Cashing in on Uncle Sam’s sweet tooth

Federal efforts to protect growers of sugar beets and sugar cane epitomize everything that’s wrong with U.S. farm programs. At times they’ve artificially raised the price of sugar, costing consumers billions of dollars; at other times they’ve stuck taxpayers with the bill for the surplus sugar production they’ve promoted. The fact that the sugar program is likely to survive the latest rewrite of the farm bill unscathed is a testament to how limited the bill’s “reforms” are.

Sweeteners are ubiquitous in processed foods, and sugar is the most popular by far. There are two primary sources in the United States: sugar beets, which are grown in parts of California (mainly in Imperial County) and 10 other states, and sugar cane, which is grown only in Hawaii, Texas, Louisiana and Florida. According to the most recent national data, there are 155 sugar beet farms in California — all in the southeastern corner — and two sugar refineries.

Like the rest of the agriculture industry, beet and cane growers enjoy considerable protection from the federal government that’s not contingent on their incomes. But while other farmers are typically offered subsidized crop insurance (taxpayers cover roughly 60% of the cost) and guarantees against steep reductions in revenue, beet and cane farmers are also protected by import and production quotas that limit supply, deter competition and inflate prices.

Their trade associations argue that the sugar program offsets foreign governments’ sugar subsidies, which trump American farmers’ superior productivity. They also say it doesn’t cost taxpayers a dime, ignoring the effect that artificially high sugar prices have on taxpayers’ cost of living. And the program does have a cost to the Treasury when unusually big harvests in the United States and Mexico (which faces no import quota on its subsidized products) push sugar prices below the target set by Washington, allowing growers to unload surplus sugar onto the federal government in lieu of repaying their federal loans and forcing Washington to sell the sweetener below cost to ethanol producers. In fact, both of those things are happening this year.

The rationale behind the sugar program is the same one used to justify every federal farm subsidy: To ensure a reliable food supply, farmers should be protected against the unpredictable and potentially ruinous swings in harvests and crop prices, not to mention unfair foreign competition. The most straightforward way to do so would be a means-tested system that helps farmers who run into financial trouble. There’s limited sensitivity to need in U.S. farm programs, however. As a result, their benefits flow overwhelmingly to the largest — and, consequently, most durable — agribusinesses. According to economist (and farm program critic) Vincent Smith, 10% of the farm operations collect 60% of the $23.5 billion in annual farm subsidies.

Both of the competing farm bills passed by the House and Senate would eliminate the egregious direct-payment program, which pays cash to farm owners based on their acreage even in times of record profits. But much of those savings would go into expanded subsidies for crop insurance and new programs to guarantee farm revenue against swings in prices and demand, further insulating farmers from market forces. Meanwhile, bipartisan efforts to weaken protections for sugar growers fell short in the House by a vote of 206 to 221 and in the Senate by a vote of 45 to 54.

It’s worth noting that the House amendment would have passed easily if not for opposition from 74 lawmakers from states with no sugar growers, as well as 30 House members from California who have no sugar growers or refiners in their districts. That’s a testament to the lobbying muscle of sugar growers, who gave more than $4 million to members of Congress in the 2012 campaign. The largest buyers of sugar — bakers and confectioners — contributed about $250,000.

The unusually high farm profits in recent years have given Congress a golden opportunity to try to wean agribusiness from federal subsidies and market-distorting protections. But lawmakers seem incapable of making meaningful changes even to a program as flawed and costly to consumers as the one that protects sugar beets and sugar cane farmers regardless of their potential to thrive without Uncle Sam’s help.