Lugar Wants No More Sugar Buys

March 19, 2001

Senate Agriculture Committee Chairman Richard Lugar (R-IN) wants USDA to purchase no more surplus sugar in another attempt to raise market prices for the product. Lugar consistently has opposed such efforts. Lugar believes Agriculture Secretary Ann Veneman may be encouraged to announce an additional sugar ‘payment in kind' (PIK) program. Under the scheme, farmers would be given surplus sugar held by USDA in exchange for destroying or not planting sugar beets or cane.

"Another PIK program would repeat a fundamentally flawed policy that is counter to the market-oriented direction of American agriculture. It is a bad deal for consumers and sugar growers to prop up an industry to overproduce sugar," Lugar said. "The current federal sugar program is unacceptable. Another PIK program is not the answer. All segments of the sugar industry should work together to develop an alternative to the market intervention practices of last year."

USDA's market intervention last year failed to improve prospects for the sugar sector, says Lugar. In June, USDA announced it had purchased 132,000 tons of sugar at a cost of $54 million. At the end of September 2000, sugar prices were still weak, albeit twice world prices. Sugar mills and processors forfeited 804,000 tons of sugar held as collateral for government loans. In December, USDA announced that under a PIK program its Commodity Credit Corporation had transferred title to more than 275,000 tons of sugar to sugar beet farmers who had agreed to plow under almost 102,000 acres of planted sugar.

In a report submitted to Congress in January, the Commission on 21st Century Production Agriculture concluded that the combination of market conditions and international commitments "create the need for serious consideration of alternatives to the current sugar program."

At USDA's Outlook Forum in late February, representatives of different segments of the domestic sugar industry gave similar reasons for the present crisis in American sugar markets. Luther Markwart, executive vice president of the American Sugarbeet Growers Association and current chairman of the American Sugar Alliance, said, "The problems we face are not isolated, but industry-wide. We cannot survive by living off of our equity or cannibalizing our business. This industry is in serious trouble."

Thomas McKenna, President of United Sugars Corporation of Bloomington, MN, also sounded a warning about the industry's condition. He said, "The domestic sugar industry is in a period of crisis and extreme uncertainty." He blamed the "primary underlying reason…is that government policy, as it relates to the sugar industry, is not effective."

McKenna said the results of government policy are evident: "Last year we experienced the lowest market price for sugar in close to 20 years. As a result, at least 50 percent of the domestic sugar industry is in a radical ‘shake out' while most all participants have put facility reinvestments needs on hold."

Markwart said that troubles in the sugar industry "should be a concern to both our customers and to policymakers." He said, "First, the government must work with the domestic industry to immediately get supply and demand back into balance by disposing of Commodity Credit Corporation-held sugar stocks by another payment-in-kind or PIK-like program and sell some sugar as an enhancement to the production of ethanol from corn."