NCPA - National Center for Policy Analysis

Sugar Producers Seek Bailout

April 27, 2000

For decades, the federal government has managed to keep sugar prices in the U.S. far above world price levels -- protecting domestic sugar companies largely by curtailing imports. Also, under a government loan program, sugar processors who put up sugar as collateral are entitled to forfeit their crop, keep the loan money and let the government eat the loss.

But now low prices and a glut of sugar have processors in a panic.

  • They want the government to buy 300,000 to 350,000 tons of sugar immediately or, they threaten, they will forfeit as much as 1.4 million tons -- valued at an estimated $550 million -- at the end of August and September.
  • The processors argue that only by spending $100 million to buy sugar now and boost market prices can the government avert much costlier sugar-loan forfeitures in the midst of an election campaign.
  • Experts estimate that higher sugar prices guaranteed by government programs costs U.S. consumers $1 billion a year in the form of higher prices for sugar, candy and soft drinks.
  • Confectioners and others who use sugar in their products have formed the Coalition for Sugar Reform, which aims to deregulate the sugar industry -- and they want the government to let the sugar producers sink.

A spokesman for the coalition says the "whole house of cards is starting to collapse.

But the sugar producers have powerful political allies -- having given Democrats and Republicans $7.2 million between 1995 and 1999, more than any other commodity group in Washington.

Source: Bruce Ingersoll, "Big Sugar Seeks Bailout, Gives Money to Help Get Way," Wall Street Journal, April 27, 2000.


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