The U.S. sugar industry, suffering the lowest prices in 22 years, expressed relief today that action by the Department of Agriculture (USDA) is a positive move toward restoring stability in the supply and marketing of sugar.
Specifically, USDA announced it is initiating a “payment-in-kind,” or PIK, program for sugar. Under a PIK program, farmers will have the option of not harvesting a portion of their 2000 crop, and in return receive from USDA sugar the agency has or will be obtaining through purchase or forfeiture.
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Earlier this week, James Horvath, president and CEO of American Crystal Sugar Company, a cooperative owned by 3,000 farmer-shareholders in the Red River Valley of Minnesota and North Dakota, testified before the Senate Agriculture Committee on the value of a PIK program, which is authorized under federal law as a cost-saving measure.
He said his farmer-owners “are supportive of this (PIK) concept. We believe it achieves several worthwhile objectives for the industry and the government.” He listed these benefits for PIK:
- It quickly reduces the current oversupply of sugar by cutting the number of harvested acres this year.
- It saves the USDA the responsibility of managing large amounts of purchased or forfeited sugar.
- It returns balance to an oversupplied market that is causing severe financial stress on sugarbeet and sugarcane farmers across America.
- It saves the government money.
Horvath emphasized that PIK does not eliminate the need for USDA to purchase additional sugar. This week in a letter to USDA Secretary Glickman the domestic sugar industry representatives said, “We cannot emphasize too much how important we believe it is that USDA issue an announcement immediately of an additional sugar purchase, in a significant amount, to avoid CCC sugar loan forfeitures.”
Since the start of the 1996 Farm Bill three and a half years ago, U.S. wholesale refined sugar prices have plummeted 34 percent, to the lowest level in 22 years. Yet, there has been no corresponding decrease in the grocery store price of sugar or in the price of sugar-containing products such as cakes, candy and ice cream. These have actually risen from 6 to 10 percent at the same time farmers have seen the sharp decline in prices they receive. With prices this low, industry officials have said forfeiture of sugar used as collateral for loans from the Commodity Credit Corporation is a certainty, unless significant purchases are made by USDA of sugar that is overhanging the market.
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By GlobalDataHorvath and others have pointed out that all of agriculture is in a crisis, not just sugar. Over the past four years, Congress has provided more than $72 billion in economic assistance for producers of other crops, and appropriately so, Horvath said. None of this has gone for sugar.
During the Senate hearing this week, three basic reasons were given for plummeting prices:
- It quickly reduces the current oversupply of sugar by cutting the number of harvested acres this year.
- It saves the USDA the responsibility of managing large amounts of purchased or forfeited sugar.
- It returns balance to an oversupplied market that is causing severe financial stress on sugarbeet and sugarcane farmers across America.
- It saves the government money.
For more information about U.S. sugar policy, visit www.sugaralliance.org.
