Sugar Provisions of the 2014 Farm Bill (P.L. 113-79)
Released: 2014-03-21T00:00:00

Overview of Sugar Program

The U.S. sugar program provides a price guarantee to producers of sugar beets and sugarcane and to the processors of both crops. The U.S. Department of Agriculture (USDA) further is directed to administer the program at no budgetary cost to the federal government by limiting the amount of sugar supplied for food use in the U.S. market. To achieve both objectives, USDA has four available tools—as reauthorized by the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79 , Section 1301 of Title I and Section 9009 of Title IX), and by Chapter 17 of the Harmonized Tariff Schedules of the United States—to keep domestic market prices above guaranteed levels. These are:

extending price support loans to processors at specified levels (the basis for the price guarantee); setting marketing allotments to limit the amount of sugar each processor can sell; establishing import quotas to restrict the amount of sugar allowed to enter the U.S. market; and making a sugar-to-ethanol backstop available if marketing allotments and import quotas are insufficient to keep market prices above guaranteed levels.

For an explanation of how these tools operate together, see CRS Report R42535, Sugar Program: The Basics .

Supporters of Sugar Program

During farm bill debate, producers of sugar beets and sugarcane, and the beet refiners and raw sugar mills that process these crops into refined sugar and raw cane sugar, respectively, supported extending the U.S. sugar policy as contained in the enacted 2008 farm bill. They argued that the program had succeeded in ensuring "reliable supplies of high-quality, safe, responsibly-produced sugar at reasonable prices" for consumers, and that it provided producers with "an economic safety net." They emphasized that these objectives had been achieved at "zero cost to American taxpayers." Sugar crop producers and processors are represented by the American Sugar Alliance (ASA).

Two large general farm organizations supported continuing the current sugar program without any change. The American Farm Bureau Federation stated that while other commodities will be faced with reduced government support in the next farm bill, "the sugar program should be left intact as efforts to generate savings would require convoluted policy structures." The National Farmers Union supported continuing the sugar program and encouraged "Congress to work with ... sugar producers to adopt a strong sugar program in future farm bills." Also, a coalition of 17 developing countries that benefit from preferential quota access to the U.S. sugar market favored continuing current U.S. sugar policy, arguing that it "provides a guaranteed level of access ... at fair, predictable prices."

Opponents of Sugar Program

Sugar users (i.e., manufacturers of sugar-containing food products and beverages) supported making changes to the U.S. sugar program. In their view, the sugar program "was made worse by the 2008 farm bill" and had operated as "a textbook example of the consequences of excessive government intrusion in the marketplace." They argued that the program, "by overly restricting the supply of sugar in the U.S. market," had kept U.S. market sugar prices "far above" world sugar prices. This development, they contended, resulted in U.S. consumers and food manufacturers paying more for sugar than foreign users pay, and encouraged the relocation of food processing jobs offshore, led to the elimination of thousands of U.S. jobs, and created a "dramatic inequity of the benefits provided to sugar growers over other agricultural producers" supported by other commodity programs.

Sugar users are primarily represented by the Coalition for Sugar Reform (CSR). CSR includes the food and beverage companies that use sugar (e.g., confectionery firms, bakeries, cereal manufacturers, beverage makers and dairy companies, and the trade associations for these industries), consumer and trade advocacy groups, and business organizations. Three trade associations representing food manufacturing firms where sugar is a principal input also placed U.S. sugar policy at the top of their legislative agenda. They are the American Bakers Association, the National Confectioners Association, and the Sweetener Users Association.

In 2013, congressional opponents of current U.S. sugar policy introduced identical bills to revise U.S. sugar policy ( H.R. 693 and S. 345 , Sugar Reform Act of 2013). These were intended to be used as amendments to be offered on the floor when each chamber debated the farm bill. These measures proposed to retain the current structure of the sugar program but modify various price support, marketing allotment, and import quota provisions. They were crafted to authorize flexibility in how USDA uses the two program tools that limit sugar supplies but still meet the statutory directive that the program operate at no cost (i.e., maintain market prices above support levels so that processors have no incentive to forfeit price support loans, and if attained, not record any budget outlays). Both bills also would have repealed the sugar-for-ethanol program.

