How Does the Government Restrict Access to Sugar?
The current U.S. sugar program costs American consumers and food manufacturers an additional $3.5 billion annually. This policy consists of four basic components, which are tightly controlled by the government:
- Price supports, which enforce a minimum price for sugar in the U.S. domestic market. This makes the domestic price higher than the world market price.
- Marketing allotments, which are aimed at preventing surplus supplies in the domestic market. Each sugar beet processor and cane mill is under a government imposed and legally-binding limit on the amount of sugar it is permitted to sell each year.
- Import quotas (also called Tariff Rate Quotas, or TRQs) set limits on how much sugar can be shipped to the U.S. every year from each of 40 countries (that exported sugar to the U.S. 30-35 years ago). Sugar imports above this level are subject to an extremely high tariff.
- The Feedstock Flexibility Program, established in 2008, mandates that in times of surplus, the government must buy sugar and re-sell it to ethanol plants at a loss. This comes at the expense of taxpayers, who as consumers are already paying more for sugar than they should. NOTE: The program has not been used because of shortages of sugar, but the Congressional Budget Office forecasts $228 of million in taxpayer costs in the years ahead.
The principle of government intervention in agricultural markets is based on the need for a country’s citizens to be assured of an adequate supply of food at reasonable prices. The U.S. sugar program, like other commodity programs, was created to provide a safety net ensuring the production of sugar in the United States. However, unlike other commodity programs, the sugar program uses import restrictions to keep domestic prices high and mandates marketing allotments that are intended to restrict domestic production.
In the past four calendar years, U.S. refined sugar prices have ranged from 64 to 92 percent higher than on the world market because the federal government, as directed by Congress, developed a complex scheme of tight controls on sugar supplies. The U.S. Department of Agriculture, as the administrative arm of government, took little action to enhance stocks badly needed by food manufacturers and consumers until supplies were clearly inadequate and prices were at record levels.