U.S. Losing Its Appetite for Sugar Support Program : Farm policy: Administration critics say props cost too much and lead to overproduction.

Silhouetted in a faint pink sunrise, another convoy of squat dump trucks, looking like so many motorized ants, turns slowly into the entrance of the Southern Minnesota Sugar Cooperative to disgorge its top-heavy loads for processing.

It’s harvest time here in sugar beet country, and the trucks will stream in around the clock until March. Some 300 farmers sell through this co-op, and sugar is their most profitable crop. Sugar beets net up to four times what corn and soybeans bring in.

But wait. In this diet-conscious age, with demand for sugar down 25% since 1972, how can Minnesota’s sugar producers be profiting?

The answer is another federal farm program. Each year, the government restricts low-cost imports sufficiently to guarantee that domestic sugar will sell at a “minimum price”--now 21.95 cents a pound, or half again as much as the world market price of 14.11 cents a pound.

The sugar program has survived since 1981 even though other price supports have been pared, but now Washington may be losing its appetite for it. Critics say the import quotas cost American consumers $1.5 billion to $2 billion a year, spur overproduction in the United States and hurt Third World sugar producers, which depend on sugar export earnings.

“The program has been uncovered for the scam it really is,” said Thomas A. Hammer, president of the Sweetener Users Assn., a Washington-based lobby that represents soft-drink manufacturers and other sugar users that are trying to cut back the price-support program.

The quotas face a spate of new challenges that may force a quick decision on their future:

- Sugar imports have been cut so much that analysts say the government will soon be unable to count on further tightening of imports to keep domestic prices high. That means it would have to use tax dollars to prop up prices, worsening the federal budget deficit.

- Congress is preparing to consider the sugar program in preliminary deliberations over the 1990 farm bill, and lawmakers are beginning to question it for the first time in recent memory.

- The Bush Administration is unenthusiastic about the current program. The State Department and the Council of Economic Advisers have pushed to cut it on grounds that it is too costly and hurts U.S. interests abroad.

- Last spring, the import quotas were declared illegal by the General Agreement on Tariffs and Trade, which polices international trade agreements. That obliges the United States to alter its system.

- The sugar program could become an early casualty of the global trade-liberalization talks going on in Geneva. The United States says it will put all U.S. farm programs on the table in an effort to persuade other countries to reduce their own farm supports, and U.S. Trade Representative Carla A. Hills has said that the United States is “pursuing the elimination” of the program.

What is an abstract debate at the national level is an intense economic struggle here in southern Minnesota. Corn growers say sugar price supports are driving up land prices by encouraging beet growers to grab more land.

“What’s happened to the rest of us is that we are being squeezed,” said Owen Gustafson, head of Fair Farm Policy, a group of corn and soybean farmers in nearby Maynard.

Gustafson’s efforts have set off a bitter feud. Gustafson says he has received threatening telephone calls, and Ronald Carpenter, one of his allies, says his barn was vandalized last spring and sugar was dumped into his tractor’s gas tank. “It was meant as a message,” Carpenter said.

Sugar beet farmers, meanwhile, are thriving. Acreage is up sharply, and marketing shares in the co-op, which controls all planting of sugar beets in a seven-county area, are selling for $650, almost triple what they were in the mid-1970s. By contrast, said Harold T. Petersen, one of the area’s most successful producers, “we had trouble getting enough people interested” when the growers’ co-op was organized in 1974. Nationwide, too, sugar production is edging up.

Analysts agree that the program is one of the most generous in American agriculture. With only 10,000 farms growing sugar cane or beets, the supports work out to an average annual benefit of $170,000 for each producer. Critics say the price floor is so high that it runs 35% to 40% above the cost of production.

Figures compiled by Fair Farm Policy show that sugar beet growers in southern Minnesota earn almost 10 times as much producing sugar as they would by raising corn or soybeans--$220.27 an acre in 1988, compared to $25.49 an acre for corn and $28.43 for soybeans. Local beet farmers say the ratio is more like 4 to 1.

Either way, not nearly as many U.S. farmers would grow sugar if it were not for the heavy supports. And the Sweetener Users Assn.’s Hammer points out that the sugar growers receive that protection “without incurring any of the obligations”--forced acreage reductions or limits on individual benefits--that other farmers must accept.

Robert A. Paarlberg, a Harvard University agricultural economist, argues that although there are plenty of smaller producers, the bulk of the U.S. sugar crop is grown by large multinational landowners. “It’s an industry that’s dominated by large corporate entities that we don’t usually think of as deserving a subsidy,” Paarlberg said.

