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30–239 PDF 2006

S. HRG. 109–625

TO REVIEW THE IMPLEMENTATION OF THE

SUGAR PROVISIONS OF THE FARM SECURITY

AND RURAL INVESTMENT ACT OF 2002

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

MAY 10, 2006

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

SAXBY CHAMBLISS, Georgia, Chairman 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

JAMES M. TALENT, Missouri 

CRAIG THOMAS, Wyoming 

RICK SANTORUM, Pennsylvania 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

CHARLES E. GRASSLEY, Iowa 

TOM HARKIN, Iowa 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

MARK DAYTON, Minnesota 

KEN SALAZAR, Colorado

MARTHA SCOTT POINDEXTER, Majority Staff Director 

DAVID L. JOHNSON, Majority Chief Counsel 

STEVEN MEEKS, Majority Legislative Director 

ROBERT E. STURM, Chief Clerk 

MARK HALVERSON, Minority Staff Director 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

To Review the Implementation of the Sugar Provisions of the Farm Security 

and Rural Investment Act of 2002 ...................................................................... 01

Wednesday May 10, 2006

STATEMENTS PRESENTED BY SENATORS 

Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 01

Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 03

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 02

Crapo, Hon. Michael, a U.S. Senator from Idaho ................................................. 02

WITNESSES 

Panel I 

Penn, J.B. Dr., Under Secretary for Farm and Foreign Agriculture Services, 

United States Department of Agriculture, Washington, DC ............................ 04

Panel II 

Blamberg, Margaret Dr., Executive Director, American Cane Sugar Refiners’ 

Association, Brooklyn, New York ........................................................................ 21

Goehring, Joe, Director of Commodity Operations, The Hershey Company, 

Hershey, Pennsylvania ........................................................................................ 24

Peiser, Robert A., President and CEO, Imperial Sugar Company, Sugar Land, 

Texas ..................................................................................................................... 22

Roney, John C., Director of Economics & Policy Analysis, American Sugar 

Alliance, Arlington, Virginia, Acompanied by: Wallace Ellender, III, Chairman, National Legislative Committee, American Sugar Cane Leage, Bourg, 

Louisiana, and Steve Williams, Presedint, Red River Valley Sugarbeet 

Growers Association President, American Sugarbeet Growers Association, 

Fisher Minnesota ................................................................................................. 19

Roy, Mrinal, General Overseas Representative, Mauritius Sugar Syndicate 

and Mauritius Chamber od Agriculture Grosvenor Gardens House London, 

United Kingdom ................................................................................................... 26

APPENDIX 

PREPARED STATEMENTS: 

Harkin, Hon. Tom ............................................................................................ 42

Blamberg, Margaret, Dr ................................................................................... 66

Goehring, Joe .................................................................................................... 76

Penn, J.B. Dr .................................................................................................... 43

Peiser, Robert, A ............................................................................................... 68

Roney, John C. .................................................................................................. 52

Roy, Mrinal ....................................................................................................... 84

Page

IV

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Roberts, Hon. Pat ............................................................................................. 98

Statement of the American Crystal Sugar Company, Moorhead,

Minnesota ...................................................................................................... 99

Statement of the California Beet Growers Association, LTD ....................... 102

Statement of the Corn Refiners Association .................................................. 104

Statement of the International Sugar Policy Coordinating Commission 

of the Dominican Republic ........................................................................... 106

Statement of the Southern Minnesota Beet Sugar Coorporative ................. 113

Statement of on the behalf of the Sugar Alliance of the Philippines ........... 123

Statement of the Imperial Sugar Company ................................................... 125

QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD: 

Baucus, Hon. Max ............................................................................................ 130

Stabenow, Hon. Pat .......................................................................................... 132

(1)

TO REVIEW THE IMPLEMENTATION OF THE 

SUGAR PROVISIONS OF THE FARM SECURITY AND RURAL INVESTMENT ACT OF 2002

WEDNESDAY, MAY 10, 2006

U.S. SENATE, 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, 

Washington, DC 

The committee met, pursuant to notice, at 10:03 a.m., in room 

SH–216, Hart Senate Office Building, Hon. Saxby Chambliss, 

chairman of the committee, presiding. 

Present or submitting a statement: Senators Chambliss, Lugar, 

Thomas, Coleman, Crapo, Harkin, Baucus, Dayton, and Salazar. 

STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR 

FROM GEORGIA, CHAIRMAN, COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

The CHAIRMAN. This hearing will come to order and good morning, everyone. 

We are here today to review the implementation of the sugar 

provisions of the Farm Security and Rural Investment Act of 2002, 

or the 2002 farm bill. Last week, the committee heard from USDA 

and representatives of the peanut industry on the peanut program. 

Today we continue our series of oversight hearings with a look at 

the U.S. sugar program. 

The sugar program functions differently than all of the other 

commodity programs. Rather than receive direct government payments, domestic sugar producers and processors benefit from a 

combination of two methods which ensure a minimum price for 

their sugar. Marketing allotments are used to control domestic supply and import quotas are used to regulate the quantity of imported sugar entering the U.S. market. These two tools allow the 

Federal Government to control the domestic price of sugar, which 

allows the program to function without direct taxpayer support and 

at a no-cost basis for Federal Government outlays, a requirement 

mandated by the 2002 farm bill. 

Unfortunately, there are many challenges facing the sugar program today, including many issues related to trade. Different sectors of the sugar industry, from growers to refiners to users and 

import quota holders, may view the sugar program in different 

ways. These views are what we expect and hope to learn here 

today. 

We welcome all of our witnesses. We thank you all for appearing 

here today and we look forward to your testimony. 

2

I understand my colleague and friend, the ranking member, Senator Harkin, will be here for a little while this morning. We will 

obviously let him have the opportunity to make any comments he 

wishes to make. 

At this time, I will turn to Senator Crapo for any comments he 

wishes to make. 

STATEMENT OF HON. MIKE CRAPO, A U.S. SENATOR FROM 

IDAHO 

Senator CRAPO. Thank you very much, Mr. Chairman. I will be 

very brief. I appreciate the attention you are giving to these commodities and to the opportunities that we need to conduct the oversight necessary to prepare for the next farm bill. As you know very 

well, sugar is a very important issue to me and the importance of 

making sure that we get it right in the next farm bill can’t be overstated. 

I am going to save most of my comments for the question and 

answer period because I want to talk with our witnesses about the 

thick juice that is now coming in which I think is a loophole in the 

system that is causing a problem with the implementation of the 

program and some of the other issues, but I will hold those comments and questions until we have an opportunity to get into it. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Very good. Now, Senator Baucus, any comments 

you wish to make? 

STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM 

MONTANA 

Senator BAUCUS. Yes. Thank you, Mr. Chairman. Just a brief 

statement, please. 

Thank you very much for holding the hearing. Obviously, sugar 

is important not only to the country, but to a lot of our States, including the State of Montana. I might say that the sugar beet industry in Montana supports more than 3,200 jobs. It generates 

more than $188 million of economic activity. More than 350 Montana farmers produce 53,000 acres of sugar beets, processed at facilities in Billings and Sydney, Montana. 

To further break those numbers down, for every dollar spent by 

the sugar beet industry in Montana, $1.85 in additional business 

activity is generated. Each acre of sugar beets planted generates 

about $4,000 in total business activity. In other words, each ton of 

sugar beets processed generates about $211—it must be a lot more 

than—for each ton, $211 in total business activity. 

As we begin to discuss the next farm bill and specifically the 

sugar program, we must think about our producers’ competitiveness over the next decades. It is our responsibility, indeed our obligation, to ensure that the farm bill provides the tools and support 

necessary for our producers to compete globally. U.S. agriculture 

tariffs currently average 12 percent. For the E.U., Japan, Korea, 

and India, respectively, it is 31 percent for the E.U., 51 percent in 

Japan, 66 percent in Korea, 114 percent for India. 

On domestic supports, current WTO rules allow the E.U. to offer 

more than four times as much as the U.S., almost $80 billion 

versus about $20 billion in the U.S. Our producers can compete 

3

with anyone on a level playing field. It is our duty to try to make 

the playing field level. 

I would also like to take a minute to read an excerpt from the 

Prairie Star. That is a Montana agriculture newspaper. It is a 

snapshot that reminds us that these sugar producers that we talk 

about in the abstract are not just statistics. They are real people. 

‘‘While Greg Lackman started his farming career raising sugar 

beets, he began to diversify his operation. Today, he farms sugar 

beets, malt barley, and wheat in Denton. Greg isn’t the only sugar 

beet grower in his family. His two brothers, Scott and Steven, also 

grow beets. Scott also grows corn and grains in addition to sugar 

beets in the Hysham area, while Steve grows beets and grain while 

raising registered Limousin cattle near Hathaway.’’

‘‘Lackman talks to his brothers almost every day and he shares 

equipment with Scott. They work together, even though they have 

separate operations. Greg’s wife, Lorraine, teaches kindergarten at 

the local school and helps take care of their children, Tina, who is 

16, and David and Shane, 13. The Lackmans exemplify the disciplined yet versatile nature of sugar beet growers in Montana. 

They represent the faces and the future of agriculture, the producer, his family, and his work. Montana producers are hard working, the salt of the earth. They are the glue in their communities.’’

So I look very much forward, Mr. Chairman, to working with our 

producers in Montana as well as my colleagues, with you, Mr. 

Chairman, and the rest of the Senate to craft the next farm bill 

that ensures the Lackmans’ future and the future of other growers 

in our State. Thank you. 

The CHAIRMAN. Thank you very much, Senator Baucus. 

Senator Lugar, any opening comments you wish to make? 

Senator LUGAR. Mr. Chairman, I thank you for scheduling the 

hearing. We enjoyed a hearing that was tremendously educational 

on peanuts last week and I look forward to learning much more 

today from the administration and private witnesses. 

I am very hopeful that there will be some discussion about sugar 

and ethanol and the use of sugar for energy. This is a new subject 

and one with which many people may be uncomfortable at this 

point, but it is one in which it appears to me that the sugar industry has a role to play that could be substantial and could have a 

different constituency altogether from that which at least normally 

comes around this table. 

I look forward to the witnesses and I thank you for scheduling 

this timely hearing. 

The CHAIRMAN. Thank you, and you are absolutely right. We are 

going to have some conversations about alternative fuels today and 

the impact sugar and sugar cane may have on that because it is 

going to be a critical part of the farm bill next year. 

Senator Harkin? 

STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM 

IOWA 

Senator HARKIN. Thank you very much, Mr. Chairman. I want 

to thank you for having this very timely hearing. As we prepare 

for the next farm bill, it is important that we review the current 

farm programs, assess how they are being implemented, determine 

4

what is working well and what can be improved in the next farm 

bill. 

The 2002 farm bill continued the no-net cost sugar program with 

non-recourse marketing loans to support sugar prices. Again, to all 

observations, it seems that it has worked fairly well. The U.S. 

sugar program is one that has served our people well in the past. 

Even though we have some of the most efficient sugar producers 

in the world, you can’t expect our producers to compete with other 

governments around the world in the way other governments have 

supported their sugar programs. 

We have a lot of challenges facing the sugar program in this 

country and our sugar producers, whether they are cane or beet 

producers. I just listened to the last part of Senator Baucus’ comments. But it seems to me that, picking up on what Senator Lugar 

just said, that if we are going to be moving aggressively ahead—

I shouldn’t say if. I hope we are moving aggressively ahead toward 

more renewable energies and bio-based energy systems in this 

country. It seems to me that sugar could form one of the strong 

legs of that and it could either be cane or beet, either one, and we 

have got a lot of land in this country where beet sugar, for example, can be grown. It is not much applicable for other crops, but it 

certainly is for beet sugar. If that is a source for providing more 

ethanol production, then we ought to be thinking about it in those 

terms in terms of the next farm bill. 

With that, Mr. Chairman, again, I thank you for these timely 

hearings and look forward to the testimony of our witnesses. 

The CHAIRMAN. Thank you, Senator Harkin. 

We have on our first panel today our friend, Dr. J.B. Penn, 

Under Secretary for Farm and Foreign Agricultural Services from 

the U.S. Department of Agriculture. 

Dr. Penn, it is always a privilege to have you here. Thank you 

for the great work you do at USDA and we look forward to your 

comments this morning on the sugar program. 

STATEMENT OF J.B. PENN, UNDER SECRETARY FOR FARM 

AND AGRICULTURAL SERVICES, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C. 

Dr. PENN. Thank you, Mr. Chairman. It is a real opportunity to 

be here with you and other members of the committee this morning 

to review our experiences with the sugar program that was included in the 2002 farm bill. We now have almost 5 years’ experience in operating that program and I am very pleased to be able 

to provide our perspective on how well the program has worked 

over the last 5 years and also to offer some observations on the 

changing business environment in which the program will be operated in the future. I think that will have relevance as the Congress 

begins to consider appropriate policies for the next farm bill. 

Let me begin by noting that we have a very dynamic sweetener 

industry, one that is increasingly being driven by factors both outside the United States and inside our borders. Our market today 

requires about 10.5 million tons of sugar to be available across the 

year and our producers—we now have slightly less than 6,000 producers, about 5,000 beet producers and less than 1,000 cane producers—they provide something less than eight million tons of the 

5

10.5 million tons that we need and the rest of the sugar then comes 

from foreign sources. 

We are among the five largest global producers and the only producer in the world to have significant beet and cane production 

both. In our sector, the production is roughly half and half. 

