Sugar Program

The U.S. Department of Agriculture's (USDA) sugar program protects domestic sugar producers from lower world prices but has boosted domestic sugar prices, costing food manufacturers and consumers an average of $1.4 billion annually. About 40 percent of this amount goes to producers. Yet program benefits are concentrated among a relatively small percentage of farms. GAO estimates that 42 percent of the sugar grower benefits went to one percent of all sugar farms in 1991. Although cane and beet sugar each represent about one-half of the domestic sugar market, the cane industry's benefits are more concentrated--17 cane farms received about 58 percent of the estimated cane grower benefits in 1991. Benefits for high fructose corn syrup manufacturers, which average $548 million annually, are also concentrated: Four firms accounted for 87 percent of production in 1990. Foreign countries that export their quota sugar to the United States receive the supported domestic price, which is higher than the price these countries could receive on the world market. GAO recommends that Congress consider legislation that would move the sugar industry toward a more open market. As part of this transition, the market price for sugar should be lowered. Congress should gradually lower the loan rate for sugar and direct USDA to adjust import quotas accordingly.

GAO found that: (1) the sugar program costs sweetener users an average of $1.4 billion annually because they pay higher prices for domestic sugar; (2) the price support is implemented through a loan program and import restrictions; (3) domestic sugar-containing products are at a competitive disadvantage with imported products due to higher domestic sugar prices; (4) sugar users can import sugar at world market prices without extra duties if their products are intended for export; (5) a few large sugar farms receive the majority of the sugar program's benefits because the beneficiaries are not subject to payment limitations; (6) some individual producers receive millions of dollars in annual benefits; (7) the high support price encourages inefficient sugar production; (8) the sugar program benefits high fructose corn sweetener manufacturers and corn growers by increasing the demand for their less expensive products; (9) USDA may have to limit sugar imports further because of increases in domestic sugar production and stable sugar consumption, but it cannot maintain price supports merely by controlling sugar imports; (10) Congress established domestic marketing allotments for sugar if imports fall below a specified minimum, but administrative and user costs would increase; (11) pending international trade agreements would prevent USDA from shielding sugar producers from increasing imports; and (12) the trend toward more open markets could make the sugar program inoperable.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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