Order Code RL34103
Sugar Policy and the 2007 Farm Bill
Updated January 24, 2008
Remy Jurenas
Specialist in Agricultural Policy
Resources, Science, and Industry Division

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Sugar Policy and the 2007 Farm Bill
Summary
Congress is expected to decide the future of the U.S. sugar program in an
omnibus farm bill in early 2008. Growers of sugar beets and sugarcane, and
processors of these crops, favor continuing the structure of the current sugar price
support program but seek changes to enhance their position in the U.S. marketplace.
Food and beverage manufacturers that use sugar want Congress to address their
concerns about the impact of sugar prices and program features that restrict supplies.
The sugar program is designed to guarantee the price received by sugar crop
growers and processors and to operate at “no cost” to the U.S. Treasury. To
accomplish this, the U.S. Department of Agriculture (USDA) limits the amount of
sugar that processors can sell domestically under “marketing allotments” and restricts
imports. At the same time, USDA seeks to ensure that supplies of sugar are adequate
to meet domestic demand. “No cost” is achieved if USDA applies these tools in a
way that maintains market prices above minimum price support levels. Should prices
fall, processors who take out loans have the right to hand over as payment sugar that
had earlier been pledged as collateral. Such a step results in program costs.
Effective January 1, 2008, sugar imports from Mexico no longer are restricted
under the rules of the North American Free Trade Agreement. Also, additional
imports are allowed entry under other free trade agreements. Both the Congressional
Budget Office (CBO) and USDA project that, if the sugar program continues without
change, the additional imports will bring prices down below support levels and make
it attractive for processors to default on price support loans. With loan defaults
representing a cost, USDA would not be able to operate a no-cost program.
To address any U.S. sugar surplus caused by imports, both the House and Senate
farm bills (H.R. 2419 and its Senate companion measure) would mandate a sugar-
for-ethanol program. USDA would be required to purchase as much U.S.-produced
sugar as necessary to maintain market prices above support levels, to be sold to
bioenergy producers for processing into ethanol. USDA funding would be open-
ended for this program. Other provisions would increase minimum guaranteed prices
for raw sugar and refined beet sugar, and tighten the rules (i.e., remove discretionary
authority) that USDA exercises to implement marketing allotments and/or administer
import quotas. One main difference is that the Senate bill would increase loan rates
by some 6%-7% compared to the House measure’s near 3%. Though CBO scores
some savings with the ethanol program, sugar program provisions will cost about
$650 million over five years and up to $1.3 billion over 10 years. If Congress does
not approve a farm bill this year, all sugar program authorities would expire.
Both bills’ sugar provisions reflect the proposals suggested by sugar crop
producers and processors. Food and beverage manufacturers that use sugar oppose
them, arguing that costs to consumers would increase and that new requirements
would restrict the flow of sugar for food use in the domestic market. USDA officials
have also criticized the proposed guaranteed price increase, the new sugar-for-ethanol
program, and the new limits placed on managing sugar imports. This report will be
updated to reflect key developments.

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Contents
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Overview of Sugar Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Issues in Current Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Level of Sugar Price Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Controlling Sugar Supply to Protect Sugar Prices . . . . . . . . . . . . . . . . . . . . . 3
Import Quotas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Marketing Allotments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Sugar for Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Sugar Program Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Implications of Possible Extension or Expiration of
Current Sugar Program Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Expiration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
List of Tables
Table 1. Annual U.S. Sugar Import Commitments When the 2002 Farm Bill
Was Enacted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 2. Outlays (-) or Receipts (+) of the Sugar Program under the
2002 Farm Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 3. CBO’s Projection of Sugar Program’s Cost under
House and Senate Farm Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Appendix A. Comparison of Proposed Sugar Program Provisions to
Current Law or Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Appendix A. Comparison of Proposed Sugar Program Provisions
to Current Law or Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
For more information, please see the following CRS product:
CRS Report RL33541, Background on Sugar Policy Issues, by Remy Jurenas.