Now, as has been noted, the Congress has mandated minimum 

price for sugar in the domestic market and our objective in operating the program is to balance the supply against the demand as 

best we can and at the same time keep the price above the statutorily required minimum. 

We have a variety of tools to use in pursuing that, as the chairman noted earlier. Mainly, we have got in this program that is far 

less market oriented than the other programs, it is much more 

rigid, but we have the Price Support Loan Program, which contains 

the minimum price. We have domestic supply controls in the form 

of marketing allotments that are assigned to each processor. And 

we have foreign supply controls that regulate the amount of sugar 

that may enter from each supplying country. 

Now, these supply controls are used, in essence, to short the 

market, to obtain the desired price objective. And then, as Senator 

Harkin noted, there is one additional Congressional mandate and 

that is that this program be operated at no net budgetary cost. 

That is, we are directed to avoid forfeitures to the extent possible, 

forfeitures of the sugar that processors place under the Price Support Loan Program. 

Now, there are many other details, many other requirements, 

rules, and regulations that govern the program, but that is the general structure that we have to operate with. 

Let me just say a brief word about program operations since this 

program began in the 2002 farm bill. Some of the modifications 

that were made in the 2002 farm bill reflected the experience with 

the previous program, and that one had resulted in a substantial 

amount of forfeitures and it had incurred a very substantial cost, 

so the marketing allotments for domestic processors were introduced in this farm bill. And then for the period May 2002 when the 

farm bill was implemented until July of 2005, the domestic market 

was relatively tranquil. There were very few significant supply or 

demand disruptions. The market price stayed above the forfeiture 

level and the market was in relative balance. So we think for that 

period, the operation was fairly uneventful. 

But from early August 2005 until the current time, we have seen 

one of the most tumultuous periods in the history of sugar in this 

country, perhaps more so than in 30 years or more according to a 

lot of the industry veterans who tell me about this. The period of 

turmoil started when we had poor weather in the upper Midwest 

as the beet harvest began and one of the suppliers was unable to 

meet the commitments. This industry, unlike a lot of other industries, has come to operate with a just-in-time inventory system, and 

when there is any disruption of supply, no matter how small, it creates reverberations across the whole sector, and that certainly happened. This was in very early August of 2005. So the industry was 

in a period of some disruption. 

And then, as you know, on August 29, Hurricane Katrina struck 

and that not only damaged the cane crop in Louisiana, but it also 

6

closed two of the refineries that were operating there and one of 

those was closed for an extended period. So we had a reduction in 

the cane crop, but we also had a reduction in the amount of sugar 

that was being made immediately available to the market. So that 

created even more uncertainty and turmoil. 

And then as we were trying to deal with that, on September 24, 

Hurricane Rita struck, and then on October 24, Hurricane Wilma 

then went across Florida and did damage to the cane crop there. 

At USDA, we immediately began responding, using the tools that 

we have available that I have described. We quickly expanded the 

marketing allotments to processors so that we could release all of 

the domestic sugar stocks that were available into the market and 

then we increased the quotas on imported sugar so that we allowed 

both refined sugar to be available immediately to the market and 

raw sugar to come in for further processing. 

So today, we are beyond the most turbulent period, but we continue to monitor the situation very closely. The market still is uneasy and somewhat unsettled, but we believe it is manageable 

through the remainder of this farm bill barring further highly disruptive events. 

Now, we have learned a lot of lessons from our operation through 

the past several months and we look forward to sharing the details 

of these with you. Some of the things that we have learned are that 

it would be helpful if we had the ability to reassign surplus allotments between the beet and cane sectors. That is not now available 

and creates an awkward situation at times. There is a prohibition 

against interstate selling of cane sugar to fulfill the allotments 

from cane producing State to State. The calculation of the OAQ is 

somewhat tortured and involves carrying stocks and we think that 

needs some attention. And then our classification standards for refined sugar, we believe, need some attention. 

So these are just some of the things that we would like to share 

with you and the staff as you begin to look more closely at the 

structure of this farm bill. 

Now, looking beyond the structure of the current program, we 

think there are some other things that the Congress should consider as it begins to look at what would be the most appropriate 

policy for the future. The business environment, the operating environment for sugar, for all of agriculture is changing very rapidly 

and those things need to be considered. Let me just quickly name 

a few and then I will stop. 

One of those is the changing industry structure, concentration of 

the industry. This has changed very rapidly in recent years. It continues to do this. So we now have a more highly concentrated, a 

more integrated, and a geographically changed industry, and that 

is going to have an impact on how any future sugar program would 

operate. So we think that needs to be taken into account. 

Also, we need to think beyond just the production part of this 

sector. The competitiveness of the sugar-containing products industry needs some attention. Senator Baucus mentioned the number 

of jobs that are in the growing and processing industry. There is 

a huge number, almost a million jobs that are associated with the 

sugar-containing product industry. That industry has been losing 

competitiveness over recent years. It has been moving plants outVerDate 0ct 09 2002 15:08 Oct 20, 2006 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\30239.TXT TOSHD PsN: LAVERN
7

side the U.S. Jobs have been lost. And that is in large part, not 

in total, but in large part due to its facing higher raw material 

prices than do foreign competitors, so we think that is something 

that should be taken into account. 

And then the world market is changing. For a long time, we were 

able to isolate the domestic sugar industry completely from the 

world market and what happened outside our borders didn’t much 

matter. That is no longer the case. We simply can’t do that to that 

extent any longer. So the world market is changing and we need 

to account for that. 

Three big things are happening that are offering some long-term 

trends. One is that the European Union is modifying its sugar program. The bottom line result is going to be that less sugar is going 

to be placed into the world market and world sugar prices are 

going to be trending higher as a result of that. 

Another, as Senator Lugar mentioned, is the changed energy situation now. We see a situation where there is a competition between renewable fuels and sugar for sugar cane and that is having 

a bullish impact on the price of sugar and that is one of the reasons 

that we have seen the world price of sugar move to 25–year highs 

in just recent months. 

Third, as has been mentioned here, is the Doha Development 

Agenda negotiations are, we hope, nearing a conclusion. If that 

round is successful, then there will be far-reaching reforms to national sugar industries all around the world and that should also 

have the effect of boosting world prices. So we will have a situation 

in which the world market price will be much less different than 

the domestic price, which has not been the case for years and 

years. 

And then, depending upon the success of the Doha development 

agenda, free trade agreements, bilateral free trade agreements are 

going to become more or less important. As has been noted also, 

with most of the future growth of agricultural markets occurring 

outside the United States, then the continued prosperity of our 

farm sector and our food processing sector will depend on gaining 

ever-increasing access to consumers in the growth markets around 

the world. So gaining opportunities for all of our farmers and 

ranchers is going to mean that we can no longer shield access to 

individual product markets, such as sugar. Our trading partners 

are going to want access to our market, especially as long as it is 

a premium market, if they are going to grant us access to their 

markets. 

And then finally and perhaps most importantly for the near 

term, Mr. Chairman, is NAFTA implementation. For a dozen years 

now, the duties on sugar and other agricultural commodities have 

been gradually coming down, and then on January 1, 2008, these 

go to zero, and that means that, in essence, there is no longer any 

border between the U.S. and Mexico for sugar and high-fructose 

corn syrup. This simply means that the current program structure 

can no longer be operated at no net cost after that time since the 

supply can no longer be sufficiently controlled to maintain the minimum price. So significant forfeiture would thus be expected to result and that would entail significant budgetary costs and it would 

violate the no net cost provision that is in the current program. 

8

So with that, Mr. Chairman, I will close. Again, thanks for the 

opportunity to appear here today. We look forward to working with 

this committee and with the Congress as the next farm bill is developed. Thank you. 

The CHAIRMAN. Thank you, Dr. Penn. 

[The prepared statement of Dr. Penn can be found n the appendix on page 43.] 

The CHAIRMAN. Let me start by going back to the process that 

you followed to increase imported sugar in order to make up for the 

domestic shortfall caused by the hurricanes last year. How do you 

allocate the amount of imported sugar needed to provide the 

amount of resources that we need and do our bilateral trade agreements that we have in place today, factor into your decision on who 

is allowed to import sugar? 

Dr. PENN. Well, the first thing that we do at the beginning of 

each fiscal year or marketing year is to determine the overall allotment quantity, the OAQ. That is determining the amount of sugar 

that is going to be required. As I indicated, that is roughly ten million tons. And then we say, OK, if that is the amount we are going 

to need, how are we going to get sugar, and we look at that that 

can be supplied by the domestic industry. That is about eight million tons, around it. So that means that there are two million tons 

of additional sugar that will be needed. 

Under our long-term trade commitments, we are obliged to import 1.25 million tons under the WTO and then under these bilateral free trade agreements, we have now committed to allow 

120,000 tons from the CAFTA-DR countries and 12,000 tons from 

Peru. There will be some additional amount in the Colombia Free 

Trade Agreement once that is concluded and announced. 

So then we look at how we are in terms of balance, and if that 

gets us the ten million tons that we need, then we move forward. 

Now, that is what we did for the beginning of 2005 and then we 

had the hurricanes. We had the disruption. Then at that point, the 

first thing that we do is to monitor the situation and see where 

there might be domestic sugar. Are the cane processors holding 

stocks that could be released into the market? Are the beet processors holding stocks? If they are, then we increase the overall allotment quantity by an amount sufficient to draw in the sugar that 

we need. Then we turn to the cane sector. They release their stocks 

into the market. You turn to the beet sector and they release 

stocks. 

Now, where we get an awkward situation and one I alluded to 

in my statement is that this year, we turned to the cane producers 

and they had no stocks. So instead of being able to say, OK, we 

will turn to the beet producers and let them make up for the stocks 

that the sugar processors don’t have, the statute prohibits us from 

doing that. We have to reassign the shortfall from the cane sector 

first to the Commodity Credit Corporation, if it has no stocks, then 

to imports. So we are in the awkward position of allowing in imported sugar when our domestic growers still have sugar on hand. 

That is one of the things that we suggest that might be looked at 

in the future. But that is the process that we go through, Mr. 

Chairman. 

The CHAIRMAN. Do you expect any supply issues for this year? 

9

Dr. PENN. Well, we are looking at the situation at the moment 

and we are closely monitoring it. We are looking at all of the factors. We are watching demand, which has at times been unstable, 

and we are looking at the refining capacity in the United States. 

We are looking at whether that is being fully utilized or not. And 

then we are looking at the sugar that we have already permitted 

to come in. Is it entering as we expected? And as the world market 

changes, there is less incentive at times for people to supply sugar 

to us. Our market is not as attractive as it has been in times past. 

So we are watching all of those factors. At the moment, I can say 

that it appears that the market is pretty much in balance, but we 

continue to monitor it and we will through the remainder of this 

year. We are only 15 days away from the next hurricane season, 

too, I think. 

The CHAIRMAN. In the CAFTA negotiations, there was a provision included that required USDA to look at the utilization of sugar 

in the manufacturing of ethanol. I know that you and the Secretary, based upon that directive, have engaged LSU to do a study 

on this particular issue. Can you bring us up to date on where that 

is? 

Dr. PENN. I can. I just had a report on that this week. The economists who are doing the study have completed a draft and they 

submitted it to our Office of the Chief Economist for preliminary 

review, and so it has been reviewed and suggestions for some further work, some additional analysis, have been made to the authors and they are doing that now. We expect them to complete 

that so that we have it available by early summer. 

The CHAIRMAN. Without indicating what the result is, are you 

encouraged by what you saw in the preliminary draft? 

Dr. PENN. Well, it depends on one’s point of view, I guess. I had 

a lot of discussions about that with you and Senator Coleman. The 

idea was to look at the feasibility of using sugar cane, sugar beets, 

and sugar in the production of ethanol, and again, without prejudging what the people are going to say, I believe that the preliminary results suggest that it is not economically nor technically feasible to manufacture ethanol from crystalline sugar but that it may 

well be feasible, as the Brazilians are proving on a large scale, to 

manufacture ethanol from sugar beets and sugar cane, from the 

fermentation of the juice from those two crops. 

The CHAIRMAN. Last, Dr. Penn, I think it is fair to say that the 

sugar sector is one of the more protected agriculture commodities 

around the world and that it is constantly giving fire to that both 

inside Congress as well as inside the WTO. As we move into the 

consideration of the sugar program in the next farm bill, can you 

give us an idea of what sort of distortions or potential problems 

exist relative to the current program so that we might apply WTO 

rules to that program? 

Dr. PENN. I think, in general, as you indicated, all of our farm 

programs have been subject to some considerable criticism by our 

trading partners, and, of course, one in particular, cotton, was the 

subject of litigation in the WTO. The general charge made is that 

by subsidizing the production of these individual commodities, we, 

therefore, cause more to be produced than would otherwise be produced and that we then put that into the world market and we deVerDate 0ct 09 2002 15:08 Oct 20, 2006 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 C:\DOCS\30239.TXT TOSHD PsN: LAVERN
10

press world markets and cause damage to competitor, producer, 

and exporter countries. 

As you noted at the beginning, the sugar program operates a little differently. It does maintain a premium price. It does it in a little different way than for the other commodities. But I think some 

of the same criticisms are applicable there. By providing a premium price, we are encouraging the production of more sugar than 

would otherwise be produced inside the United States. Now, the 

difference with sugar is that we don’t export sugar except some in 

sugar-containing products, but it is market access that causes the 

problem with respect to sugar, more so than for corn or some of the 

other row crops. So we have got our trading partners who are saying, again, if we are going to give you access to our corn and soybeans and chicken leg quarters, then we want access to your sugar 

market. We want to be able to compete there. So that is the big 

criticism, I think. 

