National Center for Policy Analysis

MONTH IN REVIEW

Agriculture

April, 1996

THE COLOR OF BIG SUGAR

The farm bill President Clinton signed recently included $200 million added by Senator Bob Dole for restoration of the Everglades and the Florida Bay and coral reefs to the south. And the president has endorsed a program calling for an additional $500 million for the purpose.

However, voting money for the Everglades makes it easier to maintain a 60-year-old subsidy for sugar that is the reason the Everglades needs restoration.

• Millionaire cane growers have covered about 500,000 acres of swampland between Lake Okeechobee and the Everglades National Park with crops.
• They divert the water flow that feeds the Everglades to water their fields and cause pollution with pesticides, herbicides and phosphate-laden fertilizers.
• Among the results are an algae bloom the size of Rhode Island in Florida Bay that is seeping through the Florida Keys to the Atlantic, where it is suffocating vast stretches of the only coral reef off the North American continent.

Since the New Deal, the federal government has limited cane imports and offered growers subsidized loans:

• The loan program now costs taxpayers about $120 million per year.
• The sugar import restrictions double the domestic price of sugar from roughly 11 cents per pound to more than 22 cents.
• According the General Accounting Office, this costs consumers more than $1.4 billion per year, and others put the cost closer to $3 billion.

A coalition of environmentalists, free traders and soft drink and candy manufacturers oppose the subsidies. But in addition to cane growers, the sugar program is supported by midwestern corn and sugar beet growers, since raising the price of sugar increases demand for their substitute sweeteners.

The $200 million will come from a tax on sugar growers, as would the $500 million in additional funds Clinton still wants. But since the subsidy program remains, it's consumers who will pay to clean up the mess.

Source: Harvey Wasserman, "Cane Mutiny," Nation, March 11, 1996.

FARM ACT ADDS PORK FOR POPCORN

The "Freedom to Farm Act" signed by the President earlier this month contains language "to ensure the benefits of popcorn are available to the people of the United States" by "strengthening the position of the popcorn industry in the marketplace."

Those truly interested in returning farming to market-based economics say such ludicrous provisions are indicative of the timidity of the Farm Act. They charge that its reforms are more illusory than real, and less permanent than might be expected.

What does the Farm Act do?

• With a cap on farm spending, the law replaces traditional subsidy payments to farmers with a fixed but declining level of transition payments -- $36 billion over seven years.
• It also ends federal authority to hold farm land out of production.
• However, at the end of seven years, unless Congress acts, the old farm policies -- subsidy payments and land set-asides -- automatically come back into effect.

Although promoted as allowing farmers to plant whatever crop they wanted, the Act prohibits farmers now growing subsidized crops from switching to anything other than another subsidized crop. A wheat farmer, for example, would only be allowed to plant other grains, cotton or rice.

What else doesn't change under the new law?

• Sugar, peanuts and most dairy products will continue to be subsidized to the tune of $2 billion a year -- guaranteeing higher consumer prices.
• Soybean subsidies will increase.
• Taxpayers will continue to foot the bill for the USDA's costly Market Promotion Program promoting U.S. agricultural products overseas.
• Landowners won't get regulatory exemptions promised for temporary wetlands under one acre in size.

The Act also creates new bureaucracies:

• A "National Natural Resources Conservation Foundation" is created to promote conservation of natural resources on private lands.
• A new food safety panel -- opposed by both consumer and meat and poultry industry groups -- is added to the USDA.

Finally, rather than end sugar subsidies which allow inefficient sugar producers to operate in and pollute the Everglades, the legislation calls for spending $300 million to acquire about 100,000 acres there.

Source: Former Gov. Pete du Pont (National Center for Policy Analysis), "Medley From the Popcorn Follies," Washington Times, April 30, 1996.