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Sugar Policy and the 2007 Farm Bill
Recent Developments
On January 11, 2008, the U.S. Department of Agriculture (USDA) in its
monthly commodity supply and demand report estimated that Mexico will export
425,000 tons of sugar to the United States during FY2008. This import estimate is
much larger than the maximum 276,000 tons previously allowed to enter annually
under the terms of the North American Free Trade Agreement (NAFTA). Market
expectations of increased sugar imports have in the last few months been reflected
in near-term U.S. futures prices for raw cane sugar skirting around effective price
support levels.
On January 8, the U.S. and Mexican sugar producing sectors reached an
agreement, to be proposed to their respective governments, to control the flow of
sugar between both countries. Both sectors would adopt measures to limit sugar
exports to the other country’s market under specified conditions. U.S. sugar
processors and growers reportedly will seek to have these recommendations
incorporated into the 2007 farm bill during conference committee deliberations. U.S.
manufacturers of high-fructose corn syrup (HFCS) — a competitive sweetener —
some Members of Congress, and a food industry association have expressed concerns
that “managed trade” could lead to new Mexican tariffs and barriers on U.S. HFCS
exports to Mexico, and “would undercut” NAFTA as commodity groups in both
countries call for changes in other agreement agricultural provisions. U.S. sugar
industry spokesmen state that the proposed agreement would not limit U.S. HFCS
sales to Mexico. In response, Bush Administration officials have restated their long-
standing opposition to managed trade, and expressed concern that accepting this
proposal could lead to the unraveling of NAFTA.
On January 1, free trade in sugar and HFCS between the United States and
Mexico took effect. Under NAFTA, Mexico no longer faces any tariff or quantitative
limit on the amount of sugar that can be exported to the U.S. market. Also, U.S.
sugar processors can ship sugar freely to Mexico. Similarly, U.S. corn refiners no
longer face a quota or tariff on HFCS exports shipped south.
On December 26, 2007, the President signed the FY2008 Consolidated
Appropriations Act (P.L. 110-161). Section 751 extends certain provisions of the
2002 farm bill until March 15, 2008. This measure will not have any practical effect
on sugar program operations, which were authorized by the 2002 farm bill (P.L. 107-
171) to apply through late summer 2008.

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CRS-2
Overview of Sugar Program
The current sugar program is designed to guarantee the minimum price received
by growers of sugarcane and sugar beets, and by the firms (raw sugar mills and beet
refiners) that process these crops into sugar. To accomplish this, the USDA limits
the amount of sugar that processors can sell domestically under “marketing
allotments” and restricts imports. USDA is required to operate the sugar program on
a “no-cost” basis. This means USDA must regulate the U.S. sugar supply using
allotments, import quotas, and related authorities so that domestic market prices do
not fall below guaranteed minimum price levels. These are set out in law as specified
loan rates, which serve as the basis from which USDA derives effective support
levels. If the market price is below the support level when a sugar price support loan
comes due, its “non-recourse” feature means a processor can exercise the legal right
to forfeit, or hand over, sugar offered to USDA as collateral for the loan in fulfillment
of its repayment obligation. This report will focus on the issues raised by the sugar
program provisions in major bills and floor amendments. For more information, see
CRS Report RL33541, Background on Sugar Policy Issues.
Issues in Current Debate
Consideration of future U.S. sugar policy to date has revolved primarily around
four issues. These are raising the level of minimum price guarantees to be made
available to processors, how to use two tools to manage U.S. sugar supply,
authorizing any sugar surplus to be used as a feedstock for ethanol, and accounting
for projected program costs. Though industrial users of sugar in food and beverage
products initially explored converting the sugar program to operate similar to the
programs in place for the major grains, oilseeds and cotton, this policy option did not
receive further attention.
