Farm Bills, Price Supports and Big Sugar

Every time Hoosiers see sugar listed as a food ingredient, they should know that they are paying more than they need to because of the current federal sugar program. I still manage my family’s 604-acre farm in Marion County, so I understand the challenges of competing. Yet, I also know that government intervention to keep prices high for a small group of powerful farming interests violates the free market concept of the American economy.”

Senator Richard M. Lugar (R -Indiana) Former Chairman of the Senate Agricultural Committee

“The farm bill provides farmers with a number of programs to mitigate risk. But there’s a problem when 10 percent of farmers receive 75cf percent of the benefits. What’s worse is that the 10 percent receiving most of these benefits are wealthy farmers who use the money to bid up land prices and keep young and beginning farmers from the business. As a farmer, citizen, and legislator, I believe it’s wrong to expect or to allow the government to give unlimited support to my farm or any other farm.”

Senator Chuck Grassley (R – Iowa)

Like many lobbies, the American Sugar Coalition wants to have its cake and eat it too. The sugar lobby wants to make sure its members receive prices for their product that in most years are close to double what’s standard on the open world market. But the lobby also wants to make sure that the sugar program’s costs to the average American household and the U.S. economy are hidden from plain sight.

Meanwhile the shmoes who prattle on about small government, free markets,  the benefits of unfettered capitalism etc. have no problem at all supporting corporate welfare.

Especially Big Ag.

Back in 1964 I actually read Barry Goldwater’s Conscious of a Conservative.  I didn’t plan on voting for him (Hillary did!) but I was interested to know how he thought.

Barry G. believed in “freedom,” small government, capitalism, a muscular foreign policy and was a socially tolerant man of his time.  He opposed government “interference” in social relations and the free markets.  He voted against the civil rights bill.

He also railed in his book against farm subsidies.  If, for example, too much sugar was being produced and the market price was falling and remained low, it was an indication that too much sugar was being produced and the market would adjust.

Some producers would leave the market; others would plant other more profitable crops and the market would stabilize.  Consumers would benefit.   Low, continually falling prices simple meant there were too many farmers and it was not the government’s business to keep unprofitable farms in business.  That’s capitalism.

Today we have an out of control farm handout system.

So here in Florida we have Big Sugar.  You can read about Florida’s sugar plantations in the previous post.  Not only does big sugar takes price support subsidies but they have been destroying the environment of south-central Florida for decades.  They are getting attention because the environmental damage has begun to affect Republicans with money.

Karma’s a bitch ain’t it?    🙂

So let’s talk about the price supports for sugar.

Lately  there has been considerable discussion about the direct and highly transparent costs to the federal government of the sugar program due to defaults on government loans by sugar processors. In 2013 for example, the U.S. Department of Agriculture spent $107 million buying sugar to increase prices to producers after processors defaulted on $172 million in what are known as non-recourse loans from the government.

What are non-recourse loans you say?

The processors borrowed money from the government using their sugar inventories as collateral at a guaranteed loan rate of 22.9 cents per pound of sugar.

If the market price is less than the guaranteed loan rate, as was the case in 2013 – 14, processors are free to default on the loan and turn the sugar being used as collateral over to the government. The government then has to deal with thousands of tons of sugar no one will buy at the loan rate price. These non-recourse loans are a central element of the government’s price-support program for sugar, which benefits sugar manufacturers and farmers at the expense of taxpayers and consumers.

Nice.

Look at it this way.  When the sugar barons “borrow” from the government under this program they are really purchasing an option.  If the price of sugar goes up they will repay the government and take their sugar back.  If it goes down it’s like “Thanks!  Here’s your sugar!”

Sweet eh?

The U. S. government will have to get rid of the sugar at a loss and it is us shmoes who eat the loss.  Thank you very much.

The sugar program, which has existed in one form or another for decades, is now a complex set of regulations that ensures producers receive higher prices for their product. For much of the past 45 years, the program has supported domestic sugar prices so extensively that they have been at least two times the world price. Between 2010 and 2012, with high commodity prices worldwide, the gap between domestic and world sugar prices was much smaller. But in 2013 and 2014 world prices for sugar returned to their lower longer-run trend levels and the U.S. price support program has again become a costly proposition.

Sugar prices are also supported through restricting imports by a tariff rate quota system. A prohibitive tariff on imported sugar is established for imports in excess of the moderate amount allowed under the quota. When the sum of domestic production plus the imports allowed under the quota system, the total amount of sugar supplied to the U.S. market, is large enough to reduce domestic prices below their targeted level, the government operates a price-support scheme through a loan-rate program. This program guarantees a minimum price to producers, ensuring that the government may effectively end up being repaid by processors in sugar rather than dollars. The world price is typically much lower than the price the domestic market clears when the quota is in place. Thus, a floor is established for the domestic price.