Legislative Activity in the 112th Congress

Sugar Program Extension

Efforts within Congress to complete action on an omnibus farm bill after the November 2012 elections did not succeed. In late December, attention shifted to finding a legislative vehicle to extend existing authorities for agricultural commodity programs, including sugar. In the final days of the 112 th Congress, congressional leadership decided to use the "fiscal cliff" bill to simply extend many 2008 farm bill provisions through September 30, 2013. Among its provisions, Section 701(a) and (b) of P.L. 112-240 extended the 2008 farm bill's commodity program authorities for one year. This meant that 2008-enacted sugar program authority applied to the 2013 sugar crops (i.e., most of FY2014, as beets and cane are harvested and processed and sugar is subsequently marketed). Separately, Section 701(f)(9) provided authority, if triggered, for USDA to implement the sugar-to-ethanol program for the 2013 sugar crops.

Earlier Action

Earlier in 2012, the Senate approved a farm bill ( S. 3240 ) that would have continued existing sugar program authorities. Two floor amendments offered to change the Senate Agriculture Committee-reported measure were defeated. S.Amdt. 2393 (tabled, or rejected, on a 50-46 vote) would have phased out the program within three years. S.Amdt. 2433 (defeated on a 46-53 vote) would have reverted most program authorities to those in effect prior to the 2008 farm bill changes and would have repealed the sugar-to-ethanol program. This amendment served as the basis for the Sugar Reform Act bills introduced early in 2013. The House Agriculture Committee-approved farm bill ( H.R. 6083 ) also would have reauthorized the sugar program without change. The House, though, never considered this measure.

Legislative Activity in the 113th Congress

The Senate-passed farm bill ( S. 954 ) and the House-passed farm bill ( H.R. 1947 ) proposed to continue 2008-enacted U.S. sugar policy without change. An amendment (identical to S. 345 , Sugar Reform Act) to reflect the interests of sugar users and consumers was offered by program opponents during Senate floor debate on May 22, 2013, but was defeated. On June 20, 2013, the House debated future sugar policy when it considered an amendment to H.R. 1947 , the first farm bill. This proposal, similar to H.R. 693 (Sugar Reform Act), was defeated.

Table 1 provides a side-by-side comparison of the enacted 2008 farm bill sugar program provisions with those enacted in the 2014 farm bill. For comparison, the table also lays out the provisions of the defeated Sugar Reform Act offered as floor amendments during the debate on the 2014 farm bill.

Senate Farm Bill Activity

The Senate Agriculture Committee, when reporting out its farm bill ( S. 954 ) on May 14, 2013, proposed to reauthorize the 2008 farm bill sugar program without any change through crop year 2018 (§1301 of the Agriculture Reform, Food, and Jobs Act of 2013). The committee's measure also called for reauthorizing the sugar-for-ethanol program in the bill's Energy title (§9008).

During floor debate on S. 954 , the Senate considered one amendment to revise the committee-approved sugar program provisions. This amendment was defeated on a 45-54 vote. Offered by Senator Shaheen on May 22, 2013, S.Amdt. 925 proposed to reduce price support levels (from 18.75¢/lb. for raw cane sugar, and 24.09¢/lb. for refined beet sugar) to those in effect just prior to enactment of the 2008 farm bill (FY2008, i.e., 18.0¢/lb. for raw cane sugar; 22.9¢/lb. for refined beet sugar), and to make a number of changes to require USDA to administer sugar marketing allotments and sugar import quotas in ways that would result in sugar being available "at reasonable prices." The amendment would have granted USDA discretionary authority to suspend or modify any marketing allotment provision, taking into account the interests of consumers, those employed in the food production sector, businesses, and agricultural producers. It also would have required USDA to exercise discretion in administering the sugar import quota—for example, by allowing for adjustments in quota levels to provide for adequate sugar supplies at reasonable prices. Another provision would have required USDA to set the ending sugar stocks-to-use ratio at about 15.5%, but with authority to adjust this target to prevent "unreasonably" high prices or loan forfeitures. Sugar users argued that having USDA use this stocks-to-use level in implementing the sugar program would result in much lower prices than in the 2009-2011 period. This amendment also would have repealed the sugar-to-ethanol program.

House Farm Bill Activity

The House Agriculture Committee, in reporting its farm bill ( H.R. 1947 ) on May 14, 2013, similarly proposed to reauthorize the enacted 2008 farm bill sugar program without any change through crop year 2018 (§1301 of the Federal Agriculture Reform and Risk Management Act of 2013). The House-reported bill also called for reauthorizing the sugar-for-ethanol program in the Energy title (§9009). Representative Goodlatte filed an amendment to revise the sugar program with an eye to offering it during committee markup, but withdrew it from consideration.