Level of Sugar Price Support
USDA is required to extend price support loans to sugar processors that meet
certain conditions on passing program benefits to the farmers that supply them with
sugar beets or sugarcane. These loans are made at statutorily set loan rates,1 and
account for most of the effective support level made available to producers and
processors. USDA is required to use its other tools to protect this price guarantee.2
1 For sugar, the loan rate is the price per pound at which the Commodity Credit Corporation
(CCC) — USDA’s financing arm — extends nonrecourse loans to processors. This short
term financing at below market interest rates enables processors to hold their commodities
for later sale.
2 The loan rates alone do not serve as the intended price guarantee, or floor price, for sugar.
In practice, USDA sets marketing allotments and import quota levels in order to support raw
cane sugar and refined beet sugar at slightly higher price levels. Each price level takes into
account the loan rate, interest paid on a price support loan, transportation costs (for raw
sugar), certain marketing costs (for beet sugar), and discounts. These are frequently referred
to as “loan forfeiture levels” or the level of “effective” price support.

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Loan rates for raw cane sugar have not changed since 1985; for refined beet sugar,
since 1992. These minimum prices have guaranteed producers of sugar crops and the
processors that convert these crops into sugar, a price that since the early 1980s has
ranged from two to four times the price of sugar traded in the world marketplace.
Both the House-passed and Senate-passed farm bills (H.R. 2419) would increase
loan rates, but to different levels, over the five-year farm bill period. The House
measure would increase loan rates by almost 3% — from the current 18.0¢ to 18.5¢
per pound for raw cane sugar, and from the current 22.9¢ to 23.5¢ per pound for
refined beet sugar. The Senate farm bill would double this increase incrementally
over four years — raising the raw sugar loan rate to 19.0¢ per pound and the refined
beet loan rate to 24.4¢ per pound, by 2012.3
Growers and processors had initially sought a one cent increase in the raw cane
sugar loan rate (with a corresponding increase in the refined beet sugar rate), and had
acknowledged their satisfaction with receiving half of their request in the House-
passed farm bill. They argued that the increase in the loan rate is needed to cover
increased production costs, particularly energy inputs. Sugar users countered that the
House-proposed higher loan rates will increase costs to taxpayers by an additional
$100 million annually. They also note that while the bill’s ethanol provisions (see
“Sugar for Ethanol” below) “are supposedly designed to deal with surpluses,” the
loan rate increase “can only encourage higher surplus production.”4 The Bush
Administration, in its statement of administration policy on the House and Senate
farm bills, opposes the increase in the loan rates for sugar.
Controlling Sugar Supply to Protect Sugar Prices
The current sugar program uses two tools — import quotas and marketing
allotments — to ensure that producers and processors receive price support benefits.
By regulating the amount of foreign sugar allowed to enter and the quantity of sugar
that processors can sell, USDA can for the most part keep market prices above
effective support levels, meet the no-cost objective, and ensure that domestic sugar
demand is met. If successful, the likelihood that USDA acquires sugar due to loan
forfeitures is remote.
Import Quotas. The United States must import sugar to cover demand that
the U.S. sugar production sector cannot supply. However, USDA restricts the
quantity of foreign sugar allowed to enter for refining and/or sale to manufacturers
for domestic food and beverage use. Quotas are used to ensure that the quantity that
enters does not depress the domestic market price to below support levels. Quota
amounts are laid out in U.S. market access commitments made under World Trade
Organization (WTO) rules and under bilateral free trade agreements (FTAs).
3 The loan rate for refined beet sugar would reflect the requirement that it be set each year
equal to 128.5% of that year’s raw cane sugar’s loan rate.
4 Letter to Members of Congress, from food and beverage companies and trade associations,
and public interest groups, July 13, 2007.

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The current sugar program accommodates, or makes room for, imports of up to
1.532 million tons each year. This import level is one of the four factors that USDA
uses to establish the national sugar allotment (called the “overall allotment
quantity”), and reflects U.S. trade commitments under two trade agreements in effect
when the 2002 program was authorized (Table 1).
