Sugar policy in the United States does not utilize government subsidies like many other American farm policies. Instead there are price supports based upon government loan rates. Under the most current farm bill, the Louisiana loan rate is 18.22 cents a pound, so if the market price is say 17 cents a pound the government will buy from the farmers at 18.22 cents and sell it at market price.
"The purpose of the U.S. sugar program is just to keep the world market from driving our prices down so low that our growers couldn't stay in business," says LSU agricultural economics professor Michael Salassi.
Salassi says other countries subsidize their sugar farmers so there never could be a "fair market" and losing out to foreign competitors would be plain bad economics. Salassi says in 2012 sugar farmers made close to a billion dollars in revenue and they weren't the only ones benefiting.
"Every dollars worth of agricultural income that a grower would receive, he's going to spend that money for production expenses and for family living expenses. So, it's spent two and a half three times in the economy,"
That's nearly $3 billion a year in economic stimulus for the Pelican State; without it he says many small communities in Louisiana would collapse. "If agricultural can't stay profitable and economically viable and go away there's not going to be another business that is going to come in and support the rural communities." Salassi explains.
UL Lafayette economics professor Anthony Greco disagrees with Salassi. He thinks some sugar cane farmers in Louisiana would be more resilient in the face foreign competition even if the government didn't install price supports and keep the import ratio of sugar cane around 15 percent.
"Well some would be more efficient producers than others and some others if they didn't survive would find other uses for that land. It's not as if they would have nothing to do or become impoverished they could turn that land over to other types of crops," says Greco.
Greco is against the price supports and says sugar lobbyists and beltway politics are the only forces preventing a free and efficient market.
"The unstated thing would be that they're responding to the pressure they're not going to say that but what they're going to say is that we need to protect our domestic industry, because other foreign governments are subsidizing growers. Sugar cane is not a necessary crop or something that has to be grown here; it's not vital to national defense," says Greco.
American Sugar Cane League General Manager Jim Simon takes a radical stance from Greco and says not only is domestic sugar production relative to national defense, it has everything to do with national defense.
"It's purely security. In World War II we were relying on Cuba to import sugar to their country. We couldn't get the sugar from Cuba and we had to start rationing a key food ingredient because we became reliant on unstable foreign governments…we have trouble feeding fuel to our cars through OPEC. We certainly don't need to be reliant on unstable foreign governments to feed our families," says Simon.
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