The CHAIRMAN. Senator Harkin? 

Senator HARKIN. Thank you very much, Mr. Chairman. 

It seems that basically what you are saying, Secretary Penn, is 

that the sugar program basically has worked well except we got hit 

with bad weather. We got hit with wetness up in the Red River 

Valley and then we got hit with the hurricanes and stuff that 

threw everything kind of out of whack. But you say right now it 

is in pretty good balance. Right now, it has been no net cost to the 

taxpayers, right? 

Dr. PENN. Given the objectives that the Congress set for the 

sugar program, I mean, then we have tried to operate it as specified in the statute, and you are right. We had all of these very 

atypical, unusual circumstances and we found that the program 

was cumbersome and difficult to manage in an atypical situation 

like that and I just gave one example a moment ago. 

In short, all of the stakeholders in the industry have to look to 

USDA to manage their businesses. I mean, they have to make their 

special needs known. They have to urge us to act in a certain way 

and that is cumbersome. It is difficult. It is costly for the industry. 

It is our belief that a more flexible program would probably operate 

better. It would supply the industry and serve the growers probably more effectively. 

Senator HARKIN. I would like to see the concrete proposals of 

that as we move into the next farm bill, if you have got something 

that you would like to have us take a look at. 

Of course, we are going to be facing some new things with the 

next farm bill that we weren’t facing with the last one and that is 

the January 1, 2008, curtain that is going to fall at that time. Now, 

again, could you address yourself a little bit to the problem that 

we have been having with Mexico. Three times, we have taken 

them to the WTO. Three times, the WTO has found in our favor 

on their barricades to our high-fructose corn syrup in Mexico. And 

now they have not only instituted a new kind of a tariff on imports. 

What is going to happen with this all on January the first of 

2008? I mean, we are, what, a year and a half away from that. So 

what is going to happen with all of those tariffs and all those 

things with Mexico and how they have been treating us in terms 

11

of keeping high-fructose corn syrup out? What is going to happen 

at that time? 

Dr. PENN. Well, this is a pretty checkered past involving sugar 

and high-fructose corn syrup. As you know, when the U.S.-Mexico 

agreement was reached, at the last minute, there was a side letter 

which addressed the sugar/high-fructose corn syrup situation. Well, 

it turned out in actuality there were two side letters. There weren’t 

identical, one in English and one in Spanish. You know the story 

about the lawyers. I mean, that just provided an opportunity for a 

lot of disagreement as to what the agreement really was. So that 

has never, I think, performed as people have expected, so we have 

had a very difficult situation there and it, hopefully, will be resolved on January 1, 2008, when these side letters are no longer 

applicable. I mean, we again have no border. 

But you are right. The Mexicans placed a tax on high-fructose 

corn syrup. We said that was illegal. We took them to the WTO. 

We won. They appealed and we won the appeal. They now tell us 

that they are going to remove the tax and they tell us they are 

going to do that on January 1, 2007. Under the WTO rules, we are 

obliged to give them a reasonable time to do that. So we are now 

looking to January 1, 2007, for that tax to be repealed. 

Senator HARKIN. Again, no matter what we do, we always have 

to understand that our cane and beet farmers in America are still 

going to have—we are still going to have to take into account what 

other governments do and how other governments run their programs. You just can’t say that, well, we are going to throw our 

farmers on the market and yet Country X or Country Y, their 

farmers are not on the market. It is a government system. It is a 

socialist type of an endeavor. So you have our farmers in an unfair 

market situation. 

So we are always going to have to take that into account. We are 

going to have to take that into account in the next farm bill, also. 

We just don’t have the kind of sugar system in other parts of the 

world that we have in America. So if we are going to have a domestic production capacity of sugar, we are going to have to take that 

into account. 

That is why I need to explore with you, and this is not the place, 

but we will as we move ahead to the next farm bill, how we integrate both the need for sugar for our sugar-containing products in 

this country, how we provide for a good domestic supply where the 

sugar farmers are at least, I won’t say guaranteed, but given the 

prospect of making a decent profit on their investments and labor, 

and at the same time provide for openings into the energy area for 

sugar. 

To me, this is kind of the twin things that we are going to have 

to look at in the next farm bill. I don’t have the answers right now. 

I just know that, somehow, we are going to have to apply ourselves 

to that in the next farm bill because we are going to demand—I 

believe the energy sector is going to grow in this area, and at the 

same time, we are going to still need to have a base supply of sugar 

for sugar products in this country. Somehow, we are going to have 

to balance those two and I look forward to any thoughts, suggestions, and advice that you might have as we move into next year’s 

farm bill. Thank you. 

12

Dr. PENN. I would be happy to work with you. 

The CHAIRMAN. Senator Crapo? 

Senator CRAPO. Thank you very much, Mr. Chairman. 

Dr. Penn, I want to talk mostly about the sugar beet thick juice 

issue, but before we get to that, I want to go back to the chairman’s 

questions about the tariff rate quotas that we are establishing. If 

I understood your interchange with the chairman, I understood you 

to say that at this point, you see things as relatively under control. 

You don’t expect at this point to need to raise the sugar tariff rate 

quotas? 

Dr. PENN. Well, these issues are all highly market sensitive, as 

you know, and as I said, we are monitoring this. At any point 

where we think the market is getting out of balance, then we reserve the right to take action. But at the moment, at the moment, 

things look reasonably calm. 

Senator CRAPO. All right. That is how I see it, too, so I just wanted to be sure that we were on the same track there. And I understand that we are in a market and the dynamics can change, but 

as of this point in time, you are not considering an increase in the 

tariff rate quota? 

Dr. PENN. I didn’t say that——

Senator CRAPO. Are you or aren’t you? 

Dr. PENN. I don’t think that it would be appropriate for me to 

say at the moment. Let me just say that we are monitoring the situation and at the point where we think more sugar might be needed into the market, then we will have to do that. 

Senator CRAPO. Well, I understand that, but I guess my question 

is, are you evaluating it? At this point in time, do you see a need 

to raise the tariff rate quota? 

Dr. PENN. Well, we are constantly monitoring. I mean, we 

have——

Senator CRAPO. I understand that, but——

Dr. PENN [continuing]. We have weekly meetings. We go through 

the numbers. It is sensitive, Senator——

Senator CRAPO. I am not trying to get you to say that you won’t 

ever do it——

Dr. PENN. No, no, but on Friday, we have another lock-up. We 

have another WAOSB report where the World Agricultural Outlook 

Situation Board will go through all of the commodities and they 

will issue new supply demand balance sheets and, you know, I certainly will be looking at that one with great interest. 

Senator CRAPO. All right. We will revisit that. 

Let me turn to the sugar beet thick juice. I believe you are aware 

that just a few weeks ago, Senator Conrad and I sent a letter to 

you about this issue. It seems to me that this is a major loophole 

in our regulation which allows basically the avoidance of marketing 

allotments and the importing of thick sugar juice that would then 

be able to be refined into sugar and marketed in the United States 

and avoid marketing allotment processes. 

I also am concerned because it seems to me that U.S. sugar policy in the past has been undermined by these types of things. It 

was the molasses that had been stuffed with sugar before that we 

have been fighting for years and we just don’t have the time, I 

think, to fight another loophole like this for a long period of time. 

13

As I understand it, the imports of thick juice have increased from 

almost zero in 2003, to 19,000 metric tons in 2004, over 36,000 in 

2005, and the estimates are that for 2006, the imports from just 

one factory in Canada could be as much as 100,000 metric tons, 

which would be the equivalent, as I understand it, of 50,000 metric 

tons of sugar. 

The question I have is, first of all, do you agree with me that this 

is a loophole and is there action being taken to address it? 

Dr. PENN. I would just disagree with your numbers. If you look 

at the report that you are citing closely, the numbers, the 100,000 

ton number for this fiscal year is from two products, thick juice and 

from high-test molasses or cane syrup, which is another product 

that is made from cane. So those two together are coming in in 

about equal proportions. 

Senator CRAPO. So about 50,000 of each? 

Dr. PENN. Yes. So thick juice is only half of the 100,000. 

Senator CRAPO. All right. So let us assume that it is 50,000 metric tons. Do you agree that the thick beet juice is a loophole that 

we need to close? 

Dr. PENN. Well, in the so-called Breaux Report that we are 

obliged to send to the Congress each year, we have to identify circumventions of the program and the entry of thick juice was included in that report as a circumvention. 

As you indicated, this is an occurrence with these supply control 

programs that people are always trying to find ways to take advantage of this premium market. This molasses results from the sliced 

beets, comes in from Canada, and it is not classified as sugar. So 

the Customs Service doesn’t assess any duties to this product. But 

once it gets into the U.S., then USDA considers it imported sugar 

and we count it against the 1.532 million tons import trigger that 

is contained in the farm bill. But it doesn’t count, as you suggest, 

against an individual company’s OAQ. 

So we have that problem with thick juice. We also have the same 

problem with high-test molasses or cane syrup, and so at the moment, we are evaluating both of those and we are looking at the 

possibility of drafting regulations which would address the situation that you have written me about. 

Senator CRAPO. And you can address this regulatorily? 

Dr. PENN. Yes. 

Senator CRAPO. I would encourage you to do that. As I have indicated, I do believe this is a loophole and I appreciate your understanding of it and would encourage you to act expeditiously to close 

it. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Lugar? 

Senator LUGAR. Mr. Chairman, let me just pursue this line of 

thought for a moment. It would appear the world price of sugar is 

lower than the price of sugar in the United States, at least from 

the charts that you have. If you were outside the sugar program 

altogether, in discussion of these proposals for years, would it not 

be in the best interests of American consumers and people who use 

sugar to be getting sugar at the world price? 

In other words, the case being made by the program is essentially that there are 1,000 sugar farmers, cane sugar, 5,000 beet 

14

sugar farmers in America and essentially an artificially higher 

price ought to be obtained by them than the world price, or, as the 

sugar producers would say, talking about the manufacturers, that, 

in fact, the manufacturers are the benefit, that they are receiving 

extraordinary subsidies from the rest of the American taxpayers. 

So in a nutshell, what is the rationale for the sugar program? 

Dr. PENN. Well, this is a very complex topic, Senator, as you 

know. On the surface, it does appear that we hold the domestic 

price far higher than the world price. In fact, if you look at just 

the chart that I attached to my testimony, in recent times, the 

world price of sugar has been six cents a pound while we have 

maintained the price at 22 to 24 cents domestically. That was 

atypically low. It moved up to ten cents and stayed there for a 

while, and in recent times, the world price of sugar has moved to 

19 cents. That has been as we have had some shortfalls around the 

world and seen increased competition for cane for ethanol. 

So just looking at that, one would say that we are distorting the 

situation enormously. I have to say that my friends in the sugargrowing industry would advance the argument that the world 

sugar price is not a real market equilibrium price, that it is a distorted price, because the European Union, for instance, has been 

putting five million or more tons of sugar, subsidized sugar, into 

the world market, that it has deflated the price. Virtually every 

other country in the world that has the ability to produce sugar 

distorts the market. They have some kind of national program. So 

our growers then would make the argument that we need some 

kind of program until such a time as we get a free and fair market, 

as one Senator indicated. 

On the other hand, you look at the sugar-containing products industry. If you are in the United States, you buy sugar at 22 or 24 

cents a pound. That is a cost of production to you. But at the same 

time, you are competing with someone who wants to send their 

product to the United States and they have been able to buy sugar 

at six cents a pound or ten cents a pound and so you are in the 

United States and you are saying, I have unfair competition from 

outside. And so what has happened is a lot of those plants have 

simply closed. They have moved over to Canada or they have 

moved to Mexico or they have moved elsewhere where they can get 

the cheaper world price sugar and export it. 

So on the one hand, with the domestic sugar program, we are 

protecting jobs in that industry, but we are losing jobs in the 

sugar-containing products industry. So it is a balance. As we look 

forward, I think we need to, as I suggested in my earlier statement, try to find a way to take all of these distortions into account. 

Senator LUGAR. Without arguing the equities, and I think you 

have expressed them well, the reason I am excited about the energy side is that I see potentially a way in which sugar might be 

utilized in a market atmosphere worldwide. I think that has been 

the Brazilian experience. It is why their market has changed dramatically. 

In other words, if sugar works, sugar cane in particular, sugar 

beets for ethanol, this would be an extraordinary chance to change 

the whole landscape so that we have a supply and demand factor 

in which sugar as it is used for energy, in the Brazilian case, 52 

15

percent of the crop right now is used for ethanol. It is a huge 

amount. And that would change the price in the United States if 

52 percent of our crop were used for ethanol, which is not inconceivable given the size of our market in the country. 

I mention this not to be invidious to any of the sugar program 

or all the people who have some vested interest in it, and it is 

honeycombed, as you pointed out, with all sorts of equities or inequities, but to try to move the argument onward to something in 

which we really have perhaps a crop here of sugar that is really 

valuable to all of us as opposed to an arbitrary figure or an arbitrary supposition. 

Now, what is your analysis, and you have said it is just preliminary in this, but why would American sugar cane and beets not be 

as equally useful for American ethanol as the Brazilian situation 

has been for Brazilian motorists with flexible fuel cars? 