Table 1. Annual U.S. Sugar Import Commitments
When the 2002 Farm Bill Was Enacted
short tons
World Trade Organization Quota (minimum)
1,256,000
North American Free Trade Agreement — Mexico
276,000
Quota (maximum) a
Total
1,532,000
a. Applies only through the end of calendar year 2007.
Since January 1, 2008, U.S. sugar imports from Mexico are no longer restricted.
However, import levels could fluctuate from year to year for various reasons. First,
the amount of Mexican sugar exported to the U.S. market will depend largely upon
the extent that U.S. exports of cheaper high-fructose corn syrup (HFCS) displace
Mexican consumption of Mexican-produced sugar. Surplus Mexican sugar, in turn,
would likely move north to the United States. Second, Mexico’s sugar output,
though trending upward, does vary from year to year, depending upon weather and
growing conditions. Mexican government policy also is to hold three months worth
of sugar stocks in reserve and to allow sugar imports when needed to meet demand
and lower prices.5 Third, Mexican sugar prices in recent years have for the most part
been higher than U.S. prices. To the extent this occurs, the incentive for a Mexican
sugar mill to export sugar north in search of a better price could disappear.
Also, the United States has committed under other existing and pending bilateral
FTAs to allow for additional sugar imports.6 Such imports in 2013, potentially the
fifth year that the sugar program authorized by the 2007 farm bill is in effect, could
total from about 420,000 tons to 1.215 million tons above existing WTO and
NAFTA/Mexico trade commitments. The wide range reflects two varying
assumptions made to estimate by how much HFCS use in Mexico might displace
sugar consumption in Mexico and create a surplus available for export to the U.S.
market.
Legislation. The sugar program provisions in the House- and Senate-passed
farm bills do not directly address the issue of additional sugar imports. Instead, both
5 U.S. sugar processors also will be free to export sugar to Mexico to take advantage of the
occasional higher prices there.
6 Most of the sugar access provisions in the Dominican Republic-Central American FTA
(DR-CAFTA) already are in effect. Congress has yet to consider the FTAs with Panama and
Colombia, all of which would grant additional access for their sugar to the U.S. market.

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propose a new sugar-for-ethanol program to handle the price-related impact of such
imports (Section 9013 in the energy title of the House bill, and Section 1501 of the
Senate bill; see “Sugar for Ethanol” and “Program Costs” below). However, other
provisions prescribe how USDA would administer import quotas in two ways. To
cover shortfalls (because of hurricanes or other disastrous events) in what domestic
sugar processors can sell under allotments, USDA would be directed to ensure that
most imports enter in the form of raw cane sugar rather than refined sugar. While
historically most permitted imports have entered in raw form, USDA allowed large
quantities of refined sugar to enter after the late 2005 hurricanes significantly affected
the ability of cane refineries in Louisiana and Florida to process raw sugar. This
provision is intended to ensure that cane refineries (which process raw sugar into
refined sugar) can more fully use their operating capacity. Unlike five years ago
when the Congress considered the last farm bill, most cane refineries are now a key
part of vertically integrated operations owned by raw sugar processors and/or
sugarcane producers. Also, limiting the entry of refined sugar would enhance the
position of the domestic beet sector to increase their sales of refined sugar.
However, only the House-passed bill would direct USDA to regulate when and
how much raw cane sugar imports are allowed to be shipped to U.S. cane refineries.
