09-19-01: Big sugar' gears up to defend subsidy

WASHINGTON -- Florida's sugar producers, a potent force in state business and politics, are preparing to fight off another attempt to end an agricultural program that some call the sweetest subsidy of them all -- the support of sugar prices by the U.S. government.
      The program costs consumers of sugar, from families to food businesses, $800 million to $1.9 billion a year, according to a detailed report by the General Accounting Office issued last year. And last fall, when sugar prices plummeted, U.S. producers forfeited $430 million of raw sugar to the government rather than pay back federal loans in cash, a tab picked up by taxpayers.
      After Congress returns from vacation next month, a coalition of consumer, environmental and business groups -- food manufacturers seeking cheaper sugar -- will try to phase out the entire program, which includes import limits as well as price supports and keeps U.S. sugar prices two to three times higher than in other markets.
      The wide variance in the sugar program's estimated cost to the consumer is because no one knows how much savings a candymaker, for example, would pass on if the price of sugar dropped sharply, said Jay Cherlow, a GAO economist who worked on the report.
      Sugar cane growers in Florida, allied with the sugar beet farmers of the Midwest and West, say the program is the best way of defending domestic producers from unfair competition and protecting a $2.1 billion chunk of the South Florida economy, including about 30,000 jobs.
      Critics say that this time, after years of failure, they have a chance to begin phasing out the program, which is part of a massive, 10-year farm bill that Congress will take up when it returns in September.
      "The sugar program is the sugar daddy of corporate welfare," said Rep. Dan Miller, a Sarasota Republican who has led the crusade against the program, "and we're subsidizing an industry that has been harmful to the Everglades."
      Florida sugar cane growers and producers, who account for about 22 percent of sugar production nationwide, are confident that the price supports will continue with widespread support on Capitol Hill.
      "We'd support true free trade, if other countries eliminated their subsidies," said Jorge Dominicis, spokesman and vice president of Florida Crystals, one of the state's big three producers.
      "Some who talk about free trade don't recognize that, and they'd be happy to drive our companies out of business."
      Robert Coker, a vice president for U.S. Sugar, the state's largest producer, points to his company's early decision to invest in Everglades restoration. And he says many of the consumer groups complaining about the sugar program "are really just fronts for the food companies that don't pass along any savings."
      "There's nothing new in what they're saying," Coker said of the critics. "Dan Miller is like the Bill Murray character in Groundhog Day, giving the same speech over and over again."
      But if the sugar debate has been locked in predictability for years, several developments have changed the politics of the issue. The biggest factor might be market forces that hit domestic producers hard, partially the result of their own actions.
      The Farm Bill of 1996 reduced price supports for many commodities, but not sugar. "The sugar program's artificially high domestic prices encouraged farmers to grow sugar beets instead of other crops," the GAO report found.
      In the late 1990s, sugar production surged in the West and Midwest and grew steadily in Florida. Total national acreage devoted to sugar grew 13 percent. That produced a glut, coupled with a sagging market worldwide, that caused U.S. producers to forfeit on their loans, in effect giving unused sugar back to the government.
      Cost to taxpayers: $430 million, the GAO said, including $1.4 million a month in storage costs.
      For the first time in 15 years, sugar producers could not make one of their favorite arguments -- that the program cost taxpayers nothing, at least directly.
      "The program could lose a lot of support if this starts to cost more tax dollars," predicted Cherlow, the GAO economist.
      Sugar producers are a powerful force on Capitol Hill, but they realized that using taxpayer money to buy back unused sugar was politically unpopular.
      This year the sugar industry is pushing the concept of "inventory management," allowing the Department of Agriculture to set limits on how much sugar is sold, which would discourage over-production. That provision is part of the farm bill that passed the House Agriculture Committee.
      "It's a safety net that's been successful before, and it's no cost for the government," said Coker. "Forfeiting on loans is a last resort and something we don't want to do."
      The sugar industry faces another problem this fall -- a well-organized effort by food and candy makers who back Miller's bill to phase out the sugar program.
      Chicago Mayor Richard Daley and Illinois companies with 31,000 employees have called for ending the program. They say the high cost of sugar is forcing companies to cut back or relocate operations in Canada or Mexico.
      "It makes no sense to put entire industries in jeopardy just to protect a comparatively small number of sugar growers and producers," said Daley in May.
      While sugar cane producers are concentrated in Florida and Louisiana, beet growers are spread throughout many states. In the Senate, they have the backing of conservative Republicans and prominent Democrats, including Majority Leader Tom Daschle of South Dakota.
      Geographically, the producers are a powerhouse, especially in the Senate," said Keith Ashdown, a spokesman for Taxpayers for Common Sense, a watchdog group. "There are six or eight states that will defend this to the death."

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