Incredible Level of Cronyism

I am simply amazed at this level of cronyism enjoyed by the sugar industry -- import restrictions on cheaper world sugar, price supports, and government loans that can be paid back with excess product rather than cash.

The U.S. Department of Agriculture is likely to buy sugar in the domestic market this year in order to drive prices up and prevent defaults on loans made to sugar processors, according to a USDA economist.

The USDA estimates it would need to buy 400,000 tons of sugar to boost prices to an “acceptable level,” said Barbara Fecso, an economist at the department. A purchase of 400,000 tons would amount to about 4.4% of projected U.S. sugar production in the marketing year that ends Sept. 30.

Domestic sugar prices have been trading at about 20 cents a pound, their lowest level in nearly four years, putting companies that make sugar from cane or beets at risk of defaulting on loans they received from the USDA when prices were higher.

People talk about these supposed government subsidies for oil companies, but every time I see a list of them they are dominated by things like depletion allowances, FIFO accounting, and investment tax credits, which are either standard accounting rules that apply to all industries or tax credits that apply to all manufacturers.  But Big Sugar gets real heavy-duty subsidies no one, except maybe ethanol companies and other farmers, get.

  • MingoV

    This has been going on for a long time. I have no idea how the handful of sugar beet farmers in Colorado and sugar cane growers in Louisiana got so much clout.

  • HenryBowman419

    I have the suspicion the the sugar cane farmers in Louisiana (who have now morphed into multinational corporations) are the likely the culprits, if for no other reason that they have historically been the consumers of government corporate handouts. Sugar is essentially a poison, unless you are working really hard and need calories just to survive -- most Americans do not fall in this category.

  • http://www.facebook.com/profile.php?id=1152494442 Stephen Macklin

    The ehtanol producers will get a taste of this deal too. The USDA will sell them the 400,000 tons of sugar at a significant loss.

  • Jerryskids

    It's not just, or even mostly, the domestic sugar producers - keep the price of sugar high and corn syrup becomes economically viable. You seriously think corn farmers want to see low sugar prices and a huge chunk of their market vanishing? When Uncle Sam subsidizes sugar, he also (perhaps indirectly but certainly knowingly, intentionally and purposefully) subsidizes HFCS and corn farmers are a much more powerful political force than sugar producers.

  • SamWah

    I get e-mails from NRO (Jim Gerrity's column) with blurbs to protect the sugar industry. I wrote them about that.

  • http://www.facebook.com/marshe Marshall J. Ellis

    Sugar has been a pet topic of mine for a long time. It's all about Cuba. Economic sanctions mean actively preventing world prices, where Cuba is a major producer, from being a factor here. Push this along with heavy ex-pat involvement in the US sugar industry. Enter ADM and the corn industry, interacting with the sugar industry and thus Cuba politics, and you have a decades long, increasingly entrenched crony setup. Which just happens to coincide with the rise of the "obesity epidemic," though other agriculture industry/government interaction also comes into that. Entrenched sugar and corn cronyism is a factor in keeping sanctions from lifting sooner rather than later.

  • http://twitter.com/pslattery317 Pat Slattery

    Let me get this straight... The USDA is going to spend (taxpayer) money to buy sugar so that sugar companies don't default on loans made by the USDA? I wonder if I could get my mortgage company to pay rent on my house so I don't default on my loan.

  • Jim Hodge

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