On June 20, 2013, the House considered one amendment to revise the committee-approved sugar program provisions. This amendment was defeated on a 206-221 vote. Offered by Representative Pitts, its text was identical to H.R. 693 (Sugar Reform Act) introduced earlier in 2013, and to the amendment offered during Senate floor debate. With the defeat of this farm bill ( H.R. 1947 ), the House subsequently considered a scaled-back farm bill without a nutrition title ( H.R. 2642 ) that would have reauthorized current sugar program authorities on an indefinite basis (i.e., no expiration date). The sugar-for-ethanol program, however, would have only been authorized through the 2018 crop. This measure passed the House on July 11 by a 216-208 vote.

On October 11, 2013, the House debated H.Res. 378 to instruct House farm bill conferees to "advance provisions to repeal" one sugar program requirement added by the 2008 farm bill and proposed to be continued by both the House and Senate farm bills. This requirement stipulates that USDA can increase imports of sugar under a sizeable import quota only after the midpoint of the marketing year (i.e., April 1), unless an emergency sugar shortage surfaces earlier. Prior to 2008, USDA had discretion to increase this quota at any time of the year if it determined market circumstances warranted such action. H.Res. 378 was introduced by Members who supported the position of food manufacturers that use sugar. Their intent was to have House conferees advocate for a return to the discretionary authority that the Secretary of Agriculture previously exercised "to manage supplies of sugar throughout the marketing year to meet domestic demand at reasonable prices." The resolution would have been non-binding if passed. The House defeated this measure by a 192-212 vote.

Reaction to Conference Agreement

With the sugar and sugar-to-ethanol program provisions identical in both the House- and Senate- passed measures, farm bill conferees concurred and focused instead on resolving differences elsewhere in the commodity and nutrition titles. Sugar producers and processors applauded continuation of current policy that they said will enable the sector to deal "with the dual threat of increasing foreign subsidies and falling sugar prices." Food manufacturers expressed disappointment that conferees failed to reform the sugar program that they maintain costs taxpayers "nearly $300 million last year," puts "bakers, consumers, and other food manufacturers at a disadvantage," and sends "thousands of jobs overseas."

Other Bills

During the 113 th Congress, supporters of maintaining current sugar policy introduced a measure that urges the President to seek the elimination of other countries' subsidies that support the production or export of sugar ( H.Con.Res. 39 ). If the President determines that all covered countries have eliminated these subsidies, the resolution calls for the President to propose legislation to Congress to implement a "zero for zero" sugar subsidy policy. In other words, once other countries eliminate their market-distorting sugar programs, the U.S. sugar production sector also would advocate for an end to U.S. sugar policy.

Opponents introduced other measures to eliminate current sugar policy. Sections 101 and 102 of H.R. 1567 would eliminate the sugar price support, marketing allotment, and import quota provisions. S. 956 would permanently suspend price support and related authorities for specified agricultural commodities, including those that provide price support and marketing allotments for sugar.

Cost Estimates

The Congressional Budget Office (CBO) projected in its May 2013 baseline that the continuation of current sugar policy as approved by the Senate, and reported by the House Agriculture Committee, would result in budget outlays of $39 million over 5 years (FY2014-FY2018) and $188 million over 10 years (FY2014-FY2023). While CBO scored the operation of the sugar price support program at zero in each of these time periods, its projection assumed that USDA will in some years need to activate the sugar-to-ethanol program. In scoring the 2014 farm bill conference agreement, CBO did not change this budget projection.

In a more recent projection, the Food and Agricultural Policy Research Institute (FAPRI) estimates that sugar policy as enacted by the 2014 farm bill and accounting for expected market conditions would result in outlays of $133 million over 5 years (FY2014-FY2018) and $446 million over 10 years (FY2014-FY2023).

CBO also projected that the Sugar Reform Act amendment would have achieved total 5-year savings of $27 million (FY2014-FY2018) and 10-year savings of $82 million (FY2014-FY2023) from the above baseline that assumed the continuation of current sugar policy. Since the amendment would have repealed the sugar-to-ethanol program, this score implied that USDA in some years would record outlays in administering the sugar program's price support operations.