The Senate-passed farm bill does not include this provision. While USDA
announced shipping patterns in FY2003-FY2005, the impact of the hurricanes led to
a decision not to follow this long-standing practice in FY2006-FY2008. USDA
justified removing these restrictions because of “changes occurring over time in the
domestic marketing of cane sugar.” This proposed provision could be viewed as
intending to increase the transaction costs for countries that export larger amounts of
sugar to the U.S. market and giving a slight competitive edge to domestic processors
with respect to buyers. Food and beverage firms oppose “micro-managing” the
timing of imports, noting that the application of such rules will limit the ability of
cane refiners to efficiently use their processing capacity and could lead to serious
shortfalls at times in the amount of sugar supplied to the market.7 In commenting on
the House bill, the Bush Administration expressed concern over requiring shipping
patterns for quota sugar imports. Also, several countries eligible to ship sugar to the
U.S. market expressed concern that the proposed regulation of the flow of imports
would run counter to U.S. trade commitments.
Marketing Allotments. In the 2002 farm bill, the domestic production sector
accepted mandatory limits on the amount of sugar that processors can sell — known
as marketing allotments — in return for the assurance of price protection. It viewed
allotments as a way to try to capture any growth in U.S. sugar demand, and assumed
that the then-U.S. sugar import quota commitments would continue without change
(see “Import Quotas” above). The statute, however, stipulated that if (1) USDA
estimates imports will be above 1.532 million short tons, and (2) that such imports
would lead USDA to reduce the amount of domestic sugar that U.S. processors can
sell, then USDA must suspend marketing allotments. Suspending allotments because
of additional imports raises the prospect of downward pressure on market prices if
most U.S. sugar demand is already met. If the additional imports were to cause the
price to fall below support levels, forfeitures would occur and USDA would be
7 Letter to Members of Congress, July 13, 2007.

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CRS-6
unable to meet the no-cost requirement. Including the allotment suspension
provision was designed to ensure that USDA not lose control over managing U.S.
sugar supplies for fear of the consequences that could be unleashed (i.e.,
demonstrating its inability to implement congressional policy).
Legislation. Implementation of the 2002 farm bill’s marketing allotment
authority has resulted in the U.S. sugar production sector’s share of domestic food
consumption ranging from a low of 73% in FY2006 to a high of 89% in FY2004.
Concerned that their market share would decline as sugar imports increase under
various trade agreements (see “Import Quotas” above), sugar producers and
processors decided to pursue a different approach. Both the House and the Senate
farm bills would guarantee that the domestic production sector always benefits from
a minimum 85% share of the U.S. sugar for food market. USDA would be required
to announce an “overall allotment quantity” — the amount of sugar that all
processors combined can sell — that represents at least 85% of estimated sugar
consumption. This is intended to address the sector’s objective that imports not
displace the ability of U.S. sugar processors to sell more of their output in each
successive year, to the extent U.S. demand for sugar grows.
Sugar for Ethanol
Background. Sugar producers and processors have had an ongoing interest
in exploring the potential for using sugar crops and processed sugar as a feedstock
to produce ethanol (a gasoline additive). In the 2002-2003 period, they encouraged
USDA to explore selling forfeited sugar stocks to corn-based ethanol processors. A
few ethanol producers experimented by adding sugar to speed up the ethanol
fermentation process, but the results appear to have been disappointing.
In 2005, Congress approved the Dominican Republic-Central American Free
Trade Agreement (DR-CAFTA) that gives six countries increased access for their
sugar to the U.S. market. During the debate, producers and processors sought a deal
with the Bush Administration on a sugar-for-ethanol package. Their objective was
to have the option available to divert additional sugar imports under DR-CAFTA
whenever domestic prices fall below support levels.8 With Congress mandating in
2005 that the use of renewable fuels be doubled by 2012,9 some have advocated that
sugar be considered as a feedstock along with other agricultural crops and waste.
Separately, Hawaii mandated (effective April 2006) that 85% of the gasoline sold
must contain 10% ethanol. This requirement assumes that over time, the sugarcane
produced on the islands will be used as the prime feedstock for ethanol.
8 Though the Administration did not agree to such a package, the Secretary of Agriculture
pledged to divert surplus sugar imports — through purchases — for ethanol and other
non-food uses, to ensure that the sugar program operates as authorized only through
FY2008. For additional information, see “Sugar in DR-CAFTA — Sugar Deal to Secure
Votes” in CRS Report RL33541, Background on Sugar Policy Issues, by Remy Jurenas.