Dr. PENN. Well, I think that it can be, and I certainly agree with 

your assessment of the situation. We produce more than four billion gallons of ethanol. We do it largely with corn because we started 20, 25 years ago doing it with corn and we have invested in developing new technologies around that particular feedstock. So 

today, we are very efficient producers of ethanol using corn. 

The Brazilians have had a very different experience. They started using sugar cane and producing ethanol and they have developed systems which make them very efficient producers. I am told 

that they can produce a gallon of ethanol for 87 cents. It costs us 

about a dollar a gallon using corn. So, I mean, they have developed 

some real efficiencies. 

My sense is that once we begin to focus, and I know Senator 

Coleman has been very interested in this, but once we begin to 

focus on using sugar beets and sugar cane as a feedstock to 

produce renewable fuels and we enhance and get the technology 

improved, the varieties of the crops, the processing technologies, 

then perhaps those two crops can play big roles in the production 

of renewable fuels, as well, and as you suggest, that moves the debate quite a long way from the use of sugar cane and sugar beets 

to produce sugar for food. You have got a completely different market here, different dynamics. 

Senator LUGAR. Finally, Mr. Chairman, my prayer is that as this 

progresses, as I think it will, that we do not have endless debates 

within this committee and in the Senate in which we protect sugar 

against corn or against cellulose or whatever else. The nature of 

these debates is extremely parochial in which we hunker down behind whatever crop happens to be in our particular field. As a corn 

producer on my farm, I have an interest in all those plants going 

up in Indiana and I am excited about this. So it is almost 

counterintuitive, and I am arguing that sugar, in fact, might be an 

equivalent to this, might even be better. But in terms of the American people as a whole, some of us really have to take that into consideration as to how in the world we are going to develop resources, 

and sugar is one of these now, and I find some excitement in that 

process. 

I thank you for your testimony. Thank you. 

The CHAIRMAN. Dr. Penn, is there anything in the current program that would prohibit a farmer in Georgia, where we have no 

16

sugar grown today from growing sugar cane and using that sugar 

cane to market it to an ethanol producer? 

Dr. PENN. No, nothing. The sugar program is defined around 

sugar for human consumption, so there are no prohibitions. 

The CHAIRMAN. Senator Thomas? 

Senator THOMAS. Thank you, Mr. Chairman. A complicated program, isn’t it? 

Sugar manufacturers suggest a no-cost policy be converted to a 

payment kind. I understand that would be pretty costly. If that 

were the case, where would the dollars come from to do that? 

Dr. PENN. Well, I think that, as I indicated a little earlier, Senator, the sugar program is going to have to be changed because of 

January 1, 2008, open border with Mexico. So that is the big challenge, it seems to me, that the sugar industry confronts in trying 

to develop a new program. So it seems to me the challenge is one 

for the industry to make suggestions as to the type of program, to 

engage with others in trying to see if a politically acceptable program could be structured. 

You know how jealously all of the other commodities—Senator 

Lugar just referred to that—protect their dollars, so I think it is—

far be it from me to sit here and suggest how those dollars should 

be allocated. 

Senator THOMAS. Mr. Chairman, I am anxious to hear from the 

other panel, so I will not ask any more questions. Thank you. 

The CHAIRMAN. Senator Salazar? 

Senator SALAZAR. No questions. 

The CHAIRMAN. Senator Coleman? 

Senator COLEMAN. Thank you, Chairman. We also want to hear 

from the other panel. Just let me make a follow-up on two issues. 

One, the conversation with my colleague from Idaho in terms of 

the increase in tariff rate quotas. Is it fair to say you are looking 

at that now? I mean, it is something you look at all the time and 

you are looking at right now? 

Mr. PENN. I look at it all the time, yes, sir. 

Senator COLEMAN. My concern there is, and if I look back at the 

pattern, I think we have seen increases in foreign sugar imports 

this year and am concerned about the continuation of that. So my 

question would be, do you consult with the sugar producers before 

you make that determination? I mean, you are involved in a conversation with folks out there to kind of get their sense of what is 

happening in the market? 

Dr. PENN. Yes, Senator. This is not a shy industry, as you know. 

I don’t have to get on the phone and call and elicit their views. 

They make them known to me. They ask you to make your views 

known to me. I hear from everybody. We get ample information. 

We do consult, and I don’t mean to be flip about this. This is important business. We do our best to get all of the factual information 

that we can. We assess it. We have a great team at USDA who 

analyze all of this, and in the end, we have to try to do what we 

think is best and to try to balance this as the Congress directed 

us to do in the statute. 

Senator COLEMAN. I believe their perspective is there is no shortage in the marketplace and I just urge you to continue to have that 

17

conversation with the cane and beet producers as you go about this 

process. I think it is important. 

Let me just add to the discussion about the energy, and I will 

be very candid, Dr. Penn. In my sense, some early discussion was 

a less than enthusiastic kind of a view of sugar to ethanol for a 

range of reasons. Studies are underway. The future is energy. It is 

out there. Obviously, there are issues about cost. I would think 

from a technology perspective, we already see the answer. Look 

what Brazil does. Look what others around the world do. So the 

issue obviously, there are lots of program costs, et cetera, so I share 

the perspective of the ranking member, who talked about the program we have on energy and I just want to end by thanking the 

chairman, who doesn’t have a lot of sugar in Georgia but has really 

been a major force in generating this discussion. I just want the 

chairman to know that I really appreciate that. 

So let us continue this focus on energy. I think there are great 

possibilities out there, and in the end, possibility the ability to put 

less pressure on trade. If sugar isn’t an issue in trade, in fact, if 

sugar from other countries can go into an energy program, it 

wouldn’t then have an impact on our domestic market there. So I 

just urge us to keep moving forward with a very open mind. Thank 

you. 

The CHAIRMAN. Thank you, Senator Coleman. As long as you are 

going to say nice things, you can have another 5 minutes, if you 

wish. 

[Laughter.] 

The CHAIRMAN. Senator Dayton? 

Senator DAYTON. Thank you, Mr. Chairman. 

I apologize for missing your statement, Dr. Penn. I had some 

Minnesota constituents and this was the only time they could meet. 

I would just say that it is peanuts and sugar combined that 

make peanut M&Ms and I have single-handedly upheld the price 

of both commodities by my purchases over the last number of 

years. 

I thank you also, Mr. Chairman, for your interest in this broad 

array of programs that go beyond your own State. You have been 

extraordinary in doing so. I thank you very much. But I enjoyed 

the products we got from the peanut industry last week, in addition to the peanuts you provide us, as well. I think we should revisit that subject on a regular basis. 

Dr. Penn, if I missed this, again, because I wasn’t here, I apologize, but if you could refresh my memory, what is the—and I 

glanced at your testimony—the 2002 farm bill established the basic 

structure of the current sugar program and then, as I recall, there 

was some part of the CAFTA agreement that the Secretary pledged 

an additional aspect to the program, an increment to the program. 

Could you tie that in, please? 

Dr. PENN. Yes, sir. The 2002 farm bill has a so-called import trigger that says that if you import more than 1.532 million tons of 

sugar, then you can’t reduce the domestic marketing allotment. 

You can’t reduce the amount of sugar that domestic growers are allowed to market. That is a key supply control feature, so it would 

make the program unmanageable for the most part if you couldn’t 

do that. So there was some concern that when we honor our minVerDate 0ct 09 2002 15:08 Oct 20, 2006 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 C:\DOCS\30239.TXT TOSHD PsN: LAVERN
18

imum import commitments under the WTO, then we add 120,000 

tons from the CAFTA-DR countries, that we would exceed that 

trigger. After extensive discussions with several members of this 

committee, the Secretary gave assurances that we would not let 

any of the 120,000 tons of sugar from the CAFTA-DR countries in 

any way affect the operation of the program so that growers were 

not entitled to the benefits that the Congress intended. 

Senator DAYTON. Has the Secretary had to act to do so? As I recall, there was a price tag associated with that. Has any of that 

had to be expended? 

Dr. PENN. No, it has not, and it is because we have had just the 

opposite situation. Rather than having too much sugar in the U.S. 

market, we have not had enough for a while and we have had to 

scramble to try to find sugar from foreign sources to bring to the 

market rather than to try to keep sugar out. 

Senator DAYTON. And what is the cause of that domestic situation, sir? 

Dr. PENN. It has been largely a combination of demand and supply factors, but the hurricanes were probably the most disruptive, 

influencing the sugar cane crop and also refining capacity in the 

U.S., closing refineries in the New Orleans area. 

Senator DAYTON. Looking at Chart No. 1 attached to your statement, I am recalling back when some of these issues were raised 

with the world price then quoted at $6 to $8 and the domestic price 

$20 to $22, approximately. Now, the world price has spiked up considerably and actually is not that far below the U.S. world price. 

What has driven the world price up so significantly? 

Dr. PENN. It has been a combination of factors. We have seen 

some stimulation in demand for sugar around the world, and then 

we have seen a series of short crops in some of the major producing 

and exporting countries. Their supplies have been reduced somewhat. And, of course, our supply has been reduced here. We have 

imported additional amounts of sugar beyond what we would have 

traditionally imported. And then a new factor is energy prices. 

With $70 a barrel petroleum, you get a lot more interest in using 

sugar cane to produce ethanol than you do to produce sugar for 

human consumption. So there has been a competition there that 

has reduced the supply of sugar available to the world market. So 

there have been just a lot of uncertainties that have been created. 

The world market price, as you note, is at a 25–year high now. 

Senator DAYTON. It is hard to predict the future, but is this an 

aberration or do you see the demand changes that you just described affecting the price for the considerable future? 

Dr. PENN. I have watched this market for a long, long time and 

this is an aberration, I believe. However, I don’t think we are going 

to see six-cent-a-pound sugar again or maybe even ten-cent-apound, because as I indicated in my statement, there are other 

structural changes that are happening in the world market. The 

European Union is reforming the sugar regime in the Common Agricultural Policy. That means it is going to be putting far less subsidized sugar into the world market, so that should have a bullish 

effect on the world market. 

Senator DAYTON. Thank you. Thank you, Mr. Chairman. 

19

The CHAIRMAN. Thank you, and Dr. Penn, we appreciate your 

testimony here this morning. As we move through this process of 

review, looking toward the next farm bill, we look forward to staying in touch with you. I thank you for coming this morning and 

thank you for your presentation. 

Dr. PENN. Thank you, Mr. Chairman. 

The CHAIRMAN. I now ask that our second panel come forward. 

We have Mr. John C. Roney, Director of Economics and Policy 

Analysis, American Sugar Alliance, Arlington, Virginia. He is accompanied by Mr. Wallace Ellender, the Chairman of the National 

Legislative Committee of the American Sugar Cane League from 

Bourg, Louisiana. He is also accompanied by Mr. Steve Williams, 

President of Red River Valley Sugarbeet Growers Association and 

President of American Sugarbeet Growers Association in Fisher, 

Minnesota. 

We also have Dr. Margaret Blamberg, Executive Director of the 

American Cane Sugar Refiners’ Association from Brooklyn, New 

York; Mr. Robert Peiser, President and CEO, Imperial Sugar Company in Sugar Land, Texas; Mr. Joe Goehring, Director of Commodity Operations, the Hershey Company, Hershey, Pennsylvania; 

and Mr. Mrinal Roy, General Overseas Representative, Mauritius 

Sugar Syndicate and Mauritius Chamber of Agriculture, Grosvenor 

Gardens House, London, United Kingdom. 

Ladies and gentlemen, we appreciate you being here, and Mr. 

Roney, we will start with you for any comments you wish to make 

and we will come down the row this way. 

STATEMENT OF JOHN C. RONEY, DIRECTOR OF ECONOMICS 

AND POLICY ANALYSIS, AMERICAN SUGAR ALLIANCE, ARLINGTON, VIRGINIA; ACCOMPANIED BY WALLACE 

ELLENDER, III, CHAIRMAN, NATIONAL LEGISLATIVE COMMITTEE, AMERICAN SUGAR CANE LEAGUE, BOURG, LOUISIANA; AND STEVE WILLIAMS, PRESIDENT, RED RIVER VALLEY SUGARBEET GROWERS ASSOCIATION, AND PRESIDENT, 

AMERICAN SUGARBEET GROWERS ASSOCIATION, FISHER, 

MINNESOTA 

Mr. RONEY. Thank you, Mr. Chairman, for inviting me here 

today. I am accompanied today by two of our farmers. Steve Williams is a third generation beet farmer from Fisher, Minnesota. 

Steve is President of the American Sugarbeet Growers Association, 

with 10,000 beet farmers nationwide and a survivor so far of excessive rains in his region last year. Dickey Ellender is a fifth generation cane farmer from Bourg, Louisiana. Dickie leads the Legislative Committee of the American Sugar Cane League and is a survivor so far of Hurricanes Katrina and Rita that ravaged Louisiana 

cane country last year. Steve and Dickie will be happy to respond 

to your questions specific to their crop or region. 

Mr. Chairman, members of the committee, the policy that you 

provided our industry in the 2002 farm bill is working well. It is 

working well for American taxpayers. It is working well for American consumers. And it is giving American sugar farmers the 

chance to survive. 

The sugar industry recommends the Congress sustain this remarkably successful policy in the next farm bill. U.S. sugar policy 

20

ensures that American sugar farmers derive all the returns from 

the marketplace and not from the government, and it attempts to 

provide farmers a stable price horizon. 

