound (not 18.74 or 18.76).
The USDA has more on the program here. This table shows that the Fanjuls’ Florida Crystals company received a quota in 2013 of exactly 910,521 tons. So 910,521 is certainly too little and 910,522 is absolutely too much. Now if only the planners at HHS had used such precision in designing the Obamacare website!
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