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Topic:
» U.S. Sugar Policy Consumer Costs
» U.S. Sugar Producers = U.S. Jobs
» U.S. Sugar Producers Efficiency
» U.S. Sugar Policy and Foreign Debt
» International Trade and Sugar Policy Costs
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U.S. Sugar Policy - Loan RateU.S. Sugar Policy Myth: Some opponents of U.S. sugar policy charge that sugar receives a disproportionate benefit compared to other crops. Some relatively few individuals have complained, mistakenly, that sugar price supports are too high when compared with other crops. This discontent has been used by other opponents of the sugar policy in an effort to drive a wedge among agricultural producers and to cause division. But facts concerning equity with other crops show an entirely different picture. Support levels for other major policy crops rose more during the 1980’s than did the support level for sugar. Historical perspective helps. In an attempt to maintain farm income, the 1981 Farm Bill provided for increased commodity support levels each year. By the end of the four-year bill (1985), support rates for the major commodities (wheat, corn, cotton, rice, peanuts and soybeans) had increased an average of 14.9 percent, while the sugar loan rate had increased only 7.5 percent, to 18 cents a pound. The overall effect of the 1981 Farm Bill was to make the major U.S. export commodities less competitive in world markets and increase budgetary exposure. As a result, the 1985 Farm Bill provided for some support level reductions; by 1990, these reductions left the average support level for the other policy crops 8.6 percent above 1981 levels. The loan rate for raw sugar remained frozen at the 1985 level of 18 cents per pound. With the 1990 Farm Bill, most commodity support prices, like sugar, remained unchanged at current levels until 1995. The loan rate for raw cane sugar has not increased for 10 years. While the loan rate for sugar has remained at 18 cents, this actually means that the rate has declined substantially in real terms. Adjusting for the effects of inflation since 1985, the sugar loan rate in 1994 was worth about 13.35 cents in real terms. In addition, sugar support levels are below the average cost of production. The most recent estimates from the U.S. Department of Agriculture show that, for the 1992 crop, the cost of production for raw cane sugar was 21.96 cents per pound, 3.96 cents above the 18-cent loan rate that has been in place since 1985. USDA put the cost of producing refined beet sugar at 25.02 cents per pound, 1.69 cents higher than the refined beet sugar loan rate of 23.33 cents. In addition, Congress imposed a marketing assessment on domestic raw sugar production in 1991. The net effect of that assessment has been a reduction in the support level and the income of sugar farmers and an increase in government revenues of about $30 million annually. The charge is also made that sugar supports result in excessive returns per acre over variable costs when compared to other crops. To compare on that basis is akin to comparing a high-value crop, such as tomatoes, to a field crop, such as wheat. The investment per acre, as well as the value of a crop of sugar beets or sugarcane, is much greater than that of other program crops. According to USDA crop date, this year total economic costs per acre averaged $1001 for sugarcane and $808 for sugar beets, but only $151 for wheat for the 1988-1992 period. Moreover, sugar beets and sugarcane are crops which require a long-term commitment of land and capital equipment and an established contract, with or ownership of, a processing facility.
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