The policy is simple. USDA offers non-recourse loans to sugar 

producers and it is required to avoid loan forfeitures and taxpayer 

costs. It has two tools to balance supply and demand and maintain 

market prices adequate to avoid loan forfeitures. It manages imported supplies through our tariff-free quota system. We are the 

world’s second-largest sugar importer. It manages domestic supplies through our marketing allotment system. Farmers can plant 

and process as much cane and beets as they wish, but if USDA determines that they have produced more than the market needs, the 

producers must hold that sugar back from the market and store it 

at their own expense. U.S. sugar policy thus places the burden of 

balancing supply and demand on the producers and not on the government. 

How successful has U.S. sugar policy been? Consumers and taxpayers have been huge beneficiaries. American consumers enjoy 

some of the lowest and most stable sugar prices in the world. Consumers in the rest of the developed world pay 30 percent more for 

their sugar than American consumers do. The 2005 average retail 

price for sugar was 43 cents. What is amazing is that this is the 

same price sugar retailed for in 1990. It is even the same price 

sugar retailed for in 1980, 26 years ago. 

What is even more amazing is that consumer prices remained 

this stable in a year when American sugar farmers and processors 

faced an unprecedented series of natural disasters, drought in the 

West, excessive rains in the upper Midwest, and three catastrophic 

hurricanes in Louisiana and Florida. In the wake of these weather 

problems, USDA and the industry took immediate effective steps to 

avoid a serious supply interruption. USDA allowed producers to release onto the market the half-million tons of sugar they had been 

required to store to balance the market. USDA more than doubled 

imports. And cane refiners damaged by the hurricanes worked 

frantically to care for their workers and get their operations up and 

running again. None of these actions cost U.S. taxpayers a dime. 

Despite sugar policy’s continued success, even after being tested 

by last year’s natural disasters, some would like to change the policy. U.S. commodity policy changed in 1996 for most programs. 

Commodity prices have been allowed to fall, with government providing payments to keep farmers afloat. Food manufacturers and 

retailers have been the biggest beneficiaries. They get the cheapest 

possible raw materials from reliable American farmers. Then, by 

not passing the savings along to consumers, they increase their 

profit margin. The taxpayer costs of subsidizing food manufacturers 

this way has totaled over $200 billion since 1996. 

A conversion to the income support approach for sugar would be 

another boon for the food manufacturers, but it would cost taxpayers $1 to $2 billion per year and consumers would derive no 

benefit. During this time of severe budget constraints and tightening limits on payments to farmers, where would the money for 

a new high-cost U.S. sugar policy come from? Would Congress reduce benefits for other crop farmers to finance a new payment program for sugar? What happens to sugar farmers already at their 

21

payment limits for other crops? And what happens to sugar farmers when that money runs out? 

American sugar farmers have not had a support price increase 

since 1985 and the survivors have come through a nightmare of 

natural disasters in 2005. Through it all, they have supplied American consumers dependably and well and they have raised more 

money for the U.S. Treasury than they have received. We ask the 

committee not to entertain the food manufacturers’ suggestion we 

yank the price stability out from under the program and place an 

added burden on U.S. taxpayers. We respectfully urge the committee to continue the remarkably successful U.S. sugar policy in 

its current form. Thank you. 

The CHAIRMAN. Thank you. 

[The prepared statement of Mr. Roney can be found in the appendix on page 52.] 

The CHAIRMAN. Dr. Blamberg? 

STATEMENT OF MARGARET BLAMBERG, EXECUTIVE DIRECTOR, AMERICAN CANE SUGAR REFINERS’ ASSOCIATION, 

BROOKLYN, NEW YORK 

Dr. BLAMBERG. Mr. Chairman, members of the committee, I appreciate you inviting me to be here today. My name is Margaret 

Blamberg and I am the Executive Director of the American Cane 

Sugar Refiners’ Association. Our association represents all but one 

of the cane refiners in the United States and we are strong supporters of America’s no-cost sugar policy. 

Last summer, this policy faced the biggest test Mother Nature 

has ever unleashed on our industry, and by avoiding a supply disaster of epic proportions, America’s no-cost sugar policy passed that 

test with flying colors. Let me explain. 

On August 29, Hurricane Katrina ripped through New Orleans, 

and for Domino Sugar, that is when refining took a back seat to 

rebuilding and recovering. In one fatal swoop, Katrina brought 

Domino’s Chalmette sugar refinery to its knees. Nine feet of murky 

water crept into factory buildings. Sugar destined for grocery 

shelves dissolved into two feet of sticky goop. Roofs were ripped 

apart, windows shattered. The electrical infrastructure was destroyed. Ground-level machinery no longer functioned. 

When Katrina’s winds and waters stopped pounding the plant, 

Chalmette became more than just a sugar refinery. It was a sanctuary to more than 250 evacuees left homeless by the hurricane. 

It was a command center for the government rescue operations. It 

became the largest collection of FEMA trailers in St. Bernard Parish, a mini-city that became known as Chateau Domino, where 

hundreds of workers and their families still live. 

Instead of talking about raw sugar prices during staff meetings, 

Chalmette executives set about figuring out how to feed employees, 

or how to get kids back to school, or where to put a makeshift laundromat or mobile cafeteria. During the disaster, Domino paid its 

employees full wages. The company put people ahead of profits, 

and putting people first paid off. 

Even though many said that Chalmette would never reopen, its 

300 workers wouldn’t take no for an answer. In a testament to 

their determination, the wrecked refinery was rebuilt in time for 

22

the Christmas baking season, and today, it is operating at pre-hurricane capacity. 

But this is not a story just about Domino. While this massive recovery effort was underway, a remarkable thing was happening in 

the U.S. sugar market. Despite losing 20 percent of America’s cane 

refining capacity for 4 months, grocery shelves remained fully 

stocked and candy factories kept on running. That is because of 

sugar policy. No-cost sugar policy gives the USDA the flexibility it 

needs to meet demand during times of emergency by tapping an industry-funded sugar reserve and by increasing imports. 

Think about it. When Hurricane Katrina wiped out a chunk of 

America’s oil refining capacity, prices skyrocketed. But when the 

same hurricane wiped out a chunk of America’s sugar refining capacity, retail prices barely budgeted. 

But the story doesn’t end there. Mother Nature wasn’t finished. 

There was Rita and then there was Wilma and floods drenched Hawaii. It was the worst year the sugar industry ever had and it 

could have been the perfect storm for disaster. But chaos never 

came because of our country’s sugar program and because of our 

country’s sugar refineries. 

In years of healthy crops, refineries supplement domestic supplies with imported raws. When hurricanes or droughts strike, 

more foreign raws can be tapped. 

One word of caution. The USDA tried to speed fresh supplies by 

permitting sizable imports of refined sugar, bypassing U.S. refineries. This strategy was counterproductive and actually slowed 

down the process. U.S. refineries are the best source of high-quality 

sugar. This was a hard lesson learned for many of our customers 

and is an experiment that the USDA should not repeat. 

In the coming months, this committee will be lobbied by large industrial users looking to turn the no-cost sugar program into one 

with a hefty price tag. They are looking to boost their profits on 

the backs of farmers and taxpayers and they are looking to give 

foreign countries control over our kitchens. This is a recipe for disaster. Feeding ourselves is the first rule of homeland security. 

We ask you to extend the existing sugar program. It is important 

for consumers, for our producers, and for America. 

The CHAIRMAN. Thank you. 

[The prepared statement of Dr. Blamberg can be found in the appendix on page 66.] 

The CHAIRMAN. Mr. Peiser? 

STATEMENT OF ROBERT A. PEISER, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, IMPERIAL SUGAR COMPANY, SUGAR 

LAND, TEXAS 

Mr. PEISER. Mr. Chairman, thank you. My name is Robert 

Peiser. I am the President and CEO of Imperial Sugar Company, 

which operates two major cane refineries located in Savannah, 

Georgia, and Gramercy, Louisiana. I am pleased to offer this testimony to the committee on behalf of Imperial’s 809 employees in 

Texas, Louisiana, and, I might add, in Georgia, because the subject 

matter affects those employees plus all of our customers who get 

our product on a local level and all of those companies regionally 

who support our operation in those areas. 

23

I am going to come about this a little bit differently. As requested by the committee, I am going to address specifics as to 

what is working and what is not working in the sugar program. 

First, let me talk a minute about Imperial. 

We are an important element of agriculture in this country. Our 

cane refineries produce approximately 14 percent of the nation’s refined sugar needs. With all due respect to Dr. Blamberg, who said 

she represents all but one of the cane refinery operations, there are 

only three, so I guess I could say that we represent all but two of 

the cane operations in this country. 

[Laughter.] 

Mr. PEISER. Our largest facility, which is located in Savannah, 

represents about 9 percent of the sugar refining capacity. The Louisiana facility is slightly less. We are much different than the rest 

of the industry in that we are the only non-integrated company in 

the industry, so we buy our sugar from independent suppliers, be 

they domestic or—producers, be they domestic or foreign. 

Historically, our Savannah refinery has bought most of its sugar 

from Florida, but as that industry has integrated over the years 

and increased its refining capacity, we have relied more and more 

exclusively on foreign sugar. As a result, from 2006 onward, we 

would expect to obtain all of our raw sugar from foreign sources. 

In Louisiana, we are quite different and we rely mostly domestic 

production to obtain our sugar in Louisiana. We are proud of our 

long-term association with the growers. We are very supportive of 

the growers and need a strong growing community to support our 

operation in the State. 

So we are far from anti-grower. The situation that we find ourselves in in Savannah is a fact of circumstances as the industry 

has changed. 

Let me say clearly and unambiguously that I think the sugar 

program is working, but it has some things that need to be 

changed, as well, to make it more efficient. 

So, first, what is working about the program? First, I want to applaud the USDA’s sugar program professionals. They have done a 

tremendous job in the face of constant crisis and work very hard 

and, I think, do a very good job. 

Second, marketing allotments have generally worked in controlling domestic overproduction, although it comes at a high administrative cost and really doesn’t work for cane refineries. In fact, we 

are often frustrated as we access supplies of sugar on an efficient 

basis. 

Third, the re-export program in the sugar program remains a 

bright spot in sugar policy because it allows cane refiners to secure 

incremental business and provide us the flexibility of sourcing nonquota sugar to solve many short-term supply issues. 

Plus, the recent removal of shipping pattern restrictions allows 

less sugar to flow easily into this country. Up until this year, shipping patterns that were part of our program really tend to inhibit 

our ability to obtain raw sugar. 

Fifth, the USDA’s administration of the program as it pertains 

to organic sugar is very important to meet the explosive needs in 

the organic marketplace and I applaud those efforts. 

24

As successful as the program has been, there are several areas 

where it has not been working. First, the support price. The differential between the support price of raw sugar and the support 

price of white sugar is no longer wide enough to support operations 

of independent refiners when both of those prices are at support 

levels. As you know, cane refining is a very energy-intensive business. As the price of energy has risen, the differential between 

those two have made it difficult and will make it difficult in the 

future to sustain cane refinery operations when both of those parameters are at their support levels. 

Second, while marketing allotments are useful, the import trigger that Dr. Penn mentioned earlier could very well become a problem as more and more imports come into this country, either with 

CAFTA or NAFTA, and we would suggest that those marketing import triggers be removed or raised in light of the dynamics of the 

market. 

Third, the current TRQ allocations among the various countries 

that actually import sugar into this country is an anachronism. It 

is archaic. It was developed in the 1970’s during a different era. 

There are many sugar exporting countries or countries that have 

those allegations that no longer ship sugar to the United States or 

many that don’t ship as much as they are allowed and so we need 

to look at the allocation process within the TRQ. 

We also need to look at the timing of the announcement of the 

annual TRQ to make sure there is a good supply of sugar into this 

country. 

We should look at import limitations, which tend to stifle the 

growth of sugar refiners and participate in the growth, and we 

need to look at the marketing allocations in general as refiners 

need to have more raw sugar to efficiently support its operation. 

The theme of our business really is to get enough, sufficient raw 

material, convert it efficiently, and distribute to our customers. 

That is what we are all about and we are all about getting more 

raw sugar into our refineries to be able to service the marketplace. 

Mr. Chairman, on behalf of Imperial and its employees, I thank 

you for receiving our views today and I look forward to working 

with the committee to find a solution to the issues that face us. 

The CHAIRMAN. Thank you. 

[The prepared statement of Mr. Peiser can be found in the appendix on page 68.] 

The CHAIRMAN. Mr. Goehring? 

STATEMENT OF JOE GOEHRING, DIRECTOR OF COMMODITY 

OPERATIONS, THE HERSHEY COMPANY, ON BEHALF OF THE 

SWEETENER USERS ASSOCIATION, HERSHEY, PENNSYLVANIA 

Mr. GOEHRING. Thank you. Mr. Chairman and members of the 

committee, thank you for this opportunity to testify at this oversight hearing on the U.S. sugar program. My name is Joe 

Goehring. I am Director of Commodities Operations for the Hershey Company and I am testifying today in my capacity as a past 

chairman of the Sweetener Users Association. 

As sugar users, we want and need a strong and healthy domestic 

sugar industry, including beet and cane producers, processors, and 

25

independent cane refiners. We see some real problems in the design of the current sugar program, but that doesn’t mean we advocate that the United States eliminate its sugar policy. Instead, we 

should come together as an industry—growers, processors, refiners, 

and users alike—to arrive at a consensus on the best government 

policy to meet everyone’s needs and to serve the public interest. 