FY2013 Program Costs

Opponents pointed to the federal outlays incurred to support sugar prices in the last quarter of FY2013 and the first quarter of FY2014 to defend their view that the sugar program does not operate at "no cost" and needs to be reformed. Countering, program supporters pointed out that the enacted 2008 farm bill directs USDA to administer the program at no cost to taxpayers, and if that cannot be achieved, to take steps to minimize costs. Further, they noted that the non-recourse price support loans available to sugar processors are designed to guarantee them minimum prices for their sugar when market prices fall below these minimums. Accordingly, forfeiting on loans is an option that the authorized program allows them to exercise when this occurs.

With the actions that USDA took to head off loan forfeitures of 2012-crop processed sugar, and its subsequent decisions to implement the sugar-to-ethanol program using sugar that processors forfeited, the sugar program recorded $259 million in budget outlays (i.e., $141 million in FY2013, $118 million in FY2014). Of this total, 67% ($174 million) represents the cost of the sugar-to-ethanol program (i.e., purchases of sugar by USDA from processors, and offering forfeited sugar, for sale to ethanol producers at a substantial discount). The remaining 33% ($85 million) is attributable to sugar purchased by USDA and then exchanged for import rights that cane refiners and brokers surrendered to USDA.

Sugar Market Price Is Key Issue

The main issue in sugar policy debate over the last few years revolved around the price level for domestic sugar . Sugar growers and processors sought the highest level possible, so long as the program's minimum price guarantee was met. Users of sugar in manufactured food products sought as low a price as possible within the basic structure of the 2008-enacted program. Processors sought to retain the program's minimum price guarantees. Users sought to reduce them by 4% to 5%. Processors sought to retain all other details of the current program, designed in large part to accommodate the uncertainties surrounding how much sugar Mexico ships north in any year. Users sought to grant USDA more flexibility in how program tools are administered, by repealing certain prescriptions added in 2008 designed to reduce its discretionary authorities to manage the program. Their objective was to have USDA manage the program in ways that could result in U.S. market prices for raw cane and refined sugar being lower and closer to what they were in the years leading up to the 2008 farm bill period (see Figure 1 and Figure 2 ).

Market and Policy Outlook

Domestic sugar prices are expected to remain close to current levels ( Figure 2 ) for the remainder of FY2014 as the 2013 sugar crops continue to be processed and marketed. USDA expects that over the next several months, U.S. prices will stay above loan forfeiture levels due to lower U.S. sugar production, reduced imports of sugar from Mexico, and an increase in demand from food manufacturers. A top USDA official confirmed this outlook in an interview, stating "he believes the department will be able to comply with Congress' mandate to run the program without taxpayer expense if possible."

In reacting to final farm bill action, food manufacturers that use sugar signaled their intent to continue to fight for reform by working with House and Senate leaders to make sure the sugar program "is on the table, even if those legislative efforts must take place outside of the Farm Bill process." These opponents note that congressional supporters "gained substantial momentum during the past year with the close votes that occurred on their floor amendments, and that efforts will continue for program modifications." Program supporters also expect the "battle" over the sugar program's future to continue.

Sugar farmers and processors continue to emphasize that foreign sugar subsidies make U.S. sugar policy necessary, and that trade-distorting policies used by Brazil, India, Mexico, and Thailand, among others, need to be eliminated. Once these policies are disciplined through multilateral trade negotiations under the auspices of the World Trade Organization (WTO), the U.S. sugar production sector would advocate for an end to current U.S. sugar policy. Sugar industry spokesmen point to H.Con.Res. 39 as a roadmap to accomplish this (see " Other Bills " for details). Observers of the longstanding WTO Doha Round negotiations note that trade negotiators have tried since 2001 to discipline trade-distorting agricultural policies but have not yet succeeded. Further, WTO member countries have not yet agreed upon any timetable to go beyond the limited deals covering agriculture agreed to at the December 2013 Bali Ministerial. This outlook suggests that the U.S. sugar production sector's roadmap would not yield any results for quite some time, and likely not in the time period covered by the newly reauthorized sugar program (i.e., through FY2019). Looking at the near term, sugar industry spokesmen note that any efforts to change the program require addressing the impact of large unrestricted sugar imports from Mexico. Specifically, the industry seeks joint management of sugar by both the United States and Mexican governments to balance supply and demand. To address the criticism made that the sugar program no longer operates on a no-cost basis (as seen in FY2013), the industry notes that the $258 million spent was less than 3% of commodity program spending and the first time in a decade that the program had not operated at no net cost to the taxpayer.

Acknowledgments

Retired CRS Specialist [author name scrubbed] was the original author of this report.