Sugar Program:

Changing Domestic and International Conditions Require Program Changes

RCED-93-84: Published: Apr 16, 1993. Publicly Released: May 18, 1993.

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Pursuant to a congressional request, GAO reviewed the Department of Agriculture's (USDA) sugar program, focusing on: (1) the program's effects on sweetener users and producers; (2) the impact of changes in domestic sweetener production and consumption; and (3) pending international trade agreements' effect on the program's operation.

GAO found that: (1) the sugar program costs sweetener users an average of $1.4 billion annually because they pay higher prices for domestic sugar; (2) the price support is implemented through a loan program and import restrictions; (3) domestic sugar-containing products are at a competitive disadvantage with imported products due to higher domestic sugar prices; (4) sugar users can import sugar at world market prices without extra duties if their products are intended for export; (5) a few large sugar farms receive the majority of the sugar program's benefits because the beneficiaries are not subject to payment limitations; (6) some individual producers receive millions of dollars in annual benefits; (7) the high support price encourages inefficient sugar production; (8) the sugar program benefits high fructose corn sweetener manufacturers and corn growers by increasing the demand for their less expensive products; (9) USDA may have to limit sugar imports further because of increases in domestic sugar production and stable sugar consumption, but it cannot maintain price supports merely by controlling sugar imports; (10) Congress established domestic marketing allotments for sugar if imports fall below a specified minimum, but administrative and user costs would increase; (11) pending international trade agreements would prevent USDA from shielding sugar producers from increasing imports; and (12) the trend toward more open markets could make the sugar program inoperable.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The 104th Congress did not address the recommendation in the Federal Agriculture Improvement and Reform Act of 1996. No action is anticipated until the next farm bill is taken up in 2002.

    Matter: Because of the additional user costs of the sugar program and the possibility that it will not operate in the future as it does today, Congress needs to consider legislation to move the sugar industry toward a more open market. As part of this transition, the market price for sugar should be lowered. To achieve a lower market price, Congress should gradually lower the loan rate for sugar and direct USDA to adjust import quotas accordingly. Reducing the loan rate gradually would allow producers time to make orderly adjustments.

 

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