A spate of competing plans to reform US sugar supports may well founder in coming months as they meet staunch opposition in Congress head-on, analysts and the US sugar industry said on Monday. "Where's the pressure coming from to change US sugar policy?" said Jack Roney, an economist at the American Sugar Alliance, an industry group.
Roney, for one, doesn't see it. His group has lobbied to continue the current US sugar program, which sets US prices above the world market though a combination of domestic sales and foreign import quotas.
The Bush administration, however, is keen to revise the sugar program to avert large payouts if farmers forfeit on support loans if sugar imports balloon in the future.
The US sugar program is under scrutiny as lawmakers prepare to write a new farm bill, the umbrella agriculture law that is expected to be renewed by September. The administration's plan is an unpopular one for sugar industry advocates, who believe it'll give them a smaller and smaller share of the US market.
But the proposal advocates only modest change in comparison to other plans, which would dismantle the program entirely. But even proponents of reform see slim odds.
"The single most likely outcome is that the program would be extended as is with some minor change," said Tom Earley, an economist who advises a coalition of food and candy companies that want to give sugar farmers payments that would put them in the same category as crops like wheat and corn. Sugar growers oppose that plan, too. Earley expects reform to be particularly tough with Collin Peterson, a Democrat from sugar-beet state Minnesota, heading the House Agriculture Committee.
The shape of the plan from Peterson's committee is still emerging, but a competing proposal put forward from a bipartisan group of lawmakers, including Sen. Richard Lugar, an Indiana Republican, would eliminate the supports entirely. "Right now, it doesn't look like (there is) political pressure for reform in 2007," said David Orden, a senior researcher at the Washington-based International Food Policy Research Institute.
While administration reform plans will be "scrutinised suspiciously" by the Democratic-controlled Congress, Orden said the sugar industry may accept some reform, especially if it feels domestic sales restrictions won't be imposed forcefully. US producers certainly haven't faced the pressure felt in Europe, Orden said, which is going through reforms expected to transform the EU from a sugar exporter into an importer.
EU sugar supports include tariffs and quotas, but under a series of reforms, its sugar market is expected to be fully liberalised by 2009. The European price is expected to drop by more than a third.
EU reform is expected to bring hard times not only for some European producers, but also for some former European colonies. It could, however, be a boon for low-cost producers like Brazil.
While the EU reform isn't expected to have a big direct impact on US sugar producers, the industry here is facing other wild cards. Those include an end to all trade restrictions with Mexico in January 2008 as a final step in implementing the North American Free Trade Agreement, or NAFTA. That could lead, in theory, to an influx of Mexican sugar imports to the United States, which could depress prices on both sides of the border.