Any one here use ethanol in their cars?  I didn’t think so.

The government usually dumps it’s excess sugar at pennies on the dollar to manufacturers of ethanol effectively subsidizing an industry currently going nowhere.  Before cheap gas and electric cars ethanol was touted as the fuel of the future.

Fructose?   The high-fructose corn syrup industry did not exist prior to the early 1970s, when the current sugar price support program was implemented. The industry came into existence only because of the high sugar prices created by the program. Now, however, the high-fructose corn syrup industry accounts for about half of all sugar consumed in the U.S., much of which is used by the soft drink industry. Increasingly, questions have been raised about the possible health effects of high-fructose corn syrup, including its relationship to obesity, diabetes and liver damage. If the program were eliminated, sugar prices would fall and the proportion of high-fructose corn syrup in our diets would decline significantly.

The direct cost to consumers from higher sugar prices amounts to about $10 per person per year for all 300 million-plus U.S. citizens. This amount, while significant, highlights a political dilemma and failure associated with many farm subsidy programs. Benefits from the program are concentrated in the hands of a small number of farmers and sugar manufacturers, but its costs are spread widely among consumers, so there is no effective opposition to the well-organized sugar lobby. Therefore, congressional support continues for a program that is extremely costly for the U.S.

And the meat and dairy industries get significantly more than Big Sugar in the grand scheme of things.

Some 75% of all farm support subsidies go to the top 10% of “farmers” – Big Ag.

An aerial shot of Fanjul land in Florida.  Looks like they need subsidies don’t it?

So you thought the farm subsidies were helping the “small family farmer,” those good hardworking Christian folk out in the heartland.  Schmoe.

The high cost of sugar raises the value of land under cultivation, encourages large landholders to buy out smaller farms and discourages new potential farmers from entering the business.  Which is one of the reasons the Fanjuls, sugar barons here in Florida, don’t want to sell their land which is needed to clean up Lake Okeechobee,

Our junior Senator, empty suit Rubio, a paisano of the Fanjuls, was backed with Fanjul money when he ran for the seat.

He thinks price support for sugar is a “national security issue.”

So all of you Republicans down in Naples with the stink of dead fish on your beaches, who spout abut deregulation and welfare queens, should take a close look in the mirror and ponder the issue of corporate welfare and deregulation.

I was a banker.  I know bullshit schemes when I see one.

.

 

About toritto

I was born during year four of the reign of Emperor Tiberius Claudius on the outskirts of the empire in Brooklyn. I married my high school sweetheart, the girl I took to the prom and we were together for forty years until her passing in 2004. We had four kids together and buried two together. I had a successful career in Corporate America (never got rich but made a living) and traveled the world. I am currently retired in the Tampa Bay metro area and live alone. One of my daughters is close by and one within a morning’s drive. They call their pops everyday. I try to write poetry (not very well), and about family. Occasionally I will try a historical piece relating to politics. :-)
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3 Responses to Farm Bills, Price Supports and Big Sugar

  1. beetleypete says:

    Those subsidies and guaranteed prices remind me of the EU. We have our ”milk lakes’, ‘butter mountains’, and similar stockpiles of produce removed from the market to maintain a high price for the producers. In a world where people are starving, much of this is just thrown away, dumped. Shameful.
    Sugar is getting cheaper here, relatively speaking. As more and more people stop using it, we can now buy a 2 pound bag (actually a kilo, so 2.2 lbs) for just 69 p, or less.
    Best wishes, Pete.

    Liked by 1 person

  2. Great essay.

    I wish people in the U.S. would read about issues like this and care. Seriously. It seems as if no one cares about what’s going on around them anymore. People just want to drive their fossil fuel-burning vehicles, eat animal flesh and processed foods despite the increased risk of many forms of cancer, buy televisions the size of small cars and stare at their overpriced phones all day. It’s disheartening to say the least.

    This mindless acceptance of insidious corruption is pathetic. People need to wake up from this nightmare of brain-deadening apathy and complacency. Our overindulgence is killing the planet.

    Thank you again for your work at enlightening people who are stumbling in the dark.

    Liked by 1 person

  3. toritto says:

    Again, you are welcome. The only reason big sugar is getting any attention here in Florida is due to dead fish and red tide washing up on the shores of wealthy Ft. Myers. Wealthy republicans don’t like their pristine beaches defiled by other wealthy republicans. Everyone else is just trying to live, which is pretty tough these days. I’m 76 and it is now for the young to take up the struggle.

    Regards and thanks for reading in the archives.!

    Like

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