On April 23, 2010, the U.S. Department of Agriculture (USDA), after determining that additional supplies of raw cane sugar are required in the U.S. market, announced a 200,000 short ton (ST) increase in the FY2010 raw sugar import quota. Manufacturers of sugar-containing food products welcomed the news, but signaled that they will press USDA to again quickly raise the quota to avoid a sugar shortage later this year. Sugar producers responded that USDA's decision "shows that the Farm Bill is operating as intended and gives USDA the time and the tools it needs to ensure adequate supplies." On March 23, 2010, the Office of the U.S. Trade Representative (USTR) announced the reallocation of shares of the FY2010 raw sugar TRQ from countries unable to fill the amount of their allocations (i.e., what they can export to the United States) to countries able to do so. This action is intended to increase the amount of imported sugar supplied to U.S. cane refiners by more than 90,000 short tons, without changing the FY2010 raw sugar TRQ that limits the overall import quantity that can enter. Of the 40 countries with shares of this TRQ, 25 will be able to ship additional amounts. Governments of every sugar-producing nation intervene to protect their domestic industries from fluctuating world market prices. Such intervention is necessary, it is argued, because both sugar cane and sugar beets must be processed soon after harvest using costly processing machinery. When farmers significantly reduce production because of low prices, a cane or beet processing plant typically shuts down, usually never to reopen. This close link between production and capital-intensive processing makes price stability important to industry survival. The United States has a long history of protection and support for its sugar industry. The Sugar Acts of 1934, 1937, and 1948 required the U.S. Department of Agriculture (USDA) to estimate domestic sugar consumption and divide this market by assigning quotas to U.S. growers and foreign countries. These acts also authorized payments to growers when needed as an incentive to limit production and levied excise taxes on sugar processed and refined in the United States. This type of sugar program expired in 1974. For the next seven years, the U.S. market was relatively open to foreign sugar imports, with mandatory price support provided only in 1977 and 1978, and discretionary support in 1979. Congress reinstated mandatory price support for sugar in the Agriculture and Food Act of 1981 and the Food Security Act of 1985. Subsequently, the 1990 farm bill, the 1993 budget reconciliation bill, and the 1996, 2002, and 2008 farm bills extended sugar program authority with some changes. Current law authorizes the sugar program through the 2012 crops for sugar beets and sugarcane. Even with price protection available to producers, the United States historically has not produced enough sugar to satisfy domestic demand and thus continues to be a net sugar importer. Prior to the early 1980s, domestic sugar growers supplied roughly 55% of the U.S. sugar market. This share has grown over the last 25 years, reflecting the price protection provided by the sugar program. As high-fructose corn syrup (HFCS) displaced sugar in the United States during the early 1980s, and domestic sugar production increased later in that decade, foreign suppliers absorbed the entire adjustment and saw their share of the U.S. market decline significantly. U.S. sugar policy maintains domestic sugar prices above the world market price, and is structured to protect the domestic sugar-producing sector (sugar beet and sugarcane producers, and the processors of their crops) and to ensure a sufficient supply. During the last decade (FY2000-FY2009), the U.S. raw sugar domestic futures price averaged 21.0 cents per pound (¢/lb. ), compared to the world raw sugar futures price of 10.8¢/lb. Because of the price differential, U.S. consumers and manufacturers of foods and beverages pay more for sugar than they would if imports were allowed to enter without any restriction. Various studies show that over the last 15 years, U.S. sugar users paid between $400 million and $1.9 billion more for sugar annually. These "cost to user" estimates vary widely, and largely reflect the extent of the difference between the higher U.S. price and the lower world price for sugar in the time period examined, and the differing assumptions and methodologies that analysts use to develop such estimates. The sugar program differs from the grains, rice, peanut, and cotton programs in that USDA makes no direct payments to beet and cane growers and processors. With this structure, taxpayers do not directly support the program through federal government outlays. This fact is highlighted as a positive feature by the sugar production sector and program supporters. The program's support level and import