9 For more information, see CRS Report RL33564, Alternative Fuels and Advanced
Technology Vehicles: Issues in Congress, by Brent D. Yacobucci.

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If the cost of feedstock is excluded, producing ethanol from sugar cane can be
less costly than producing it from corn. This is because the starch in corn must first
be broken down into sugar before it can be fermented. This extra step adds to the
cost of processing corn into ethanol, when contrasted to using sugarcane or processed
sugar. Further, sugar cane waste (bagasse) also can be burned to provide energy for
an ethanol plant, reduce associated energy costs, and improve sugar ethanol’s energy
balance relative to corn ethanol.
Brazil’s success at integrating sugar ethanol into its passenger vehicle fuel
supply has stimulated interest in exploring prospects for sugar-based ethanol in the
United States. However, wide differences in sugar production costs and market
prices in the two countries cause the economics of sugar-based ethanol to differ
significantly. In investigating the economics of ethanol from sugar, USDA
concluded that producing sugar cane ethanol in the United States would be more than
twice as costly as U.S. corn ethanol and nearly three times as costly as Brazilian
sugar ethanol.10 Feedstock costs accounted for most of this price differential.11 The
USDA study showed that while sugar ethanol may be a positive energy strategy in
such countries as Brazil, it may not be economical in the United States.12
Legislation. Both the House and Senate farm bills incorporate a proposal
presented to the Agriculture Committees by the U.S. sugar production sector. The
“Feedstock Flexibility Program for Bioenergy Producers” would require USDA to
administer a sugar-for-ethanol program using sugar intended for food use but deemed
to be in surplus. USDA would sell both surplus sugar that it purchases if determined
necessary to maintain prices above support levels, and the sugar acquired as a result
of loan forfeitures, to bioenergy producers for processing into fuel grade ethanol and
other biofuel. Competitive bids would be used by USDA to purchase sugar from
processors, at a price not less than sugar program support levels, which it would then
sell to ethanol firms. USDA would implement this program only in those years
where purchases are required to operate the sugar program at no cost. USDA’s CCC
would provide open-ended funding. This new program would take effect prior to the
expiration of current sugar program authority on September 30, 2008.
Because it would cost much more to produce ethanol from U.S.-priced sugar
than from corn, this new program would require a considerable subsidy to operate as
intended. The prime market for such sugar likely would be existing and planned
corn-based ethanol facilities close to sugar beet and sugarcane producing areas (e.g.,
10 Office of Economics, The Economic Feasibility of Ethanol Production from Sugar in the
United States, July 2006.
11 In Brazil, the cost of producing raw cane sugar reportedly ranges from 6 to 9 cents per
pound (or 9 to 12 cents when converted to refined basis). In the United States, raw cane
sugar production costs range from 12 to 20 cents per pound; U.S. production costs for
refined beet sugar range from 17 to 33 cents per pound. For additional perspective, see
“Costs of Production and Sugar Processing” in USDA, Economic Research Service, Sugar
Backgrounder, July 2007, pp. 17-21.
12 This discussion is adapted from “Sugar Ethanol” in CRS Report RL33928, Ethanol and
Biofuels: Agriculture, Infrastructure, and Market Constraints Related to Expanded
Production, by Brent D. Yacobucci and Randy Schnepf.

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CRS-8
the Upper Midwest and Hawaii). Producers of ethanol from corn in the continental
United States, though, would likely need to adjust their fermentation process and/or
invest in new equipment to handle sugar. As a result, they may not be as interested
in purchasing sugar as a feedstock unless the price is significantly discounted further
(e.g., requiring even more of a subsidy) to reflect the additional costs of processing
sugar instead of corn. However, the availability of this subsidy could facilitate the
development of the ethanol sector in Hawaii and partially reduce the islands’
dependence on importing gasoline for its vehicle transportation needs. CBO
estimates that this feedstock program would increase demand for sugar and slightly
reduce the cost of the sugar program itself (see “Program Costs” and Table 3 below).
