U.S. House Farm Bill Draft Supports Subsidizing Sugar for Ethanol Production
The oft-delayed, much debated 2007 farm bill is finally set to start grinding forward again with the House Agriculture Committee scheduled to begin its markup July 17 and aiming to take the bill to the floor the week afterwards. As part of a newly announced 111-page update to the crop subsidies program, U.S. growers will have the opportunity to sell beet and cane sugar for use in creating ethanol. This is a landmark shift for the program, which had previously only treated sugar as a food source.
Support rates for sugar, which now stand at 18 cents per pound for cane and 22.9 cents per pound for beet sugar, would increase to 18.5 cents and 23.5 cents, respectively. To help make this happen, the Agriculture Department would set rigid limits on marketing allotments for "domestic human consumption" for the 2008-12 crop years. Not surprisingly, the American Sugar Alliance, the sugar grower trade group, has come out in favor of the proposal, stating that it would make the program "even stronger" with its "long overdue loan rate increase" and support for ethanol production.According to the proposal, the USDA would intervene to buy any surplus sugar and sell it to ethanol producers if it helps keep the program's net operating cost in the black. These purchases would supposedly only be made when necessary through a competitive bidding process.
We've often argued that such crop subsidy programs are a bad idea: not only do they harm poor producers around the world by drastically lowering prices, they also typically benefit only the largest, richest farmers (for a full list of the beneficiaries, check out Mulch's Farm Subsidy Database). While it may have made economic sense for Brazil to encourage the use of sugar cane-based ethanol initially (they had large surpluses in the late 1970s and 80s), subsidizing its production in the U.S. is not an ideal strategy. Could we soon witness the rise of another King Cotton or King Corn?