Our organization has proposed exactly that to our friends in the 

producer and processor community and we are gratified by their 

preliminary response and we hope they will agree that such an exercise will be constructive. 

Compared to government support policies for other commodities, 

the sugar program is different in several respects. Two of the most 

important are our import quotas and marketing allotments. Few 

other commodity programs rely on import quotas and virtually 

none rely on marketing allotments. 

The turbulent sugar markets of the past 9 months have highlighted some deficiencies in the current program. Obviously, the 

sugar program did not cause last year’s hurricanes. Markets would 

have reacted no matter what policies would have been in place. The 

question is whether the current sugar program reacted well to sudden shocks, and unfortunately, it did not. 

For example, even after the hurricanes had done significant damage to the Louisiana sugar cane crop and had closed a major cane 

refinery, there was still perfectly good sugar that processors were 

willing to sell and industrial users were more than willing to buy 

but which could not be legally sold because of the allotment system. Eventually, USDA did act to free up the sugar, and I want 

to commend USDA for the many actions they took in the wake of 

the hurricanes to make some sugar available to the market. But in 

a tight market, it shouldn’t be necessary for the Federal Government to give buyers and sellers permission to enter into commercial transactions. One of the fundamental problems with current 

sugar policy is that it interposes the government between buyer 

and seller, often to the detriment of market needs. 

USDA also increased import quotas a number of times in the 

past year, and again, we have appreciated their actions. But here, 

too, there have been problems, not problems of USDA’s making, 

but problems that are inherent in a quota system. For example, 

USDA sought to increase imports of refined sugar, the kind that 

we manufacturers buy and use, to account for the temporary closure of the Louisiana cane refinery. Unfortunately, a sizable 

amount of that sugar entered ostensibly as refined sugar was, in 

fact, product that required substantial further refining simply because of the definitions that the Customs Service uses in administering the quotas. It is a technical issue that is covered in more 

detail in my testimony, and I won’t belabor it, but the result for 

users was less supply of refined sugar than USDA intended and 

less than the market needed. 

I cited two problems that occurred in a tight market and I don’t 

want to leave the impression that the sugar program works fine except in a tight market. It doesn’t. In fact, the history of the sugar 

program over the past 25 years has more often been a history of 

surplus domestic production rather than shortage. Surplus domestic production is not in the long-term interest of the industry and 

26

should not be a policy goal any more than shorting a market 

should be. 

Looking briefly toward the future, Mr. Chairman, we believe that 

there are even more compelling reasons to revise the current sugar 

program. First off, domestic sugar usage is flat and close to a tenth 

of domestic sugar demand is being filled by imported sugar-containing products. The incentive to expand these imports is directly 

related to the usually wide spread between U.S. and world sugar 

prices. 

In a related phenomenon, the structure of the current sugar program has been associated with the loss of thousands of manufacturing jobs. This was documented in a recent Commerce Department study. Trade policy factors, including an open border with 

Mexico in less than 2 years, the prospect of a Doha Round agreement that will require higher sugar import quota and also call for 

reductions in so-called Amber Box subsidies, like the sugar price 

support program, strongly suggests the need to think about alternative sugar policies. 

Mr. Chairman, we know that there will be future opportunities 

to make more detailed recommendations for the next farm bill. We 

will not attempt to do so now. We prefer to work toward an industry consensus of growers, processors, cane refiners, and users 

which will provide the optimum policy solution for all stakeholders 

going forward. We believe such a consensus would be welcomed by 

this committee and we look forward to working with you as you develop the next farm bill. We thank you for this opportunity. 

The CHAIRMAN. Thank you very much, Mr. Goehring. In response 

to your last comment, at our hearing last week on the peanut program, that is exactly what happened in 2002. As we all know, there 

had been somewhat of the same type of friction there that maybe 

we can see has been in the sugar industry. 

Mr. GOEHRING. Absolutely. 

The CHAIRMAN. I hope that we can do exactly as you say, have 

all segments of the industry come together with a very positive program for us. 

Mr. GOEHRING. Mr. Chairman, we approach this with an open 

mind. I was part of the peanut work that was done on the last 

farm bill and would like nothing more than to be able to arrive at 

a consensus with all members of the industry. 

The CHAIRMAN. Very good. 

[The prepared statement of Mr. Goehring can be found in the appendix on page 76.] 

The CHAIRMAN. Mr. Roy? 

STATEMENT OF MRINAL ROY, GENERAL OVERSEAS REPRESENTATIVE, MAURITIUS SUGAR SYNDICATE AND MAURITIUS CHAMBER OF AGRICULTURE, GROSVENOR GARDENS 

HOUSE, LONDON, UNITED KINGDOM 

Mr. ROY. Mr. Chairman, members of the committee, I am deeply 

honored to have been invited to testify to this hearing of the Senate 

Agriculture Committee on the U.S. sugar program and to present 

the views of the traditional sugar quota holders and exporters 

under the U.S. tariff rate quota on raw sugar. 

27

I am appearing before the Senate committee in my capacity as 

General Overseas Representative of the Mauritius Sugar Syndicate. The Mauritius Sugar Syndicate is a private sector international marketing organization of the sugar industry of Mauritius. 

I was, prior to my present post, I was the Chief Executive Officer 

of the Mauritius Sugar Syndicate and therefore was responsible to 

sell sugar in our markets, including the United States. I am also 

currently the Chairman of the ACP London Sugar Group, which 

represents the 18 countries in Africa, the Caribbean, and Pacific 

which sell sugar under the sugar protocol to the E.U. The ACP 

group also includes 13 countries which currently hold allocations 

under the U.S. TRQ. 

My testimony will underline the importance of sugar for Mauritius, the key role of the U.S. sugar program as a vector of tradedriven development in the developing country quota holders, and 

the imperative of continuing the U.S. sugar program and its benefits for the future. 

Mauritius is a small island of 1,860 square kilometers in the Indian Ocean east of Madagascar, the size of the State of Rhode Island or Fairfax County in Virginia. Despite its small size, Mauritius ranks among the ten top exporters of sugar, exporting between 

500,000 to 600,000 tons of sugar. 

A total of 40 countries, all but three of them are developing, have 

access to the U.S. sugar market under the TRQ. By providing the 

guarantees of long-term access, remunerative price levels and stable price levels, and predictable revenue, the U.S. sugar program 

has contributed to the sustainable development of these countries 

through grade, not aid. The key, however, is the combination of 

market access coupled with the value of the remunerative price of 

this market access. Without market access without value, it is 

meaningless, especially against a background of rising trade costs 

to deliver the sugar to distant markets. 

I would also like to respond to the contention—this was raised 

earlier in the morning—that the U.S. sugar program harms consumers and costs jobs because it maintains the market price at a 

higher level than the world market price. The world market price 

is not a valid benchmark for the value of sugar as it is a residual 

market. 

An International Sugar Organization study carried out among 

100 counties in June 2003, covering the period 1996 to 2002, concluded that 76 percent of the sugar which is produced is actually 

consumed in the countries where it is grown. It also concluded that 

the average world domestic price at retail level was $610 per ton, 

which means 27.67 cents per pound, significantly more than the 

support price in the U.S. sugar program or the New York Number 

14 prices, and more than twice the average world price during the 

last decade. Most sugar industries of the world, in fact, sustain 

their long-term viability through principally sales to their captive 

higher-priced domestic markets. In short, the world price is essentially irrelevant to any evaluation of the operation of the U.S. 

sugar program. 

Attached to my written testimony is a recent article I wrote for 

the 24 February 2006 education of Agra Europe on the E.U. sugar 

28

regime reform from the ACP perspective. I would like to request 

that this article be incorporated in the record of this hearing. 

It has been suggested that the U.S. should reform its sugar program because the E.U. is already reforming its regime. This is a 

non-sequitur. When the E.U. sugar reform is complete, the E.U. 

will still produce twice the tonnage that is currently produced by 

the United States. In fact, the E.U. production, which is currently 

about 90 million, will have to go down to 40 million, which is twice 

the U.S. production. And it will have a support price which is higher than the U.S. support price. In short, even after the reform, the 

E.U. sugar regime will be at higher benchmarks than the U.S. 

sugar program, so there is no justification for reforming the U.S. 

sugar program because the E.U. are doing so. 

At the same time, however, the E.U. sugar reform price risks the 

further impoverishment of the E.U. developing country quota holders and will probably drive several of the ACP countries out of the 

sugar industry completely. Already, one of the countries, St. Kitts, 

has announced its decision to cease production after 360 years. 

This, in turn, will add to the serious unemployment problem, deprive these countries of much-needed export revenues, and create 

new barriers of economic development to these vulnerable countries. The U.S. support price, which is lower than the E.U. price 

after the 36 percent price cut, is already at the minimal sustainable level and cannot be reduced without causing similar damage 

to developing country quota holders other than DRQ. 

In conclusion, Mr. Chairman, for the past 24 years, the U.S. 

sugar program has provided much-needed access to the U.S. market for 40 traditional suppliers, most of whom are developing countries, at stable and remunerative prices. The predictable export 

revenues generated by these exports through the U.S. market have 

contributed to the economic development of these countries through 

trade, not aid. From our perspective, the U.S. program has been 

very successful and should be extended so that it can continue to 

provide meaningful trade opportunities at remunerative prices 

which contribute to the sustainable development of numerous developing countries across the world while providing the U.S. with 

a broad safety net of reliable supplies to the U.S. market, and we 

have seen that when there was this catastrophe last year. Extension of the U.S. sugar program will also be consistent with the goal 

of the Doha Development Round of encouraging development 

through trade. 

I rest my testimony, Chairman. Thank you. 

The CHAIRMAN. Thank you, Mr. Roy. 

[The prepared statement of Mr. Roy can be found in the appendix on page 84.] 

The CHAIRMAN. I thank all of you. Unfortunately, I have been 

called by the leader to an immigration meeting that has just started and I am going to have to run. Senator Lugar has generously 

agreed to chair the remainder of the hearing. Before I leave, I want 

to say a special welcome to you, Mr. Ellender, because I understand that one of your uncles, Allen Ellender, left the sugar cane 

farm many years ago down in South Louisiana and came and 

walked the halls of the Senate. He was here for about 35 years, I 

understand, 18 of which he served as chairman of this committee. 

29

We appreciate all of our predecessors who went before us, but most 

especially those who were involved in the great industry of agriculture, so we wish to issue you a very special welcome. 

Mr. ELLENDER. Thank you. 

The CHAIRMAN. Senator Lugar? 

Mr. ELLENDER. Thank you, Mr. Chairman. I understand that you 

were also high school educated in Louisiana. 

The CHAIRMAN. Don’t hold that against me. 

[Laughter.] 

The CHAIRMAN. That is exactly right. 

Senator LUGAR [presiding]. Thank you very much, Mr. Chairman, for allowing me to continue this very important hearing. 

I congratulate you, too, Mr. Ellender, and your family. I did not 

want to interrupt the course of earlier testimony to intrude with 

this history, but I am delighted the chairman has done so. We had, 

during a period of time when I was privileged to serve as chairman 

of the committee, a history written of the committee which lists all 

the chairmen, something about their tenure, and so this is available to our members to have that heritage. We know about your 

family and we appreciate you. 

Let me just ask this general question because earlier on, I suggested that the price of sugar in the United States apparently, on 

the charts that the USDA presented, was lower than the world 

price. Mr. Roy has testified that for a variety of reasons, the world 

price is irrelevant, that essentially, as I gather, this oversimplifies 

it. There are so many countries intruding into the sugar market to 

support either their citizens, their industry, whoever that may be 

involved, that this is a situation honeycombed with all sorts of protective mechanisms, defensive mechanisms, or some would say 

proactive mechanisms, depending upon what euphemism you want 

to place on all this. It really almost requires a computer study to 

punch in all of the data and to figure out who is doing what to 

whom in the process of this. 

What I am curious about is as this committee begins to examine 

the program again, and you need not answer this immediately, but 

for the record, if any of you know of reputable studies that get into 

the weeds for 40 countries or however many are involved so that 

we get some idea really of where the price lies, anywhere, under 

any circumstances, quite apart from distortions that may come. 

Otherwise, we are in a situation in which the politics of this are, 

in part, if the E.U. doesn’t move, we don’t move. If WTO doesn’t 

happen, we really have to be on guard against the rest of the world 

or whoever the malefactors are. As a relative amateur in this thing, 

I don’t know who all the malefactors are. I am sure there are a lot 

out there and we certainly want to protect the American people 

against all of this. 

But here within the economy, however, Mr. Goehring, you mentioned from the standpoint of Hershey and the industry of sugar 

users that, in fact, there are problems, if you are consumers of Hershey bars or whatever else, for consumers. Now, very rapidly, others have testified they are not so sure about you. They think maybe 

you are taking advantage of this program at Hershey or elsewhere, 

charging the American people more for Hershey bars and that is, 

in fact, where they are paying the money, not to the sugar people 

30

but to the users of the sugar. Where justice lies in that argument, 

once again, is very difficult to tell. 

We always hope in a competitive market economy that somehow 

these things are sorted out, but what I am gathering is you are 

saying in a world economy, it is not that simple. Things are not 

sorted out. And indeed, I have argued and some have argued recently that in the area of energy, for example, if over 75 percent 

of all the reserves as well as the current production are controlled 

by governments, not by supply and demand, that if ExxonMobil has 

3 percent of the market, we can all beat on ExxonMobil, but the 

other 97 percent is somewhere else, maybe with Vladimir Putin, 

maybe others who are, in fact, setting the price, or even deciding 

not to go into the reserves. 