Ellen Haas, executive director of Public Voice, a consumer group, called the sugar system “an artificial program that props up prices and regressively affects the poor.”

Donald W. Westfall, senior analyst at Abel, Daft & Earley agricultural consultants in Alexandria, Va., says the generous price support levels have prompted food processors to turn to cheaper sugar substitutes such as high-fructose corn syrup. Before sugar supports, he said, corn sweeteners “were not a major ingredient.”

For many developing countries, exporting sugar is a major source of the foreign exchange that they need for imports and to pay off foreign loans. In 1980, before the current program began, the United States imported 4 million tons of foreign-grown sugar. Today, it imports only 1 million tons a year.

Brazil was able to ship 441,000 tons of sugar to the United States in 1983-84. Last year, it was permitted to sell only 146,000 tons. Comparable figures are 411,000 tons and 159,000 tons for the Philippines and 535,000 tons and 177,000 tons for the Dominican Republic. Tiny Belize has been forced out of the market and has begun raising marijuana as a substitute crop, according to U.S. officials.

But the growers say the quotas are needed to enable them to compete with low-cost sugar from the Philippines and Caribbean countries. Eiler C. Ravnholt, vice president of the Hawaiian Sugar Planters’ Assn., warns that trimming the program even modestly would result in widespread job cuts.

Luther A. Markwart, executive vice president of the American Sugarbeet Growers Assn., claims that Americans pay no more for their sugar than consumers in most other major industrial countries--a message that the industry is spreading in new television ads.

Markwart disputes arguments that sugar prices in the United States would be lower if the sugar program were eliminated. And he says prices of sweets such as soda pop would hardly be affected if sugar prices fell, because sugar is such a small part of them.

Sugar growers concede that they receive far more for their crops than do most other farmers, but they say this is justified because it takes substantially more work to raise sugar beets than corn or soybeans and the risk of crop failure is far higher.

“Sure, we’re earning a large amount of profit, but we’re taking the risk,” said Willis Wubben, who grows sugar beets, corn and soybeans nearby, at Prinsburg. “Without a sugar program, there would be no beets here.”

On his farm near Murdock, a few miles from Renville, LeRoy Stamer, one of the area’s largest beet growers, explained a labor-intensive process that requires expensive equipment, unusually close crop management and delicate timing during harvesting season.

“The critics don’t know what we go through out here,” Stamer said, pointing to the crews rushing around the clock to harvest the beets before they lose their sugar content. Without the program, he said, “there wouldn’t be any sugar grown here. Do we really want that?”

The processing of sugar at the co-op also is more complex than for many other crops. The beets are trucked to the Renville processing plant, where they are washed and sliced into slivers.

Then they are put into a diffuser that immerses them in hot water to extract the sugar, filters and purifies the solution and crystallizes and bags the sugar. The whole operation takes 18 hours. The plant must be run continuously from September through March.

Jim Widner, vice president of the co-op, says the factory alone employs 150 people during the off season and another 150 workers during the processing season, and that the industry supports hundreds of other laborers, implement dealers and service industries.

“What do we do with all these farmers?” Widner asked. If foreign producers replace Americans, “do we just use the U.S. as a vacationland?”

Few critics of the sugar program want to repeal it, however. Eliminating the current import quotas would “cut the rug out from under” U.S. sugar growers, Harvard’s Paarlberg conceded. “I’m not one who wants to cut these programs right away.”

Sugar users and a handful of lawmakers have proposed paring the program enough to reduce the price floor by 1.5 cents a year over the next four years. They say this would bring it to within a penny a pound of the world price by 1994. They would also increase imports by 500,000 tons each year.

Sen. William V. Roth (R-Del.), has called the current program “a boondoggle.” He favors a gradual cutback that would still allow profits enough to keep most domestic growers in business, but at the same time discourage overproduction.

Agriculture Secretary Clayton K. Yeutter is considering a restructuring plan of his own that would convert the current quotas to tariffs, which are easier for countries to compare and eventually to reduce.

The program’s future rests with the House and Senate agriculture committees, which are beginning to draft the 1990 farm bill. The committees may decide to lower the floor price slightly.

Meanwhile, far from Washington, the dump trucks continue their non-stop hauling between the huge piles of sugar beets scattered across the southern Minnesota landscape and the refinery here.

“This land is blessed,” said Willis Wubben, looking over the bountiful harvest on his spread in Prinsburg. The question to be decided over the next few months is whether that blessing needs additional sweetening.