Amid Obesity, Deficit Policy Debates, Government Could Buy 400,000 Tons Of Sugar
March 14, 2013 by Sam Rolley
New York City Mayor Michael Bloomberg has been attempting to enforce policy initiatives to ban sugary drinks to protect New Yorkers from diabetes and other maladies. And first lady Michelle Obama, in her quest to reduce the number of fat children in America, last month lauded a Wal-Mart initiative to reduce the amount of sugar in its processed foods by 10 percent.
Despite the political bloviating about how bad sugar is (and despite evidence and common sense to the same effect), the Department of Agriculture is currently considering buying 400,000 tons of the sweet stuff. You see, not only does government want to tell you how much sugar to eat — it also wants to tell you how much it should cost and what kind of profits producers of the product should earn.
Last year, sugar processors borrowed $862 million through a government price-support program born out of the 1934 Sugar Act. In the months since the loans were issued, sugar prices have tumbled by about 18 percent and continue to slide. The loans are secured with the 4.1 billion pounds of sugar that companies like American Crystal Sugar Co., Amalgamated Sugar Co., U.S. Sugar Corp. and others expect from the current harvest.
But, with the falling price of sugar government bureaucrats say there is a need for government to intervene to boost prices to an “acceptable level.” That means allowing the sugar producers to essentially default on loans in return for 400,000 tons of sugar (about 4.4 percent of total sugar production) which will then be sold by the government at a loss of about 10 cents a pound, totaling $80 million in loss.
USDA officials say the sugar must be sold on the cheap to entice ethanol producers to buy the stuff.
“If we acquire [sugar] in a down market, we have to get rid of it because we don’t want to own sugar, so we’re going to lose money,” USDA economist Barbara Fesco said. “No matter how we dispose of it, there’s going to be a loss, so if we sell it [to ethanol producers], at least we’re getting something in return for it.”
The result to consumers would be higher costs of just about anything containing sugar at the market. And the “sugar bailout” would also subtract money from the economy at a time when Federal officials continually express the need for more funding.