These are important arguments to try to get a hold of something. 

Now, obviously, it would be ideal if the panel here today, learned 

as you are, came to a consensus, came to this committee and really 

divests of all of the judgments or the parochial arguments or the 

protection of whoever else in our constituencies who feel compelled 

to do. To some extent, I think that has occurred with the peanut 

group, not entirely. There were questions raised there on storage 

issues, for example, and price finding issues, which seems to be 

very difficult to obtain in the peanut business, likewise, quite apart 

from the sugar business. 

I think probably this debate as we get into the farm bill will take 

two courses, one of which is that there is a very sophisticated consensus in which we appreciate that there have to be balances between users and suppliers and the need to have peanut farmers 

and production in our country and a degree of protection against 

all predators elsewhere if they are really making it difficult for us, 

or we will get into the old bromides, let us protect ourselves unless 

we have WTO. WTO, probably we are not going to have. 

Or we can say, kick the can down the road. Why have a big debate in 2007? Postpone it to 2008, or try 2009 or any other time, 

because it is not easy to get consensus of this committee or this 

body, or to conference with the House, particularly on contentious 

issues where many members of the House and the Senate have 

particular constituencies. It might come to a corn farmer or soybean farmer like me. Now listen, Lugar, don’t get too harsh with 

regard to this because after all, perhaps, we can all, if we are 

thoughtful about this, reach consensus, not necessarily at the expense of any of our growers, but perhaps somebody else. 

With all that in mind, just let me sort of explore for a second, 

is the consumption of sugar worldwide increasing? In other words, 

with the wealth of nations, we hear from the oil people that certainly there are a lot more consumers of that product, we are led 

to believe, in fact, in the whole energy group. A certain dynamism 

now is involved in the growth of India and China, but leaving aside 

one-third of humanity involved there, even in our country, despite 

all the constraints. But I am curious, is that true for sugar as a 

commodity worldwide, worldwide demand? Does anybody have any 

sense of that? Yes, Mr. Roney? 

Mr. RONEY. Yes, Senator. World sugar consumption has been rising consistently, even slightly in excess of the rate of population 

growth, because of rising incomes in developing countries. And the 

31

fact that consumption has grown more rapidly than production in 

the last couple years is a big factor in the reason that the world 

sugar price has doubled. 

Senator LUGAR. To what extent—maybe the fuel business in 

Brazil is so novel to that country that you really can’t gauge that, 

but still, 52 percent of the Brazilian sugar crop is a lot of sugar, 

a lot of money. So I am wondering to what extent do you think the 

consumption is on the food side as opposed to the energy side. Do 

you have any feel for that? 

Mr. RONEY. Senator, Brazil is the shining example and by far 

has the largest cane ethanol industry in the world. It has been 

built on 30 years of government programs, both to subsidize production and then more recently to mandate consumption. So they 

have encouraged the industry in that way and it has made sugar 

virtually the byproduct of the Brazilian cane industry. 

So each year when you see more demand absorbed by ethanol, 

that can diminish the amount of sugar available for the world market, and I think that has been another factor this past year. Historically, any time there has been a little bit of an increase in 

world demand, Brazil has shifted some cane from ethanol to sugar 

and filled that demand and kept the world price low. But their ethanol demand within Brazil is so high now because of the popularity 

of their flex-fuel cars that they can barely meet domestic ethanol 

demand. So they continue to increase their cane output, but at this 

moment, they couldn’t increase the sugar side rapidly enough to 

prevent the world price from rising. 

But this continues to be a very interesting dynamic because 

Brazil is, by far, the world’s biggest player in the world sugar market. They export about 18 million tons per year. That is up from 

two million tons just a decade ago. The question has been, can they 

expand ethanol and cane and sugar simultaneously and the jury is 

still out on that. 

But with the increased world demand for ethanol, what we are 

seeing in a number of countries is governments stepping in and instituting programs to encourage cane ethanol. But it does take government involvement, and that is what we are seeing in every ethanol program, including the U.S. corn ethanol program, around the 

world. It does take government involvement and encouragement, 

some subsidy to some degree, to encourage the investment to make 

that happen, to make it economical. 

Senator LUGAR. You lead into my next question, and that is, hypothetically, would it be a good policy for the U.S. Government to 

give assistance to the sugar industry to produce ethanol? We have 

a gamut of programs which we take seriously in this country, not 

that we are going to become energy independent, but that a much 

larger percentage than the low single digits is going to have to be 

from alternative sources or we are not credible with regard to the 

rest of the world. We are going to be in bad trouble. 

I am not trying to suggest arguments for any of this panel, but 

what is sauce for the goose might be sauce for the gander. If you 

are serious about ethanol and you have a lot of sugar cane, you 

have got some possibilities and they are ones that might be more 

attractive to the American people than the discussion we are having this morning, which might be characterized by some editorial 

32

writers as a fairly parochial industry-centered situation involving 

Senators who are equally involved in the same industry. 

But sort of breaking out of the pack, one of the reasons why the 

Brazilian thing is fairly attractive is the flexible-fuel cars can go 

either way. If sugar is up and oil is down, the car uses the oil or 

the petroleum-base. If it is the other way around, use the other. 

You begin to have a different dynamic in that situation than anywhere else in the picture. 

I suppose I would argue that the energy dollars and monies and 

so forth are huge in comparison with whatever we are talking 

about today in sugar, and so I am just trying to suggest, even as 

you come together with a consensus program, think about this if 

you can to where this is all headed as opposed to simply the old 

problems of the candy maker refers the refiner or versus the grower, beets and cane, exquisitely down to the last decimal point 

whether beets get the money or cane or so forth. 

Let me yield for a moment to my colleague before I get carried 

away with enthusiasm. 

[Laughter.] 

Senator COLEMAN. Thank you, Mr. Chairman. I appreciate the 

discussion. This was an issue which was raised when we dealt with 

CAFTA and I think it is very fair to say that—and if I say something that is incorrect, please, I would have the panel correct me—

but there is a lot of concern among the industry. Right now, there 

is a no-cost program and so the idea of even ethanol, by the way, 

there is a subsidy in ethanol. But as I think the testimony has 

been very clear here, Brazil has got a 30–year history of subsidy 

across the board. Half of the 85 pumps in America, Mr. Chairman, 

are in our State, in Minnesota. We have 400 to 500. That is half 

in the country. And so you have got to spread out infrastructure, 

and so you have got a country that has been really a marvel. 

I would just raise two issues. I just want to follow up on this discussion. We haven’t even begun to deal with the energy needs of 

China and India. I mean, there is a possibility down the road of 

the U.S. and Brazil working together to export ethanol to China. 

I met with Hu Jintao and I raised the energy issue with him. And 

so we still have to deal with this issue, and I don’t want to move 

away from it. 

Mr. Williams is part of a country in Northern Minnesota that 

went through tremendous flooding, and I suspect that in the absence of this program, that I don’t know whether he or some of his 

neighbors would be in business or would be worried about being in 

business today. So I don’t want to move away, and we are going 

to get back to some of those questions, but I just want to follow up 

on what you said. 

I would hope the industry would have an open mind, understanding, again, there is almost an article of religious faith, a nocost program, and if we do anything to challenge that no-cost program, we will somehow lose the support in Congress or the support 

in this country. I would note, and I think if I may comment for the 

record, that I do have some processors in Minnesota who do want 

to change the program, folks in Southern Minnesota and some others. I visited with them. They would like to change the program. 

They have a different perspective than perhaps my friends in the 

33

ASA. So, on the record, it is not unanimity, but I think it is fair 

to say, across the board, there is this concern about we don’t want 

to cost anything. But I just want to echo your comments, Mr. 

Chairman, in that regard. 

If I can, if I have the floor, I hope everyone reads all of Mr. Roy’s 

testimony, your written testimony. It goes in much further than 

what you talked about. 

I mean, what we hear again and again, and we can lay out the 

phrases, we have got a program here that works well, that is at 

no cost, that is stable, and I hope that we don’t forget that as we 

go through. 

Can I just ask, can we follow up on the energy question, because 

the panel has not commented. Can we get your perspective on your 

vision about the prospect of a sugar or beet or cane to ethanol program? Is there an openness on the part of the ASA and others to 

take a close look at that? Does anybody want to respond? 

Mr. RONEY. Senator, from the point of view of the American 

Sugar Alliance, we are certainly open to that. We see that the future for U.S. energy policy is very much tied to ethanol. We see 

every opportunity for sugar to be a part of the biofeedstock mix 

that goes into ethanol. But we would also emphasize that we do 

need to hold on to our domestic policy until we have the reform in 

the world market that Senator Lugar has talked about and to 

maintain that kind of price stability. We see a sucrose ethanol program as potentially complementary to the program that we have 

now for sugar for food. 

But certainly, we are open to ideas and thoughts on that, and 

with the acknowledgement, of course, that this would involve a 

government program of some sort, that this is not necessarily 

something that we can jump into economically and expect to be 

able to compete with the uncertainty of world ethanol and U.S. ethanol prices. 

Mr. PEISER. Senator, if I can add, it is very difficult to argue with 

the use of ethanol and sugar into ethanol given what is going on 

in this country today and the world. And indeed, I would think if 

there is an alternative use for sugar, you might get some less parochial discussions about other public policy questions from growers 

who have only one use today. So I think the balancing of their 

product to service more than just one master, I think would be 

quite useful. 

Having said that, I think we all have to recognize that there is 

a very, very tight balance of supply and demand in this country 

even before the hurricanes, and I think everybody would say that 

it was a pretty good equilibrium throughout the country, certainly 

some regional differences, but generally, it was a decent equilibrium. It was probably a little too much capacity for a while, but 

as you may know, several refineries had closed, two in the last couple of years, and that is what has created this very tight balance 

between supply and demand. 

So any program that is put forward to find an alternative use of 

this crop has to recognize that tight balance and has to recognize 

that there needs to be other ways of creating supply for the consumption demands in this country, because without that, you could 

34

have clearly not a sufficient supply of sugar to satisfy consumers 

in this country. 

Senator COLEMAN. Mr. Goehring, is it fair—by the way, I looked 

at the data and I understand the concern about not only relocations 

in the industry, but there has also been a drop in the wholesale 

price of sugar from 1996 to 2004. Those prices, as I understand it, 

the wholesale price of sugar dropped 20 percent from 1996 to 2004. 

That is when you had most of your relocations. I suspect that even 

with sugar at the world price, that folks who relocate elsewhere are 

not coming back to the U.S. Is there a way to truly assess the impact of this program on relocations in your industry? 

Mr. GOEHRING. You know, I think it is different for each individual company, but I can speak for the Hershey Company. The 

vast majority of our production is located in the United States, 

Senator, although since the 1960’s, we have produced in places like 

Canada and Mexico. We are constantly trying to evaluate what 

products ought to be made where, and, of course, input costs such 

as sugar are a major part of our decision process. Recently, because 

of the disparity between the U.S. price and access to a world sugar 

price, people who produce, for example, hard candies have been 

moving production outside the U.S. where they can get access to 

the cheaper-price sugar. 

Senator COLEMAN. On a personal note, Mr. Williams, because I 

know at the same time we are having this conversation, I have 

been talking to the mayors in Roseau and Crookston and all about 

flooding in your neck of the woods, not too far from Fisher, some 

of those communities there. Could you talk a little bit about the 

program and the impact it has, because we have had a lot of discussion here about catastrophe and yet prices remain pretty stable. 

So the American consumers in that sense have benefited in spite 

of what you would see distorting market factors. Can you talk on 

a personal level about that? 

Mr. WILLIAMS. Thank you for the question, Senator. This program is very important to the growers that I represent, but not 

only to the growers but the communities, because these plants located around the country are located mostly in small towns and 

they provide good union jobs. If these plants are lost, there is no 

one to replace—there is no businesses to replace these lost jobs. 

They also need a lot of support industries, small businesses, and 

through the revenue they provide, through the economics that they 

provide, they provide a lot of opportunities for small business and 

small business jobs. 

Where I am from in the Red River Valley of North Dakota and Minnesota, sugar beets provide over $3 billion of annual economic 

activity. There just is nothing up there to replace that activity and 

those jobs in Northwestern Minnesota and North Dakota. So this 

is very important, not only to me as a grower, my growers around 

the country, it is also very important to my banker because we put 

a tremendous investment into this crop and also a tremendous investment into actually owning the plants. Every sugar beet processing plant in the U.S. is now owned by the growers, as of last 

year. 

So there are tremendous value-added ag industries that help 

their communities and help their growers and they provide a lowVerDate 0ct 09 2002 15:08 Oct 20, 2006 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 C:\DOCS\30239.TXT TOSHD PsN: LAVERN
35

calorie, 15–calorie product for consumers at a fair price and a good 

supply, on-time supply for our customers, and we think that the 

program works extremely well for growers and for the U.S., not to 

mention it does not cost the taxpayers any money. So thank you 

for the question, Senator. 

Senator COLEMAN. Thank you, Mr. Chairman. 

Senator LUGAR. Thank you very much, Senator Coleman. 

Let me ask this question, which has not intruded yet in the hearing. Given the articles or even larger studies by many people interested in nutrition and health, many advise less use of sugar. I wonder whether that has affected any of your markets, either as persons who produce products or as people who produce sugar at all. 

