Sugar Producers Want a Piece

The whiff of ethanol dollars floating around Capitol Hill hasn’t escaped the notice of sugar producers in the U.S. The New York Times reports:

Seeing Sugar’s Future in Fuel

LOREAUVILLE, La. — Todd Landry, a farmer who conjures big stands of sugar cane from the muddy fields of southern Louisiana, has been struggling lately against droughts and freezes and hurricanes. Come January he will confront another peril: expanded sugar imports from Mexico.

Mr. Landry and other sugar producers think they have spotted a life raft, and its name is ethanol. Taking a cue from Midwestern farmers who have improved their lot by selling corn to ethanol distilleries, sugar cane and sugar beet farmers want an ethanol deal of their own, paid for by American taxpayers.

I don’t have nearly the problem subsidizing corn growers that I do subsidizing sugar producers. I don’t want to see farmers of a staple crop like corn put out of business by cheap imports. But I don’t think it would hurt us a bit to do with less sugar. We would probably save money on health care costs in the long run.

But the farm bill that is currently being debated contains a juicy piece of pork designed to keep the hands of sugar producers in the taxpayers’ pockets:

A little-noticed provision in the new farm bill working its way through Congress would oblige the Agriculture Department to buy surplus domestic sugar caused by the expected influx of Mexican sugar next year. Then the government would sell it, most likely at a steep discount, to ethanol producers to add to their fermentation tanks. The Bush administration is fighting the measure.

The Congressional Budget Office calculates the cost at $660 million over five years, relatively cheap as farm programs go. But that is an estimate based on assumptions about how much sugar will come across the border. In truth, no one is sure.

“The U.S. Department of Agriculture would be taking on a limitless commitment,” said Robert L. Thompson, a University of Illinois professor of agricultural policy, “to buy any quantity of sugar offered at a guaranteed price, and that would get very expensive, very quickly.”

Why would such a program even be considered? Why else?

The system has been subjected to withering criticism for decades, but the sugar lobby has clout on Capitol Hill. Sugar producers donated $2.7 million in campaign contributions to House and Senate incumbents in 2006, more than any other group of food growers, according to the Center for Responsive Politics, a Washington group.

The USDA isn’t keen on the idea:

Mark E. Keenum, the Bush administration’s under secretary of agriculture for farm and foreign agricultural services, said administering the ethanol program would be “very cumbersome.” Mr. Keenum suggested that the Agriculture Department would end up buying sugar for 22 cents a pound and selling it to ethanol producers for 4 to 7 cents a pound. “You can easily do the math and look at the loss potential,” he said.

Nor are ethanol producers:

Ethanol producers, who could be forced to invest in new equipment to process sugar, say they do not have much use for the idea. “In today’s grain-based biorefineries, the amount of sugar you could introduce into the process would be fairly small,” said Matt Hartwig, spokesman for the Renewable Fuels Association.

Hmm. They would be forced to invest in new equipment that primarily benefits a 3rd party. One wonders then why the RFA thinks it is a good idea to force gas station owners to invest in new E85 pumps, when the amount of E85 that can be supplied is very small. I guess it just depends on whether you are doing the giving or the getting.

10 thoughts on “Sugar Producers Want a Piece”

  1. Years back, when I was a lowly researcher for the Savings & Loan industry, the battle cry was “Free Enterprise and Regulation Q.” Back in those days (the 1970s) Reg. Q allowed thrifts to pay a 1/2 percent higher interest rate on passbook deposits. Rates were regulated, and we thought any de-reg would be catastrophic for the industry and the nation. The main source of deposits for bank and thrifts were passbooks.
    Somehow we survived de-reg, although there was the S&L bath of the 1980s.
    Since then I have learned that no industy in America believes in free enterprise or free trade, except for importers. And importers change their mind when you want to import into their nation.
    The farm lobby makes welfare queens look like pikers. I ran a furniture business for years, never really made money, eventually went under. No one cared, and no help from Uncle Sam. Fine.
    Agribusiness has it figured out. When it rains, you say you have floods, and need help. When it does not rain, you say drought, and you need help. When the year is good, you say there are bumper crops, prices are falling, and you need help. And agribusiness absolutely needs imported, illegal, cheap labor.
    So, law and order, except for my workers. Then the law doesn’t mean so much.
    Get ready for sugar subsidies, and your grandkids will still be paying those subsidies. And your great grandkids.
    I still wonder how long until potato farmers figure out the ethanol-subsidy angle. I buy a 10 lb. bag of potatoes for $1 on sale. Far more calories in there than the three corn cobs, which also cost $1.
    You can make vodka from potatoes, so I assume you can make ethanol. An acre of potatoes should yield more ethanol than an acre of corn. I think it takes less inputs of all kinds. Then you could make ethanol, and feed the leftover mash to pigs (who make meat cheaper than cows).
    My guess is that the potato farmers of America are somehow not well-organized. Exist in too few states, or are too small in those states that they do exist.

  2. Much of corn becomes sugar, so it’s difficult to say it’s a “good” crop. Energy intensive farming producing fuel for cars so we don’t exercise and simple carbohydrates to stuff us with empty calories. hmmm.

  3. This is rich. Now sugar barons want to get in on the deal!

    US consumers already pay some $2 billion more for products containing sugar because of import quotas and duties.

