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Don’t give me some sugar because I’d rather have my money back

by Eric Ferguson on October 4, 2013 · 2 comments

What would you think of somebody who took out a loan, used something valuable as collateral, and when the collateral dropped in value by the time the loan was due, refused to pay the loan and made the borrower take the less valuable collateral? Assume the borrower had the money to pay the loan, but just chose not to pay. Perhaps the first thought that came to your mind upon hearing that description was the horror that greeted the suggestion that underwater homeowners who were struggling to pay their mortgages should just walk away, and tell the bank to just keep the house. How immoral! How irresponsible! In some places, even illegal! You can’t just walk away from a debt, come on.
 
Except this borrower isn’t a home buyer. It’s the sugar industry.
 

Slumping sugar prices cost U.S. taxpayers $53.3 million Monday as the government was forced to buy more than 272 million pounds of refined beet sugar and sell it at a huge loss to biofuel producers.
 

The transaction sought to limit the amount of sugar that processors give the government to pay off nearly $203 million in government loans, which were due by midnight Monday.
 

By law, sugar companies may repay government loans with sugar instead of cash if prices fall below certain levels. The government, meanwhile, can cut taxpayer’s losses by buying and selling as much sugar as possible for ethanol rather than paying the costs of storage and disposal.


 
For you, walking away from a debt would be an ethically unthinkable shameful act, but for the sugar industry, it’s normal business; perfectly legal under our agricultural subsidy system. Yes, they have the money, but they just don’t have to repay the loan from the Department of Agriculture, so they won’t. Would it surprise anyone to discover these beneficiaries of a separate set of rules includes American Crystal Sugar?
 

Minnesota’s biggest sugar beet cooperative gave the U.S. government 195 million pounds of its product Tuesday to pay back $46.6 million in federal loans.
 

An official at Moorhead-based American Crystal Sugar Co. said depressed sugar prices made forfeiture of its product a better deal than selling it for cash to repay the loan.
 

“It was the best outlet at this time,” said Kevin Price, lobbyist for the 4,000-member co-op.

 
If I understand a bit of math, 195 million is the majority of 272 million. So basically, our sugar beet policy is run by and for American Crystal Sugar. Well, congratulations Mr. Price, because I bet you just fleeced the taxpayers of enough money to pay for your employer’s lobbying operation. If American Crystal Sugar sounds familiar, it’s because it’s the same ethically-challenged operation that locked out its workers to force them to accept an offer the workers found so lousy, that even with limited means, they held out a year before accepting. American Crystal Sugar preferred losing money and suffering safety hazards over showing a sense of decency.
 
Readers may be sensing I’m not this company’s best customer.
 
I get the amount of money is small in the scope of the federal government. We’re blowing more than that each day on the Republicans’ shutdown of the federal government. Still, doesn’t this beg the question of why the USDA is loaning money to sugar producers? I thought these guys were big into government leaving them alone, getting off their backs, The Free Market Rules! and all that. They certainly didn’t want anyone getting involved in how they treated their workers. So OK, let’s see them live by the free market. No more subsidies, and no more protection. Let them compete in the global sugar market if they can. What, free trade is wonderful, but only for other people?
 
For those of you who dislike foreign aid (seriously, it’s only about .5% of the federal budget, yes, that decimal point is supposed to be there), we send money to help farmers in lesser developed countries (they have to spend it on US products so it’s not entirely a gift, but anyway) when one of their biggest problems is competing with cheap American agricultural exports. Our products are cheap not only because American producers are efficient, but because they’re subsidized. If we stopped subsidizing sugar, corn, etc., that would help third world farmers more than our aid. We could stop spending both ways.
 
I suppose sugar producers would complain that they need subsidies because they have to compete with cheap corn-based sweeteners, but funny thing about that. Corn is heavily subsidized too. So we’re spending money to make junk food cheap while decrying the bad diets of the poor and obese. Somehow I can’t help thinking that instead of subsidizing junk, we could use the same money to help people with low incomes afford real food. Take the money out of subsidies, and put it in food stamps.
 
Well, our Congress is really big on practically and problem solving, more interested in fairness and efficiency than special interests and ideology, so I’m sure they’ll get right on it.

Dog Gone October 4, 2013 at 9:52 am

The feds subsidize the unhealthy sweet industry, be it sugar cane, sugar beets, or high-fructose corn syrup.

This is contrary to good public health policy, given the obesity and diabetes incidence in this country. It is also, clearly, an example of “picking winners and losers” that the right moans and whines about — yet they are the biggest supporters of big Ag subsidies, along with big oil subsidies, and other big corporate subsidies.

It is only when it is real people, who live and breathe and eat, that they are not in favor or subsidies – like food support.

as noted in this NPR article last March:
A Sweet Deal?

Sugar costs are a complicated combination of import restrictions, production quotas and a kind of guaranteed price.

“The U.S. sugar system is essentially a Soviet-style control on production,” says Chris Edwards, an economist at the Cato Institute.

The effect of these policies, he says, is that U.S. sugar prices normally remain artificially high — sometimes twice the world price. (Last year, the price of sugar around the world averaged 26.5 cents per pound, compared with 43.4 cents in the U.S.) That hurts food companies and leads to higher prices at the grocery store.

“The core goal of policymakers has been to push up U.S. sugar prices to the benefit of U.S. sugar growers,” Edwards says.

The USDA says it’s not to blame. The agency just administers what Congress sets in the farm bill.

“It is what it is. It’s been a program that supports a lot of sugar producers and has had a lot of support in Congress over the years,” Glauber says.

In fact, import tariffs on sugar date back to 1789. Other provisions originated during the Great Depression.

also:http://www.bloomberg.com/news/2013-03-13/that-sickening-sugar-subsidy.html
has more on this sweet deal for the favored few.

and
http://grist.org/article/farm-subsidies-bitter-and-sweet/

“The answer to our food system woes may not lie in ending subsidies. Rather, it may lie in figuring out ways to disincentivize overproduction of environmentally damaging and nutritionally dubious crops like corn and sugar, and increase incentives for fruit and vegetables.

Right now, that’s a tough task. As Jill Richardson recently wrote on La Vida Locavore, we currently have almost as much land devoted to corn for high-fructose corn syrup as we do to vegetables in the United States:

The USDA site also says that 4.1% of U.S. corn goes for high fructose corn syrup. That means that since 29.9% of all U.S. cropland harvested was planted in corn in 2007, 1.2% of all U.S. cropland harvested in 2007 went for high fructose corn syrup. That’s only slightly less than the 1.5% of U.S. cropland devoted to vegetables or the 1.6% of U.S. cropland devoted to [fruit] orchards.”

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