Questionable Payments and Loan Defaults in Sugar Programs

CED-79-24: Published: Mar 16, 1979. Publicly Released: Mar 16, 1979.

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The Department of Agriculture (USDA) has two programs intended to help sugar producers with price-support payments and price-support loans. The sugar price-support program on 1977 crop year sugar has resulted in questionable payments of millions of dollars. The plan program for 1977 crop year sugar is beset with problems of storage, underpayments to growers, and failure to vertify or enforce minimum wage requirements.

Substantial defaults on government loans are occurring as a result of low-cost sugar imports, but no final plans have been made to dispose of the sugar forfeited to the government as loan collateral. The options for disposing of forfeited sugar are limited, but USDA is exploring the most promising option of donations to domestic food assistance programs. The method used to calculate the average market price for sugar produced in Hawaii distorted the national average market price and led to higher support payments. In addition, three sugar processors failed to comply with regulations in reporting income information needed to compute support payments which resulted in all processors being underpaid.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should provide more specific guidance on program implementation, particularly with respect to whether payments to any processor should be limited so that the sum of the government's payment and the market price received by any processor does not exceed the support level. In addition, to assure more equitable treatment of sugar agricultural workers, Congress should specify that future sugar payment programs contain minimum wage provisions for workers.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should: (1) reconsider the method used to compute the average market price for Hawaiian sugar; (2) review payments to the three raw sugar processors and make payment adjustments if necessary; (3) review all contracts to identify those which do not comply with the requirements for the cutoff date for payment eligibility and examine all future claims to insure that they are based on contracts which contain proper eligibility requirements; (4) provide adequate written instructions to processors on how benefits should be passed to producers and require assurance that all producers receive equitable payments; (5) plan for the handling and disposition of sugar forfeited as a result of a loan; and (6) review wage payments made to fieldworkers to insure compliance with minimum wage requirements.

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