protection, however, keep the U.S. sugar price above the price of sugar traded internationally, and constitute an indirect subsidy to the production sector by way of higher prices paid by U.S. sugar users (food and beverage manufacturers) and household consumers. Program opponents frequently refer to this subsidy component to argue for changes to U.S. sugar policy. U.S. sugar policy uses three tools to ensure that domestic growers and sugar processors receive a minimum price for their sugar. First, statutorily set loan rates determine the support level that processors, and in turn producers, are guaranteed to receive for raw cane and refined beet sugar. Second, "marketing allotments" limit the amount of domestically produced sugar that processors can sell, and now ensure that the domestic sugar production sector supplies at least 85% of U.S. food and beverage demand for sugar. Third, import quotas restrict the amount of foreign sugar allowed to enter the U.S. market. USDA decisions in administering allotments and quotas are intended to balance available sugar supply (i.e., domestic output plus imports) with U.S. food demand for sugar so that market prices do not fall below effective support levels. The 2008 farm bill ( P.L. 110-246 , Subtitle D of Title I) further requires USDA to operate the sugar program on a "no-cost" basis (i.e., to result in no federal government outlays). It is administered by the Farm Service Agency. Each tool is described below, with a discussion of what the 2008 farm bill requires and what USDA has announced in exercising its authorities for the FY2009 and FY2010 sugar programs. USDA extends "non-recourse" price support loans to processors of sugarcane and sugar beets rather than directly to the farmers who harvest these crops. Loans are available only to processors who agree to pay growers for deliveries of sugar beets and sugarcane at USDA-set minimum payment levels. Their "non-recourse" feature means that a processor can exercise the legal right to hand over sugar it initially offered USDA as collateral for the loan to meet its repayment obligation, if the market price is below the effective support level when the loan comes due. These loans at times can be attractive to sugar processors as a source of short-term credit at below-prime interest rates. The 2008 farm bill increases sugar loan rates by 4% to 5% in stages through FY2012. For the 2009 sugarcane and sugar beet crops that are harvested and processed during FY2010, the national average loan rate is 18.25¢/lb. for raw cane sugar, and 23.45¢/lb. for refined beet sugar. The loan rate increase is the first since 1985 for raw cane sugar and 1992 for refined beet sugar. The rate for beet sugar is statutorily set higher than for raw sugar because the former is available immediately after processing in white refined form, ready for industrial food and beverage use and for human consumption. By contrast, raw cane sugar must go through a second stage of processing at a cane refinery to be converted into white refined sugar. To reflect differences in marketing costs among production areas, USDA adjusts these national loan rates on a regional basis. Sugar loan rates alone do not serve as the guaranteed price floor for domestically produced sugar. In practice, USDA's aim is to support raw cane and refined beet sugar at higher price levels that take into account those costs that a processor incurs in taking out a price support loan and in marketing sugar to a first purchaser. During FY2009, the effective support level for raw cane sugar was 19.81¢/lb. in Louisiana and Texas, and about 20.6¢/lb. in Florida and Hawaii. These were based on each state's price support level, plus an amount to cover a processor's cost to transport raw cane sugar to a cane refinery, plus the interest paid on any price support loan taken out, plus location discounts. For refined beet sugar, effective support across six beet-producing regions ranged from about 23¢/lb. to about 26¢/lb. The support level was based upon the regional loan rate, plus specified marketing costs, plus interest paid on a price support loan, plus a cash discount. For FY2010, effective support levels are about the same. To ensure that market prices do not fall below these "effective" price support levels, USDA limits the amount of sugar that can be marketed by administering marketing allotments and import quotas (i.e., limiting supply). A loan forfeiture (turning over sugar pledged as loan collateral to USDA) occurs if a processor concludes that the domestic market price when the loan comes due is below the "effective" sugar support level for his state or region. In other words, this is the price that would discourage a processor from "forfeiting" sugar placed under loan to USDA. It is this level—not the loan rate—that represents the minimum level of program benefits that sugar crop growers and processors expect to receive.