AGRICULTURE : Farm Bill May Contain Bitter Pill for Nation’s Sugar Growers : Coalition of conservatives and liberals is trying to eliminate the industry’s price supports. Proposal could strike another blow to California economy.

For American consumers, summer has brought sweet treats like ice cream, lemonade and cotton candy. But for the nation’s sugar growers and the tens of thousands of workers whose jobs rely on the sugar industry, these have not been sweet times.

With Congress set to begin work on the 1995 farm bill next week, growers of the sugar cane, sugar beets and corn that satisfy the nation’s sweet tooth are under siege from a powerful coalition of conservatives and liberals. These lawmakers are trying to halt the federal program that has propped up prices for sweeteners for all but two of the last 60 years. And this year, it looks like they may succeed.

That could spell hard times for California’s giant sugar beet industry, with some 865 growers who earn $138 million yearly from the crop. In all, some 14,000 jobs in the state rely directly on the sugar beet crop--the third-largest in the nation and one of the state’s most important farm commodities. If the federal government’s program were wiped out, the drop in income could drive many of the state’s growers--and some of the state’s six processing factories--out of business.

The federal sugar program boosts prices several ways. It restricts imports of foreign sugar, provides the sugar industry with loans and, in some cases, limits domestic production.

Growers, joined by the Clinton Administration and other allies, argue that these support programs help keep the U.S. market price of sugar above the cost of production. One of its principal objectives is to deter European growers, who receive hefty subsidies from their governments, from dumping surplus sugar onto the American market and driving U.S. growers out of business.

While the program is designed to cost the Treasury nothing, a 1993 report by the General Accounting Office concluded that it costs U.S. consumers--the federal government among them--$1.4 billion yearly by artificially lifting the price of sugar.

Over the years, that situation has upset House liberals, who feel that consumers are being gouged while a relatively small number of large sugar producers, many with bad environmental records, reap windfall profits.

And it has incensed the sprawling industry that uses sugar in processed food--makers of candy, soft drinks, cereals and baked goods. These include such corporate giants as M&M;/Mars, Hershey, Coca-Cola and RJR Nabisco, who maintain that the inflated cost of sugar hikes the cost of their products and trims their profit margins.

But this year, those forces have been joined by a welter of Republicans who oppose the sugar program largely on philosophical grounds.

Like a host of subsidies and other income-support programs for farmers, the sugar program represents an unwarranted federal intrusion into the workings of the marketplace, and the time has come to dismantle some or all of them, say these conservatives.

In spite of claims to the contrary, they argue that gutting the sugar program will save the government money and cut the deficit. It will do so, they say, because the government, as a major buyer of foodstuffs, pays extra for sweetened products. The higher costs amount to significantly more than the $31.4 million sugar growers contribute yearly to the government in taxes, according to a soon-to-be-released report by the Congressional Budget Office.

In the House, a bill to abolish the farm bill’s sugar program has 90 co-sponsors, ranging from Majority Leader Dick Armey (R-Tex.) and Rep. Robert K. Dornan (R-Garden Grove) on the right to Reps. Barney Frank (D-Mass.) and Patricia Schroeder (D-Colo.) on the left. Among the sponsors are four committee chairmen and five members of the delegation from Florida, a huge producer of cane sugar and normally one of the sugar industry’s mightiest strongholds.

“That means something,” said Rep. Dan Miller (R-Fla.), principal author of the bill. “This movement has a very strong chance of winning this year.”

The traditional strength of the sugar industry has rested in both numbers and in money. And even in this year of unprecedented opposition, sugar growers pack a powerful political punch, in part because the industry is sprinkled through many states.

According to the American Sugar Alliance, about 420,000 jobs cultivating and processing sweeteners are spread across 42 states--from California, Idaho and Montana, where sugar beets are grown; across the Midwest and down the East Coast, where corn is grown for syrup; to Florida, Mississippi, Texas and Hawaii, where sugar cane thrives.

The industry adds $26.2 billion to the U.S. economy, the growers say.

While corn growers are not directly subject to the federal sugar program, the price of high-fructose corn syrup, a common sweetener for beverages, is kept artificially high because the sugar program props up the prices of corn’s two closest competitors: sugar cane and sugar beets.

In fact, federal investigators in recent weeks have subpoenaed four of the largest U.S. producers of corn syrup in an effort to uncover price-fixing in this highly sensitive market, according to a report published in the Washington Post.

The sugar industry has extended its considerable clout by contributing $11.3 million to the campaigns of congressional candidates from 1979 to 1994, according to the Center for Responsive Politics, a Washington-based watchdog group.

Nearly half a million dollars of that has gone to members of the House and Senate agriculture committees, where support for subsidy programs traditionally has been so strong that any challenges have come in amendments only after the bills reach the floor of each chamber.

This year is no exception, as Congress moves to draft the farm bill, which will guide federal agriculture programs for the next five years. While Senate Agriculture Committee Chairman Richard G. Lugar (R-Ind.) has been a consistent critic of the sugar program and other federal farm subsidies, the attack on the sugar program is expected to come not in committee sessions, which begin next week, but when the bill comes up for debate on the House and Senate floors in late summer and early fall.

The Sugar Alliance and its congressional allies argue that doing away with the program would strip the sugar industry naked in a world market that is heavily subsidized by foreign competitors.

European producers grow 19 million tons of sugar yearly and consume just 13 million tons, say lobbyists for the U.S. industry. The remaining 6 million tons can be deposited on the American market, in years when the federal government will allow it, for the world market price of 14 cents a pound--well below U.S. growers’ average of 23 cents a pound.

If such sugar dumping were permitted and U.S. farmers were left unprotected, growers say, jobs would be lost, sugar farmers and processors would go out of business and the price of sweeteners would climb steadily upward as fewer and fewer producers scramble to satisfy America’s sugar cravings.

To prove it, they point to two earlier occasions when Congress halted the sugar program--in 1974 and 1980. Each was followed by a steep rise in sugar prices--from about 24 cents per pound to 65 cents and 49 cents, respectively.

Asked about the argument that producers of processed foods would drop their prices if sugar became cheaper, Robert H. Buker Jr., senior vice president of U.S. Sugar, the nation’s largest cane producer, laughed.

“You’d never get a cheaper Snickers or Coke, though you might get a cheaper box of sugar on the shelf--at least for a while, before sugar factories are driven out of business,” Buker said. “Then prices would rise.”

Here, too, the sugar industry has the weight of history on its side. In 1974, responding to rising costs for sugar, members of the soft-drink industry raised prices as many as four times. Yet when sugar prices dropped again, the prices of sweetened beverages stayed relatively high, as bottlers increased profits.

Those are arguments that growers have been carrying to Capitol Hill in the last several weeks. Warned by their allies in Congress that they are at risk of losing the fight, growers have drafted a compromise that would lessen the federal government’s role in the industry over several years.

But with the forces against them building momentum, the growers have begun to recognize that they can no longer rely on many of their customary congressional allies this time.

Opening a May hearing on the issue, Rep. Thomas Ewing (R-Ill.), a traditional champion of the sugar growers and chairman of the House Agriculture subcommittee overseeing the program, acknowledged that opponents have a “powerful argument” to end the program.

“The atmosphere in Washington requires every farm program to justify its continuation,” Ewing said. “But the debate grows more contentious when sugar is the issue.”