The sugar program is sneaky, taxing consumers through the market place instead of via direct government spending. A system of import quotas and domestic supply controls works to raise sugar prices to a target level of 23.3 cents per pound of raw sugar when world prices fall below that amount.
Over the thirty year period from 1980 and 2009, the sugar program effectively doubled the price U.S. consumers paid for sugar and increased annual food costs by about $9 per person. That doesn’t sound like much, but that translates into a $1.7 billion net gain to US sugar growers. That is a lot of candy to share among less than 20,000 relatively wealthy sugar farmers.
What’s worse is that each dollar of those farm benefits costs the U.S. economy 76 cents because of economic inefficiencies created by the sugar program, a pretty expensive exercise in transferring income to wealthy farmers and landowners from much poorer average Jane and Joe consumers.
The U.S. sugar program is also a humanitarian problem. The program lowers world prices because it reduces U.S. domestic sugar consumption. These reductions in world prices have caused substantial reductions in the incomes of some of the world’s poorest farmers, pushing them closer to the subsistence line.
The timing is right for Congress to end the program permanently. Over the past two years, the sugar program has been worth very little to U.S. sugar producers and processors as world sugar prices have been much higher than in the previous thirty years, and well above the U.S. price support level of 23.3 cents per pound.
Recent legislative initiatives such as the Free Sugar Market Act introduced by Congressman Joe Pitts (R-Pa.) and the Free Sugar Act introduced by Senator Richard Lugar (R-Ind.) would be major steps toward helping American consumers and some of the poorest farming families in the world. Some U.S. farmers would stop raising sugar beets and sugar cane, but almost all would switch their land to other crops, including corn and soybeans—two commodities for which prices have been at record levels over the past four years. Farmers wouldn’t go broke, the sky wouldn’t fall, and the additional production of scarce grain and oilseeds commodities would be a very good thing for U.S. consumers and the U.S. economy. Importantly, more jobs would also be created as the American food industry would become more competitive both in the United States and globally.
Vincent H. Smith is a professor of agricultural economics at Montana State University. Michael Wohlgenant is the Wiliam Neal Reynolds Distinguished Professor of Agricultural Economics at North Carolina State University.