Sugar supports bolster cane industry and food prices

WASHINGTON — Federal price supports are worth tens of millions of dollars a year to Florida's sugar cane industry, researchers estimate — a benefit that critics claim drives up the price of many foods.

A huge farm bill approved by Congress this month would continue to keep the price of sugar in the United States well above the world market price. President Bush has vetoed the bill, but votes to override the veto are seen as likely in both the House and the Senate.

The U.S. government uses a combination of loan rates and import quotas to keep the domestic sugar price around 21 cents per pound, while the price on the world market is around 12 cents a pound.

The U.S. International Trade Commission and academic researchers have estimated that the federal protections are worth $1 billion a year to the sugar industry. Most of the benefits flow to sugar beet producers in the upper Midwest, but much of the rest goes to Florida.

In 2004-05, Florida contributed an estimated 51.3 percent of the cane sugar and 21.4 percent of the total sugar produced in the United States, according to University of Florida's Institute of Food and Agricultural Science.

Palm Beach County accounts for 75 percent of the total sugar cane harvest, the institute says, and the rest is grown in the adjacent counties of Hendry, Glades, and Martin.

Sugar is used in a wide variety of foods, from soft drinks to breakfast cereal, and Americans consume an average of more than 60 pounds of refined sugar each year.

Because U.S. policies keep the U.S. price of sugar artificially high, "if you want to manufacture anything with sweeteners in this country, you have to pay twice as much," said Chris Edwards of the Cato Institute.

"Inevitably, it is American consumers who pay the price in the form of higher food costs," the Grocery Manufacturers of America said in an e-mail interview.

The American Sugar Alliance, which represents major producers, contends that U.S. policies guarantee consumers a reliable supply of sugar at a reasonable cost, and that "current sugar policy hasn't cost taxpayers a dime."

The effect on food costs is hard to calculate, according to Tom Spreen, an agricultural economist at the University of Florida.

Sugar is "like flour, it's mixed into processed food with a lot of other ingredients so the cost of it is diluted," he said.

The picture could get even more murky as the North American Free Trade Agreement comes into full effect this year and trade barriers come down.

The new farm bill calls on the government to buy surplus domestic sugar and sell it to ethanol producers if there is a glut of imported sugar.

If subsidized sugar emerges as a major source of U.S. ethanol, it could potentially help lower corn and fuel prices, and thus relieve the cost of food in general.

"You always get this rippling effect," said Spreen. "It's crazy calculus."

A broad coalition of food manufacturing giants has tried without success for years to change the sugar program.

Between 1997 and 2002, nearly 10,000 American jobs were cut as U.S. manufacturers such as Hershey's relocated their plants to Canada and Mexico, where they can tap into world sugar prices.

The U.S. Department of Commerce estimated in 2006 that for each job growing and harvesting sugar that was saved through high U.S. sugar prices, nearly three confectionery manufacturing jobs were lost.

The sugar lobby dismissed the criticism.

"The few candy companies that have moved are leaving America to take advantage of cheaper labor, fewer worker benefits, lower operating costs, a smaller tax burden, and environmental regulations that are less stringent," said Phillip Hayes of the American Sugar Alliance.