Idaho's senior U.S. senator and others staunchly defend the nation's program supporting sugar prices, saying that it operates at no cost to taxpayers. But after sugar prices fell 38 percent in the past year, government officials are scrambling to minimize a potential hit to taxpayers.
U.S. sugar policies, which date to the 1930s, allow producers to "forfeit" their crop to the government rather than repay federal loans when sugar prices drop below certain levels. With some sugar prices recently dipping below those levels, the U.S. Department of Agriculture is now at risk of becoming the owner of millions of pounds of sugar.
"We are hovering around forfeiture levels," said Phillip Hayes, a spokesman for the trade association American Sugar Alliance. "The USDA is trying to avoid that because it is costly to the taxpayers."
Boise-based Amalgamated Sugar, a beet growers' cooperative with sugar factories in Nampa, Twin Falls and Paul, has some federal loans outstanding, CEO Vic Jaro told the Idaho Statesman. He declined to say how much money those loans represent and wouldn't comment on the possibility of selling sugar to the government.
"We try to sell sugar to the market," Jaro said. "That's certainly what we intend to do."
Some members of Congress are mounting challenges to sugar-industry protections that could interfere with the government's support effort. Amalgamated posted an "urgent request" on its website urging Oregon sugar beet growers to contact their senators to fight proposed legislation that could restrict the government's ability to buy excess sugar and sell it at a discount. That plea was not directed to Idaho growers, Jaro said, because that isn't necessary.
"We are constantly in touch with our Idaho delegation," Jaro said.
U.S. Sen. Mike Crapo, co-chair of the Senate Sweetener Caucus, "continues to advocate for the sugar program because of the benefit that it brings to Idaho," press secretary Judd Deere said. He echoed past Crapo comments that the Idaho sugar industry brings in more than a billion dollars annually.
Proposed legislative targets that would shave sugar-industry protection are likely to be attached to a budget bill or to the farm bill, Deere said.
"He will oppose any bill or amendment to a bill that would phase out or do away with the program," Deere said.
Experts say the government today has a couple of options if sugar prices continue to fall. The least costly could be buying excess sugar to sell to ethanol makers at a discount. That "feedstock flexibility" program is the target of the proposed legislation. Taxpayers would be on the hook for any losses on those government sales.
That hit would likely be much less than the cost to taxpayers if the government takes ownership of millions of pounds of sugar that it must then dispose of, experts say.
The Wall Street Journal reported last week that the USDA is considering buying 800 million pounds of sugar from beet and cane producers, which could lead to an $80 million loss. But the agency's deputy communications director, Justin DeLong, said the agriculture department "has not made a determination as to the methods of reducing a sugar surplus."
Still, USDA is in the process of figuring out the amount of sugar that must be removed from the domestic market to avoid forfeitures. "Forfeiture doesn't take sugar off the market," the Sugar Alliance's Hayes explained.
Sugar producers may forfeit their product to the government if prices fall below 25.57 cents per pound for refined beet sugar or 20.94 cents per pound for raw cane sugar.
Refined beet sugar sold for 28.50 cents per pound in February, according to USDA data. That was down from 51 cents a pound in February 2012. Raw cane went for 20.72 cents per pound in February, down from 33.57 cents one year earlier.
Hayes blamed the U.S. sugar surplus on cheap Mexican imports allowed under the North American Free Trade Agreement. But banner harvests in the U.S. beet and cane sugar fields last year have also pushed prices down.
The U.S. sugar program restricts imports while offering loan guarantees to U.S. producers. The short-term loans mature in nine months or less.
The chance of a taxpayer bailout comes at a critical time for renewal of the sugar program. A new five-year farm bill that includes the sugar program has not been approved by the U.S. House. A Senate farm bill passed in 2012 must be reapproved this year because the House did not act on it last year.
Supporters in the Senate have thus far fought off attempts to kill the program. Democratic Rep. Collin Peterson successfully protected the sugar program from attack as ranking minority member of the House Agriculture Committee; his district includes most of the sugar beet producers in Minnesota, the nation's top-producing state for the crop.
Opponents of the U.S. sugar program say import limits and loan guarantees have cost sugar users billions of dollars in artificially inflated prices over the years. The U.S. Coalition for Sugar Reform, a group of candy and food producers, estimates the U.S. sugar program has cost consumers about $14 million since the last Farm Bill passed in 2008.