Congress Sours on Uncle Sam's Sweet Deal With Sugar Growers
AUSTIN, TEXAS — TEXAS sugar-cane grower Jack Nelson pockets double the world price for his output, thanks to the federal sugar program. All he wishes now, he says in essence, is for Congress to guarantee his market share forever.
Congress says it wants to curtail the kind of government intrusiveness manifested by six decades of federal control of the sugar market. But two reform proposals in Congress are widely different and have divided the sugar industry.
One bill in the House of Representatives, the Freedom to Farm bill, would terminate or reduce a large number of farm-support programs, including sugar, and save $13.4 billion over seven years. The bill was defeated last week in the House Agriculture Committee when two Republicans defected. It was expected to be taken up again today. But the legislative process could last weeks as differences between the House, Senate, and the White House are sorted out.
''Right now,'' says Tom Hammer of the Sweetener Users Association, ''the government is picking the winners and the losers.''
Among the losers are consumers with a sweet tooth. Each year they pay $1.4 billion extra for candy bars, soft drinks, and other products because of the sugar program, the General Accounting Office estimates.
Winners include the 35 countries permitted to sell raw cane sugar to United States refiners for a combined $200 million profit.
The US government chooses where in the global market to shop and how much to buy from each seller, based on 20-year-old statistics. Nine of the favored countries - Argentina, Ecuador, India, Madagascar, Mexico, Paraguay, Peru, Taiwan, and Uruguay - no longer remain net exporters of raw sugar. Every grain they sell to the US must be offset by imports to satisfy their own consumption.
''Don't you think that's crazy?'' asks Michael Dean, a commercial official in the Australian Embassy. Australia also sells to the US at the inflated price. But Mr. Dean says the US program depresses demand in his country. Without it, ''you'd see a higher return for all sugar-exporting countries.''
The sugar program has also nourished manufacturers of high-fructose corn syrup, a sugar substitute. Artificially high sugar prices helped them capture the soft-drink market. ''That was our biggest market and we lost it,'' says Nick Kominus, president of the US Cane Sugar Refiners' Association.
Unlike corn or wheat growers, US sugar producers do not receive a subsidy payment. Instead, the government ensures them a high price through loans and limits on imports. Also, it occasionally dictates market share for US sugar wholesalers.
The latter action restrains US producers of beet sugar, which nonetheless have expanded sales enormously at the expense of regulation-hobbled cane sugar. By preventing beet-sugar suppliers from flooding the market, Washington enables producers of raw cane sugar to repay their federal nonrecourse loans. Otherwise, Washington would be stuck with tons of raw cane sugar to store or sell in a falling market.
''Madness,'' says I.H. Kempner III, chairman of Imperial Holly Corp. in Sugarland, Texas, of the complicated system. His refining company's output is the most balanced in the business at 60 percent beet sugar and 40 percent cane sugar.
Beet growers and refiners, who split profits, favor the bill introduced by House Agriculture Committee Chairman Pat Roberts (R) of Kansas. No longer would the government block beet people from grabbing more of the sugar market. Cane growers also support Mr. Roberts's approach because it maintains mechanisms that let them command high prices from refiners of their raw cane sugar. Nelson and the other 135 farmers belonging to Rio Grande Valley Sugar Growers Inc. produce raw sugar worth $65 million a year on 42,000 acres. But they may be overreaching. As Mr. Kempner notes, ''Raw [cane] sugar producers are making a lot of money but they are seeing their customers [cane sugar refiners] die.''
Sweetener users charge that the Roberts bill might actually bring higher prices. They prefer a bill by Reps. Dan Miller (R) of Florida and Charles Schumer (D) of New York. It would eliminate domestic market and price controls.
Growers' lobbyist Joseph Terrell predicts the Miller-Schumer bill would fail to control supplies of foreign sugar. ''Devastating'' imports would swamp the US market. Mr. Hammer insists prices would ease without subjecting the US to ''ruinous'' subsidized world prices. Cash-strapped refiners of raw cane sugar also support the Miller-Schumer bill. Only six refining companies will remain after a merger closes one this month. Since 95 percent of their operating cost is raw sugar, lower prices would boost ca ne refiners ability to compete against beet sugar.