    You will note that most soft drinks in the US are sweetened with HFCS (high fructose corn syrup) courtesy of existing US agricultural policy. It is estimated that just 17 sugar producers (1%) receive 58% of the subsidy. These are powerful interest who make millions in campaign contributions. There is even a new US television show, “Cane” which may do for the sugar barons what “Dallas” did to the oil barons in the 1970s.

    I have seen firsthand how both US and EU sugar subsidies have hurt the developing economies in the Caribbean and Africa. These countries have excess labor and conditions ideal for growing sugar, yet the US market is off limits to them. Now sugar producers want additional government subsidies for producing ethanol.

    No way. Two wrongs don’t make a right. But three lefts do.

  4. Robert,
    I believe you are wrong about sugar, only because the health problems caused by “sugar” are actually caused by high fructose corn syrup. High fructose corn syrup is just another consequence of cheap over production of corn. For a facinating account of agricultural production and especially corn, read Michael Pollan’s book, “The Omnivore’s Dillema”.
    Phil Jonat

  5. One wonders then why the RFA thinks it is a good idea to force gas station owners to invest in new E85 pumps

    Oh, for crying out loud! When did RFA say we should “force” gas station owners to offer E85? All they want is for Big Oil to stop making that investment 10x more expensive than necessary. It can cost less than $10k to convert an existing pump to E85, but RFA says oil companies use franchising agreements to disallow this. Franchisees who wish to add E85 often must instead build a new island well separated from the existing pumps, at a cost of up to $100k. Of course this destroys ROI, so the franchisee decides not to add E85. As a result, most of the nation’s 1200+ E85 stations are independents.

  6. I don’t have nearly the problem subsidizing corn growers that I do subsidizing sugar producers. I don’t want to see farmers of a staple crop like corn put out of business by cheap imports. But I don’t think it would hurt us a bit to do with less sugar. We would probably save money on health care costs in the long run.
    Bad call, Robert!

    1. That “staple crop” is not exactly health food. See King’s comments about HFCS.
    2. As King pointed out, the bulk of the subsidy is not going to family farms, it’s going to huge agri-business. They donate just as royally to political candidates, I can assure you.
    3. Where on earth are the “cheap imports” going to come from? That’s a ghost. The reality, as King alluded to, is that cheap US corn is killing farmers (and ag-based economies) all over the third world.
    4. Want to use less sugar? Ever heard of HFCS? If USDA wanted to improve America’s health, why not “protect” fruit and nuts, rather than starchy corn and wheat?

    Pull yourself together, lad. Agricultural subsidies are either all good or all bad. I know it is more complicated when you have family and friends on the farm, but at the end, you owe your readers and yourself an intellectually honest call.

  7. Oh, for crying out loud! When did RFA say we should “force” gas station owners to offer E85?

    Yes, for crying out loud. Given that the RFA endorsed the following:

    The Biofuels Security Act by Senators Tom Harkin (D-IA), Dick Lugar (R-IN) Barack Obama (D-IL), Joe Biden (D-DE), and Byron Dorgan (D-ND). This legislation would increase the Renewable Fuels Standard (RFS) to 60 billion gallons of ethanol and biodiesel by 2030. The current RFS is 7.5 billion gallons by 2012. The bill would require large oil companies to install E85 pumps at their stations resulting in approximately 50% of all major brand gasoline stations nationwide having E85 pumps available within a decade.

    Then they certainly agreed that we should force station owners to install E85 pumps. That’s not much different than foercing ethanol producers to invest in new equipment to benefit sugar producers, now is it?

  8. Agricultural subsidies are either all good or all bad. I know it is more complicated when you have family and friends on the farm, but at the end, you owe your readers and yourself an intellectually honest call.

    My family has never received agricultural subsidies. In fact, we don’t sell corn, we use it for our beef (which we do sell).

    I would like to see us eliminate HFCS – which is one of the worst things to ever enter the food supply – and I don’t want to see subsidies benefiting the ADMs of the world, but I also don’t want to see family farms disappear. At the end of the day, farming is a business, and farmers have to live and die by their business decisions. However, I tread very cautiously with respect to the food supply. We always need to be self-sufficient with our food supply, and I don’t like the rate at which farmland is becoming subdivisions. So yeah, I can see the benefit of certain ag subsidies.

  9. Robert,
    I guess I see your point, but I don’t agree.
    We always need to be self-sufficient with our food supply,
    Why? More to the point, how much would you pay for that priviledge? What is wrong with having the Third World (or rather, the locations with favorable climates) grow much of America’s food (with corresponding lower capital and energy inputs)?

    …and I don’t like the rate at which farmland is becoming subdivisions.
    Those are the realities of life – can’t say I like it either, but what are you going to do? Agriculture will become more productive, like the rest of us.

    So yeah, I can see the benefit of certain ag subsidies.
    I don’t. Why protect one industry? Because it is vital? Which industry is not?

  10. Yes, for crying out loud. Given that the RFA endorsed the following:

    I may have missed it, but I never saw RFA endorse that particular legislation. ACE certainly endorsed it, and RFA supports renewable fuels standards in general, but I’ve never seen RFA support the version of the Biofuels Security Act which mandates E85 pumps.

    I have seen RFA come out against Big Oil’s use of franchise agreements to prevent E85 pump conversions.

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