WASHINGTON - For the second time in a month, Florida's sugar
producers are expected to default on more than $85 million worth of
government loans when they come due today.
But the three producers won't be financially liable. Under their
government loan program, they will simply transfer ownership of more than
238,000 tons of sugar to the government on Monday.
The sugar industry has suffered from low prices for a year due to
bumper crops at home and foreign imports on top. The last time sugar was
turned over to the government was in 1985.
Producers have traditionally benefited from a protective program that
keeps prices high by restricting imports. But so many U.S. farmers have
started growing sugar for the good prices that not even restricted imports
can keep them all flush.
U.S. Sugar Corp. in Clewiston is expected to announce on Monday that
it's giving up 35,000 tons of sugar worth $12.6 million. Florida Crystals
in Palm Beach will give up 103,651 tons worth $37.3 million. And the Sugar
Cane Growers Cooperative in Belle Glade is expected to forfeit about
100,000 tons worth $36 million, although figures were not firm as of
Friday night.
"Obviously, turning sugar over is a last resort," said Judy
Sanchez, spokeswoman for U.S. Sugar.
Producers must pay a penny per pound of forfeited sugar as a penalty,
she said. The company has already laid off 327 full-time and seasonal
employees due to the hard economic times.
The first loans for the 2000 growing season were due Aug. 30. The Sugar
Cane Growers Cooperative and Florida Crystals forfeited 47,000 tons of
sugar worth $17 million. Across the country, the defaults so far amount to
about $57 million.
On the latest round of loans due today, the U.S. Department of
Agriculture estimates between $100 million and $200 million worth of debt
will go bad.
All that money not being repaid represents a huge loss to taxpayers,
say critics of the sugar program. And that will give them ammunition to
end the pro gram, since its big defense has always been the fact that it
never cost the taxpayers anything.
"What is changing now and is forever gone is the most potent
argument," said Jeff Nedelman, spokesman for the Coalition for Sugar
Reform in Washington.
Nedelman mocked the producers' common refrain about their
import-restricting program: "It's true. This program does not cost
the American taxpayers a penny. It now costs them about $250
million."
Sugar industry officials argue that the costs of sugar programs are
minimal compared to U.S. aid to other crops, such as wheat, corn and rice.
"The support to the rest of agriculture is estimated at over $32
billion this year, none of which is going to sugar," said Jack Roney,
a senior economist with the American Sugar Alliance in Washington.
"(The sugar forfeitures) are still just a fraction of the support
going to other producers."
Starting Monday, the USDA will take most of the sugar it now owns and give
it to sugar beet growers in the Midwest to sell, in exchange for them
plowing under about 100,000 acres of their sugar crops this year to
further reduce the supply.
The agency also took sugar off market in May, when it paid $54 million
to growers to take 132,000 pounds out of circulation.
Those actions, in addition to all the sugar being let go this weekend,
will return the market to higher prices, said Dalton Yancey, a lobbyist
for the Florida sugar cane producers.
The price per pound of sugar went from just over 19 cents on Sept. 22 to
19.6 cents on Friday, according to the Coffee, Sugar and Cocoa Exchange in
New York.
The increase reflects expectations of the sugar forfeits, said Sanchez
of U.S. Sugar.
But any recovery that might happen this year will be temporary, Yancey
said, because the causes behind low prices haven't gone away. They include
too much sugar at home, an expected surge of imports from Mexico this
year, and sugar syrup that's being imported from Canada outside of the
normal import restrictions.
"We're still in the soup, and fundamental problems still
exist," he said. |