Two Crops, One Commodity A Unique Policy for a Unique Industry

Sugar is an essential ingredient in our nation’s food supply that’s made from two different crops – sugarbeets and sugarcane. 

While sugar is made from two different crops, the challenges to raise a crop and produce the sugar are often the same, from increased input costs to the ever-present threat of heavily subsidized foreign-produced sugar displacing domestic production. 

American sugar producers proudly supply roughly 70 percent of America’s needs; however, the U.S. still ranks as the world’s third largest importer of sugar. To ensure we do not become more reliant on foreign sugar supplies, we need farm and trade policies that allow our American farmers and workers to survive. 

Here’s how America’s no-cost sugar policy works:

  • Sugar policy is contained in legislation known as the Farm Bill, which comes up for reauthorization every five years. 
  • The bill authorizes the U.S. Department of Agriculture (USDA) to offer loans on sugar being stored for consumers by America’s sugar producers. Farmers use the loans on the sugar to pay their bills while sugar is being stored for their customers. Producers are paid throughout the year as customers take delivery and pay for the sugar.
  • Sugar producers have nine months to pay back the loan. Because loans are repaid with interest and there are no subsidy checks, the policy operates at $0 cost.
  • To meet America’s sugar needs, USDA monitors the amount of sugar to be produced domestically along with sugar supplied from the more than 40 foreign countries given access, through trade deals, to import sugar at, or close to, duty free into the U.S. market. 
  • If demand exceeds domestic production plus expected sugar imports, market access for additional foreign sugar can be increased to meet customer needs.
  • Sugar policy does not allow for unlimited amounts of duty-free foreign sugar to enter the U.S. market. This helps provide American sugar producers with a more level playing field given the heavy subsidization of sugar production around the world.

Without a strong sugar policy, American sugar farmers and workers would be at a clear disadvantage in the market, facing unlimited supplies of subsidized imported sugar, often controlled by foreign government policies designed to protect their own sugar industries.  Additionally, American consumers would be subject to the whims of foreign suppliers, who often turn supplies to the world on or off depending on their domestic needs, with little regard to market conditions. 

Absent smart sugar policy, domestic sugar production would be jeopardized, putting family farms out of business, eliminating jobs in urban and rural communities, and threatening our nation’s food security. 

U.S. sugar policy is based on the common-sense notion that supply and demand should be in balance.  Congress has agreed and overwhelmingly voted to continue sugar policy in the 2008, 2014, and 2018 Farm Bills. 

Sugar policy is designed to assist the American sugar farmer at zero cost to taxpayers. To ensure zero cost and adequate supplies, USDA and the U.S. Trade Representative (USTR) have several tools at their disposal: 

OFFER SUGAR PRODUCERS ACCESS TO NON-RECOURSE LOANS, WHICH ARE PAID BACK IN NINE MONTHS WITH INTEREST. 

Similar to other crops and commodities, government loans are also available to U.S. sugar producers. These loans must be repaid with interest nine months after being issued. The sugar loan rate, which has only been increased twice in the past 14 years, is part of sugar policy in the Farm Bill. If market prices crash, the sugar which is the collateral on the loan can be taken off the market by USDA to help the market rebound. That sugar may be used under the feedstock flexibility provisions of the Farm Bill, which allows sugar to be used for ethanol production.  

It is a rare occurrence for a producer to default on a loan.  The last time this occurred was in 2013 when Mexico violated trade law by dumping subsidized sugar on the U.S. market. As a result, the domestic sugar industry lost $4 billion.  

LIMIT FOREIGN IMPORTS TO THOSE OBLIGATED UNDER EXISTING TRADE AGREEMENTS. 

Prior to the start of the fiscal year, USTR sets the foreign raw sugar import quotas for 40 countries at the amounts agreed to under the WTO trade agreement. Nearly all sugar enters at, or close to, duty free.  Additionally, other trade agreements, such as CAFTA, provide for additional yearly, duty-free imports.  

INCREASE FOREIGN IMPORTS TO MEET MARKET DEMAND ABSENT ADEQUATE SUPPLY 

If the U.S. market is under-supplied, USDA and USTR can increase import volumes to allow more foreign sugar to enter the U.S. market at, or close to, duty free.   

SET THE AMOUNT OF SUGAR DOMESTIC PRODUCERS CAN SELL INTO THE MARKET 

As part of the policy’s tools to meet U.S. market needs, USDA forecasts U.S. sugar consumption and allocates 85% of that amount to U.S. sugar producers. Companies that produce more sugar than needed store that surplus at their own expense, not the government’s. 

By avoiding oversupplies and shortages, sugar prices stay stable. And fair prices eliminate the need for government payments to farmers.