2014 Farm Bill and Sugar Policy
Challenges
• The opinions expressed in this presentation
are my own and do not necessarily represent
the views of the Sweetener Users Association.
What We Won’t Say a Lot About
Mexico Case: Overview
• Filing followed Mexico agreement to divert
sugar to world market
• Mexico vital part of U.S. supply
– Domestic production <85% since mid-’00s
– TRQ set at minimum by law
Mexico Case: Overview
• Mexico imports increased but at expense of
TRQ imports, not domestic production
• In period of investigation –
– U.S. production rose
– Total imports declined
– U.S. market share rose
• High prices from sugar
program = higher output
Mexico Case: Overview
• U.S. raw, refined prices averaged higher in
post-NAFTA than pre-NAFTA period
• Same is true for farm cash receipts, value
added for processors
• Some individual processors had near-record
results
• Prior points all documented in public hearing
record
Some Common Ground …
• Added sugars
• ISO
• Transportation policy
• GMO labeling
OK, But What About the Sugar
Program?
– Basic structure likely in place for a while
– Users sought reform, not abolition in farm bill
• Don’t like current sugar program structure, but reforms
would have left loan rate, allotments, TRQ in place
• Further legislative debates likely in coming years
– USDA has made good-faith effort to manage
OK, But What About the Sugar
Program?
• Where users, growers may agree
– Should be transparent, least public cost
• Key assumption
– Periods of surplus, tightness both likely
Transparency
Is S/U Ratio Only Policy Guide?
Is S/U Ratio Only Policy Guide?
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Wide variations on S/U month-to-month
Challenging for USDA to set policy
What info could supplement S/U?
HTSUS already calls for “reasonable prices”
– Reflect more individual judgments
– Regulated (raws only)
• Could USDA incorporate into decisions – with
transparency?
Announce Contingent Policy Actions
• USDA announce (advance) intentions in event
of undersupply
– Subject to change if markets changes
• USDA reinstate tranche system for TRQ when
markets uncertain
– Cancellable
– Makes TRQ increase less irrevocable
Make Minimum TRQ Quantity Real
• Shortfalls approaching point where minimum
TRQ not available in practical terms
• TRQ often justified as foreign aid – but no
benefit if no sales
• Some form of tradability would allow small
quota-holders to profit
• U.S. could (& should) take steps to prevent
market manipulation
Improve Information Quality
• Agencies should have more direct interaction
in WASDE process
• U.S. should join ISO
Program Cost Reduction
Is FFP Best Surplus Option?
• Will always show large losses on acquired
sugar
– Whether forfeiture or market purchase
– Exposure increases as corn price falls
Cost Reduction Options
• Cost reduction options should be first choice
– If subsidy< likely FFP subsidy
– If no net increase in domestic supply
• Re-export programs can be used when U.S.,
world prices relatively close
– Limited by balances, other factors
• Expand eligible universe to include SCP reexport license holders, polyhydric alcohol
Cost Reduction Options
• USDA should publish calculations for what OAQ
would be in absence of 85% floor
– Would not reduce costs by itself …
– Tell market what USDA would do, but for 85% limit
• Allotments not real supply constraint for industry
as whole
– No year in since mid-’00s when production = 85%
– Does affect some individual processors
– In absence of floor, USDA would use for cost control
Program Management
• USDA has challenging job, has performed well
in recent years (considering)
• Additional transparency would help all market
participants
• Using cost reduction options
can help contain potential costs
2015 International Sweetener
Colloquium
• Feb 8-11, 2015
• Waldorf Astoria Orlando
• Orlando, FL