US exports to
Source: USDA Foreign Agricultural Service (FATUS) database, 2004.
US high-fructose corn syrup trade with NAFTA partners, 1993–2003 (volume in thousands of metric tons and value in millions of dollars)
US imports from
Note: Data are based on HFCS-42 sweeteners and HFCS-55 syrups (HTS codes 1702.40.0000 and 1702.60.0050).
a reexport program to boost US sugar exports to world markets.89 The economic cost for maintaining the sugar program is huge. According to the US General Accounting Office (GAO 2000), US sugar programs cost the economy about $900 million annually.90 US sugar programs indirectly benefit sweetener producers, since artificially high sugar prices encourage the production of HFCS from corn. 91
The 2002 Farm Act continued the price support loans provided under the 1996 Freedom to Farm Act, with one important difference: The 2002 Farm Act also requires the US Department of Agriculture (USDA) to op- erate the overall US sugar program at no budget cost to the government. This trick is accomplished by giving the USDA authority to restrict sugar 92
89. The US government is slowly moving toward more direct income support programs. In August 2000, the USDA implemented the payment-in-kind program to reduce the US gov- ernment’s sugar inventory and lower the potential for loan forfeitures. Under the program, US sugar cane and beet producers can choose to divert acreage from sugar production in ex- change for sugar held by the Commodity Credit Corporation. See USDA (2002b).
90. As of 1997, there were 973 farms in the entire United States growing sugarcane and 11,800 farms growing sugar beets. High yields in Florida and rising acreage and yields in Louisiana contribute to the growth of cane sugar production (see table 5.8). High domestic sugar prices in turn provide an incentive for US farmers to grow sugar beets instead of other crops, such as wheat. In 1998, the US General Accounting Office estimated that the sugar program cost domestic sweetener users about $1.9 billion per year (GAO 2000). See also Goombridge (2001).
91. Executives from the Corn Refiners Association, which represent HFCS manufacturers, argue that HFCS producers do not benefit from the sugar program because domestic HFCS prices are not directly linked to sugar prices. However, given the high rate of substitution between HFCS and sugar, the indirect benefit of high sugar prices is substantial. See GAO
; Gokcekus, Knowles, and Tower (2003); and David Orden’s testimony (July 26, 2000).
Sugar loans (maximum term nine months) are nonrecourse, which means that when a
loan matures, the USDA must accept sugar forfeited as collateral instead of cash repayment.