NCPA - National Center for Policy Analysis

A Costly Abundance Of Sugar

August 3, 2000

It appears the Clinton administration would rather destroy an agricultural commodity than allow American consumers to buy it at bargain prices. That is the conclusion reached by critics of its approach to dealing with the growing glut of sugar.

The U.S. Department of Agriculture is offering to give farmers government-owned sugar in return for destroying part of their sugar crop this year. The aim is to keep U.S. sugar prices above free-market levels..

Economists see this bizarre policy as the inevitable outcome of decades of government intervention in sugar markets. They also trace this approach back to the production controls of the Great Depression, when farmers were paid for destroying crops and hogs in an effort to keep prices high.

  • The government has a price support level of 18 cents a pound for raw cane sugar and 22.9 cents a pound for refined beet sugar -- despite a glut of refined sugar and projections of huge sugar beet and cane harvests.
  • In effort to keep sugar prices high, the USDA purchased 132,000 tons of refined beet sugar in June at a cost to taxpayers of $54 million -- but the purchase failed to boost prices.
  • Sugar producers -- who post their inventories as collateral for federal loans -- are deciding to forfeit those stocks rather than repay the loans, which will leave the government with 174,000 tons of sugar.

Under the department's offer, farmers who destroy part or all of their crop won't actually take delivery of the government's sugar, but will receive certificates they can redeem for up to $20,000 in cash.

Source: Bruce Ingersoll, "U.S. Offers to Give Government Sugar to Farmers Who Destroy Part of Crop," Wall Street Journal, August 3, 2000.


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