Is there a trend of that sort, or by and large, in your judgment, the 

American people are ignoring that and love sugar products anyway, 

despite the controversy, say, at the school lunch program in which 

now soft drinks are not going to be provided in elementary school 

situations, largely because of obesity studies of young people, far 

from old people? Where does that fit into this situation, demand for 

the product? 

Mr. PEISER. Senator, it is a very good question and I am sure Mr. 

Goehring has something he would like to say, as well. But I don’t 

think people argue that people should eat less sugar but should do 

it in moderation, just like everything should be done in moderation. 

There is a lot of confusion in the country about sugar and sugars 

and the distinction between sucrose and fructose, and the debate 

over the school lunch program particularly as it relates to soda 

really relates to fructose, since there really is no sucrose in colas. 

Unfortunately, this industry, the sugar industry, gets lumped together quite often in that debate and it is very important to distinguish between the two. 

Mr. GOEHRING. Yes, Mr. Senator, there is clearly an interest by 

the American people out there about nutrition and I think it is 

growing. We have seen various dietary trends over the past 30 

years. Clearly, from our industry’s standpoint, we say that confectionery products ought to be part of a balanced diet and not exclusively or overused. We have had trends in the 1970’s and more recently with the Atkins diet where the sugars and the carbs were 

not considered very good. It seems to have rebounded from those 

very low levels of consumption and declines in consumption and it 

is probably a more balanced type of demand right now. 

Senator LUGAR. Let me ask Mr. Peiser, you used the word tight 

balance in discussing the sugar situation in our country in recent 

months and all. If you were to play the devil’s advocate, someone 

would say, well, why in the world was there a tight balance? After 

all, there is sugar all over the world, in 40 countries. Mr. Roy has 

testified that a great number of them gain really their development 

sustenance from the fact that they have a part of this situation. So 

why was the balance so tight? 

I understand all the rudiments that have been discussed here 

today and the questions raised about USDA. Were they sort of 

fudging the standards a bit, inviting a little bit of sugar in here at 

that particular point? But arguing once again as the devil’s advocate, why shouldn’t the USDA say, you know, we can relieve this 

in a hurry. As a matter of fact, there is no need for tightness whatVerDate 0ct 09 2002 15:08 Oct 20, 2006 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 C:\DOCS\30239.TXT TOSHD PsN: LAVERN
36

soever. Let us reassure the whole public. Let us reassure the world 

that, by golly, there is a lot of sugar out there. Now, what is wrong 

with that point of view? 

Mr. PEISER. I think the balance of different constituents’ interests is very important here and everybody has somewhat of a different point of view, and you are right, everybody is a little bit parochial, but all the parochial interests tend to look at the public 

good. 

If you went back several years ago, and I don’t think you have 

to go back more than two or three, the balance was, in fact, tight. 

The refining capacity in this country was quite a bit bigger than 

it is today. Because of the difficulties of the independent refiners 

being able to create a margin that made sense, several refineries 

closed. Domino closed their refinery in Brooklyn. We closed our refinery in Sugar Land, Texas. That is what has created the tight 

balance, and both of us closed that because we couldn’t make 

money there. Notwithstanding everybody’s parochial interests, I 

think everybody has to make a little bit of money. 

The desire to open up the borders to create more supply in this 

country certainly serves some interests. It might not serve others. 

So we are sitting here saying we don’t mind some increase in importation of sugar to create a little bit more of a leeway because 

it is clear that any shock to the system is difficult to absorb. But 

talking about consensus of interests, if we go too far, we are probably hurting some other constituents too much. So we support the 

whole notion of a consensus among all the various groups. 

We are interested in obtaining more raw material to make our 

factories efficient and to be able to service the customers that we 

have in our local regions. It is a very regional business. You can 

have surplus sugar out West that doesn’t help the people in Georgia and North Carolina who rely on our refineries. So there is a 

balance. We would support some increase in imports to be able to 

provide more raw material for us. At the same time, we recognize 

the issues that others face and I think there has to be a balanced 

approach. 

Senator LUGAR. Senator Coleman has spent a lot of time in his 

role as subcommittee chairman in Foreign Relations talking about 

CAFTA and Latin American trade. One of the issues that always 

arises when we discuss trade openings with our friends in Central 

or South America is sugar. Sometimes this is solved by a so-called 

sugar carve-out or compensation or what have you. But at the 

same time, it is apparent here that the overall interests of the 

United States in the stability of our hemisphere and the rise of nations that are very close to us is a very important consideration 

and sugar is not always an obstacle to this, but sometimes it looms 

very heavy on the horizon in almost any trade negotiation. 

My hope is, once again, there is some thought while we are 

reaching consensus domestically, that some thought be given to our 

worldwide security. That case has been made by some of you today, 

that this is a security issue, and I accept that. But security is 

broader, perhaps, than perhaps that first definition, and without 

knowing what the balance is, I would just say that probably we 

have been inhibited in terms of our outreach to our hemisphere 

and we are paying a certain price for that now. 

37

I won’t go into political analysis. Left-of-center governments sort 

of routinely coming on, populist risings and so forth—sugar is not 

the whole of it, and in some cases it may be our benign neglect of 

the area in which we have not indicated we cared that much. But 

now we do care. Senator Coleman cares a lot and so do I and so 

do other members of this committee. 

Without, once again, asking you to reformulate, what should be 

the position of Costa Rica, Nicaragua, or what have you, to take 

recent examples, leaving aside the very big issue with Brazil? I 

agreed to do an op-ed piece that appeared in the Miami Herald yesterday with the Brazilian ambassador just simply trying to say we 

care about Brazil. Brazil is really very important, particularly in 

the midst of perhaps Venezuela, Bolivia, others, and this is the 

world in which we live, sugar people and all the rest of us. 

I don’t mean to be obsessed about the issue. I am sort of looking 

for reasons why people in this world might want to use more sugar, 

and I keep coming back to the fact that it is probably in the energy 

situation and even accept the fact that in order to get sugar on 

some sort of a par with corn over cellulosic ethanol or with what 

have you. We may need to think about that, as opposed to having 

the same argument that we usually have among interest, parochial 

or not. 

Mr. GOEHRING. Senator Lugar, speaking from the sugar sweetener users’ standpoint, we would be open to all those types of ideas 

and trying to reach a consensus with the rest of the industry. 

Mr. RONEY. Senator, I might just provide two quick thoughts. 

One is that I think that the market did work remarkably well this 

past year by doubling the imports. I mean, when our production 

dropped, our program was set up in a way that the foreign countries that do have surplus sugar were able to send that sugar——

Senator LUGAR. Good point. 

Mr. RONEY [continuing]. To the U.S. in large volume an we maintained stable consumer prices. 

I would also caution in terms of the potential for free trade or 

opening our market, throwing our market open to world trade, we 

know enough about the sugar industry to realize that of the 38 

countries that supply us with sugar now, 37 of them would be 

harmed and there would be one beneficiary, Brazil, because sugar 

is a byproduct to its cane industry and they produce it virtually oblivious to price and have really the benefit of 30 years of ethanol 

subsidies and built up that industry. I believe it would be in a position to inundate our market to the detriment of all those other developing countries. 

So I think this has been a dynamic in the world sugar industry 

that is very pronounced and that is not fully understood yet, but 

it is something that developing countries, I think, understand, that 

we understand, and we are certainly seeing the effects in the E.U. 

of their drop in prices, as Mr. Roy mentioned. It is potentially devastating to quite a number of developing countries and will harm 

them more than it will help them. 

Senator LUGAR. I would invite you, Mr. Roney, or others just to 

back up those points and help the committee understand what the 

effects are on the other 37 countries, you know, who they are—we 

have a glimpse of that today—and why what you say has validity, 

38

if, in fact, this may be a another whole set of circumstances while 

we are trying to balance interests to try to think through really 

where everybody does lie in the world, in addition to vis-a-vis our 

growers or our processors here. 

I suspect that you are right. This is a worldwide issue. I suspect 

that probably all of you are right, that some of the E.U. negotiators, if not predatory, are unreasonable on these issues. But we 

probably need to understand their issues, likewise, to be better negotiators as opposed to just simply throwing in the towel and saying, you are obtuse, and so as a result, we don’t change. We just 

kick the can down the road. That is less and less satisfying, even 

though from the standpoint of the work of the Congress, given lots 

of other things to do, temporarily, often it is expedient. Let us not 

discuss sugar this year. Let us try something else. 

I applaud the chairman for wanting to discuss sugar well in advance. We are not really in the throes of the farm bill. USDA 

hasn’t made their very first recommendation. I hope they will make 

one someday and suggest their own views, really, of how this might 

work out. 

Mr. PEISER. Senator, with all due respect to Mr. Roney, the system this year barely worked. 

The CHAIRMAN. Barely worked. 

Mr. PEISER. Barely worked. There were some plants of our customers that closed from time to time because of the unavailability 

of sugar. We came within hours at some times of running out of 

raw material. We all are very lucky that it might not have been 

worse. There was a heavy reliance on Mexico. We were fortunate 

that there was enough sugar that could be exported from Mexico. 

Often, however, it didn’t come in in the right specifications of quality. It didn’t come in in the right bags. When you try to change the 

system that quickly, from a very strict set of parameters to one 

that is a lot looser, there are logistics issues that don’t work well. 

So what I heard Dr. Penn say earlier was that he would like to 

see a little more flexibility in the program. We are a supporter of 

the program. I don’t want to give anybody the impression that we 

don’t support the program. But we do support more flexibility in 

the program and we do support a way of making sure that there 

is a sufficient amount of raw material so that the refining capacity 

in this country can be fully utilized. 

Senator LUGAR. Senator Coleman, do you have some final questions? 

Senator COLEMAN. No. I appreciate this hearing. It has been very 

helpful and certainly we have more work to be done, but clearly, 

as Mr. Williams indicated, and I believe we used the word parochial, Mr. Chairman. When I have an industry that it is $3 billion 

of the economy plus tens of thousands of workers, not just those 

in the factories but those in the towns and others, to me, that is 

not parochial. That is doing your job representing the people you 

are supposed to represent. So these are important interests here 

and let us figure out how to move it forward. 

Mr. GOEHRING. Senator Lugar, could I make one small point 

here? 

Senator LUGAR. Sure. 

39

Mr. GOEHRING. I would like to respectfully disagree with some of 

the statements that Mr. Roney made in the sense that the price of 

sugar today and the wholesale price is at a very high level. It is 

at the highest point that we have seen in 25 years. So we have not 

really seen stable prices over the past three or 4 years, and especially since the hurricane. Industrial users are paying very high 

prices for sugar today. 

Senator LUGAR. Yes, sir, Mr. Roy? 

Mr. ROY. If I may, I just wanted to share perhaps the experience 

of Mauritius as far as energy, using sugar for energy. We principally use bagasse through co-gen projects. We currently are supplying 20 percent of our requirements in energy through bagasse 

and we have recently examined the possibility of ethanol. As you 

know, before, ethanol was not very cost effective because the price 

of oil was the way it was. But today, the problems with ethanol, 

because ethanol, you can make that from molasses, so there is no 

need for you to divert cane juice. 

But the problems you have with ethanol is that the revenue that 

you get out of it is not that much. You have a tremendous problem 

of disposal of waste, vinasse. You have got to treat it. It is very 

costly to do that. And third, and this is an issue we are looking at 

today, that you could get ethanol imported at such a low price that 

whether it is worthwhile to make the capital investment to do ethanol, because as you know, ethanol, you can also do, and this was 

said this morning, from other more interesting inputs, such as 

corn. So these are the issues one must look at with ethanol when 

one looks at it. Thank you, Chairman. 

Mr. ELLENDER. Mr. Chairman, Mr. Peiser talked about doubling 

the price. I received roughly 20 cents a pound on the raw price for 

my product last year. This year, I received roughly 21 to 22, so on 

my side, it didn’t double. Even with my Louisiana education, I can 

figure that 20 to 22 cents doesn’t double. 

[Laughter.] 

Mr. ELLENDER. The market, the program almost didn’t work. Dr. 

Penn made the comment that we went through a tumultuous period in South Louisiana, and for anyone in South Louisiana, that 

is quite an understatement over the last year with Katrina and 

Rita, and the Florida people experienced Wilma, also. So despite 

three Category 3 to 5 storms hitting directly our sugar industry, 

the sugar still worked. 

Senator LUGAR. We thank each one of you for the longevity of 

your experience this morning. It is a hearing that is very helpful 

to us. The original papers that the chairman made a part of the 

record in full as well as your testimony are informative to us and 

to our other colleagues and our staffs who will read them. We look 

forward to more consultation with you as you proceed and wish you 

well in your proceeding. 

Having said that, the hearing is adjourned. 

[Whereupon, at 12:15 p.m., the committee was adjourned.] 

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101


30239.058
102


30239.059
103


30239.060
104


30239.061
105


30239.062
106


30239.063
107


30239.064
108


30239.065
109


30239.066
110


30239.067
111


30239.068
112


30239.069
113


30239.070
114


30239.071
115


30239.072
116


30239.073
117


30239.074
118


30239.075
119


30239.076
120


30239.077
121


30239.078
122


30239.079
123


30239.080
124


30239.081
125


30239.082
126


30239.083
127


30239.084
128


30239.085
(129)

QUESTIONS AND ANSWERS

MAY 10, 2006

130


30239.086
131


30239.087
132

Æ


30239.088