Sugar users, led by giant food processors, want to end a federal program that supports sugar prices. Sugar producers say that would destroy the domestic sugar industry and harm communities dependent on it.

The root of the controversy is that the world produces more sugar than it consumes. That excess is often traded at half or a third of the price of sugar produced in the United States.

The federal program limits sugar imports in order to support the price of domestically produced sugar, and a bill to end that program was introduced two weeks ago by Reps. Dan Miller, R-Fla., and George Miller, D-Calif.

In 1996, the last time Congress reauthorized farm programs, Dan Miller came within five votes of ending the sugar program. Since then, he has pushed for amendments to annual appropriations bills that would eliminate or reduce the program.

The House Agriculture Committee is expected to consider the issue as part of a new farm bill this summer, and the Senate is scheduled to consider the bill next year, when the current farm bill expires.

So far, the Bush administration has not taken a position on the issue.

The battle will eventually affect jobs, consumer prices, federal spending, the environment and world trade relations. With so much at stake, interest groups are expected to pour in millions of dollars in political contributions.

JOBS

Roughly 172,000 farmers, workers, and their families are employed directly or indirectly by the U.S. sugar producing industry in 27 states. Cane sugar is harvested in Florida, Louisiana, Texas and Hawaii, while sugar beets are harvested throughout the upper Midwest and western farm belts. Another 250,000 jobs are tied to corn sweeteners produced in the Midwestern farm belt.

In Louisiana alone, sugar cane is a $350 million-a-year industry, with more than 1.5 million tons produced during the season that ended early this year. More than 30,000 acres of cane is grown in Terrebonne and Lafourche parishes.

Roughly 500,000 jobs are tied to refining or using sugar as an ingredient in food products. The Chicago area is considered the center of U.S. candy production, while bakeries and confectioners are located virtually in every corner of the country.

Producers say eliminating the sugar program will cost them jobs; users say the current program is costing them jobs.

The jobs issue was sharply focused earlier this month when Mayor Richard M. Daley of Chicago sent Miller a letter noting that the confection industry has lost 11 percent of its Chicago-based jobs since 1991. The price supports, he said, are causing the companies to consider relocating their facilities outside U.S. borders.

Meanwhile, 65 mayors from small, one-industry towns across the Midwest and West wrote a letter to Daley expressing support for the sugar program.

"This industry is the backbone of our whole economy and if we lose that industry, we lose jobs, schools, and businesses we lose communities," the letter said.

CONSUMERS

Sugar program critics point to a U.S. General Accounting Office study last June which estimated that the sugar program increased consumer costs by about $1.9 billion in 1998. Sugar producers argue the study is flawed because it assumes that food processors will be able to purchase low-cost world sugar indefinitely and will pass on the savings to consumers.

But Jack Roney, director of economics and policy analysis for the American Sugar Alliance, raw sugar prices dropped 14.8 percent and wholesale refined sugar prices dropped 28.8 percent from 1996 to 2000. Meanwhile, the average retail price of a bag of sugar increased 1.5 percent, while the price of candy jumped 7.7 percent, baked products rose 8.5 percent and ice cream increased 13.7 percent.

Jeff Nedelman, spokesman for the Coalition for Sugar Reform, said no one expects a direct pass-through of savings from lower prices. Instead, he said, the savings are used by manufacturers to hold down or delay price increases caused by other factors, such as higher energy prices and increased labor costs.

Part of the dispute over how consumers would be affected stems from a disagreement over the true cost of sugar on the world market.

Sugar users claim that sugar is regularly available at about 9 cents a pound, about half the lowest recent U.S. price.

Sugar producers say world market prices fluctuate wildly, hitting about 40 cents a pound in the early-1980s.

"That supply on the world market is sometimes there, and sometimes not," said Dalton Yancey, executive vice president of the Florida Sugar Cane League and Washington representative of the Texas and Hawaii Sugar Cane Growers.

GOVERNMENT SPENDING

Theoretically, the sugar program is not supposed to cost the federal government any money. In fact, the government is supposed to make money from low-interest loans to sugar refiners.

It hasnt worked that way in the past year. Domestic sugar prices plummeted to a two-decade low of about 17 cents a pound last year -- well below the roughly 19- to 20-cent break-even point for processors to repay their loans plus interest.

But under the federal sugar program, processors can default on their loans and forfeit the portion of their crop pledged as collateral. Last year, about 10 percent of the crop was forfeited.

Since 1999, roughly 890,000 tons of sugar have been forfeited to the federal government at a net cost of $365.8 million, according to the Agriculture Departments Farm Service Agency.

In addition, the government is paying the processors about $1.4 million a month in rent to store the sugar they forfeited.

The Agriculture Department estimated in February that under current trends, the government could lose $2 billion in 10 years on the sugar program.

Sugar supporters say the problem is one of oversupply caused by several factors: unusually good weather, increased production on lands formerly farmed for other crops, and too much sugar being imported from Canada and Mexico under trade agreements.

The sugar industry also wants a return to rules in force prior to 1996 that allocated the amount of sugar each farmer could sell on the domestic market. Eliminating those allocations has spurred overproduction domestically, they say.

ENVIRONMENT

Sugar program critics argue that it has encouraged the farming of marginally productive lands and polluted the environment, particularly the Everglades.

Miller notes that Florida and the federal government have committed to spending more than $8 billion over the next quarter-century to restore the Everglades. Part of that money will be used to repurchase lands currently used for sugar production.

Rep. Mark Foley, R-Fla., whose district encompasses much of the sugar-producing area around the Everglades, says whatever pollution may stem from sugar farming is less than would occur from other crops. He notes that sugar farmers have made great strides and paid a hefty price to clean up their operations and reduce pollution.

WORLD TRADE

Miller and other sugar critics argue that the United States is at a negotiating disadvantage with the rest of the world if it advocates open markets for other U.S. products while maintaining trade barriers on sugar.

Yancey and Roney counter that American sugar farmers are among the worlds most efficient. They say American sugar producers would welcome the opportunity to compete on the world market, but they claim that most foreign nations subsidize the production of sugar, putting U.S. farmers at a disadvantage.

THE POLITICAL COST

Miller says he doesnt expect to win his fight in the Agriculture Committee. Hes gearing for a floor battle later this year or next.

Critics of the sugar program claim that it has been kept alive in Congress at least in part because of the financial contributions and lobbying efforts of "Big Sugar."

They point in particular to contributions made by Palm Beach County-based Flo-Sun Inc. and its owners, the Fanjul family. During the 2000 election, the Florida Crystals Inc. political action committee contributed $690,750 in unrestricted "soft money" contributions to both parties and $78,200 in direct contributions to candidates and political parties.

Members of the Fanjul family contributed more than $148,000 to political candidates, parties and sugar-based political action committees.

In addition, Flo-Sun listed lobbying expenditures of $290,000, according to campaign and financial disclosure reports.

"Sugar should be the poster child for campaign finance reform," said Miller.

But Yancey said sugar users have spent even more money on lobbying and campaign contributions.

For example, Nestle Chocolate spent nearly $2.1 million in lobbying during the past two years, contributed $67,000 in soft money contributions and $61,500 in direct contributions. Hershey Foods Corp. spent $380,000 in lobbying, $32,500 in soft money and $25,800 in direct contributions.

"Its not about consumers. Its about huge companies like Kraft, Nabisco, Hershey, Nestles all those big users are 100 times bigger than big sugar companies, and what they want to do is buy sugar cheaper," Yancey said.