As designed, this program would rely on U.S.-produced (rather than foreign)
sugar. The amount that USDA decides to purchase would approximate its estimate
of the extent that imports under trade agreements reduce the U.S. sugar price below
support levels. Producers support this provision, viewing it as an insurance policy
for receiving the benefits of a guaranteed minimum price for sugar marketed for food
use. Sugar users oppose this program “to ostensibly manage surplus supplies.” In
their July 13th letter to Members of Congress, they argued that this authority “will
likely be used to short domestic markets, further restricting the availability of sugar
for food use in the U.S. market.” They characterized this approach as “wasteful of
taxpayer resources” because sugar is not price competitive with corn as a feedstock,
and will require large subsidies to ethanol producers “to induce them to accept the
sugar.” The Bush Administration opposes this sugar-for-ethanol component,
commenting that it would not allow USDA to dispose of surplus sugar to end uses
other than ethanol production, even if “those uses would yield a much higher return
for taxpayers.”13
Sugar Program Costs
USDA has succeeded in operating the sugar program at no cost for the years
covered by the 2002 farm bill. Though processors forfeited small quantities of sugar
in FY2004 and FY2005, USDA subsequently sold the acquired sugar to offset the
earlier outlays.14 The net revenue, or sales proceeds (shown as receipts in some
years), were from the sale of acquired sugar (Table 2). The proceeds shown for
FY2003 reflected the sale of a significant amount of sugar acquired due to loan
forfeiture in FY2000 (under the previous farm bill’s sugar program provisions). In
looking at the current farm bill’s entire five-year time period, sugar program
operations generated more than $100 million in receipts.
13 Office of Management and Budget, “Statement of Administration Policy” on H.R. 2419
(Food and Energy Security Act of 2007), November 6, 2007, p. 3.
14 The forfeiture of a price support loan results in a budget outlay, because the credit that had
been extended is not paid back by the processor (resulting in a loss to the U.S. government).
To the extent USDA succeeds in selling forfeited sugar, proceeds flow back to USDA and
reduce the loss.

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Table 2. Outlays (-) or Receipts (+)
of the Sugar Program under the
2002 Farm Bill
Fiscal Year
millions of $
2003
+ 84
2004
- 61
2005
+ 86
2006
-10
2007 Estimate
+ 10
Total, 2003-2007
+ 109
Source: USDA, Farm Service Agency, “CCC Net Outlays by
Commodity and Function,” June 2007.
The latest budget forecasts in early 2007 projected that the sugar program, if
continued without change, would cost almost $700 million (Congressional Budget
Office — CBO) to about $800 million (USDA) for the five years covered by the
2007 farm bill (FY2008-2012). For the 10-year period (FY2008-2017), program
outlays were projected at almost $1.3 billion (CBO) to $1.4 billion (USDA). These
estimated outlays reflect the effect of projected sugar imports from Mexico and other
countries that have gained additional access for their sugar under bilateral FTAs.
Each cost projection assumed that additional supplies depress the domestic sugar
price below support levels, and lead processors to forfeit on a portion of their loans.
Though the sugar price support and marketing loan provisions in both farm bills
(Section 1301 of the House bill; Section 1501 of the Senate bill) are intended to
ensure that USDA operates the program at no cost, CBO scores these provisions as
increasing program outlays by $84 million and $80 million, respectively, over five
years, and $167 million and $289 million, respectively, over 10 years (Table 3, rows
a and d). The higher 10-year cost of the Senate provisions appears to assume that
(1) part of the increase in sugar output induced by the higher level of price support
and then placed under loan is subsequently forfeited by processors, and (2) the
increase in the minimum storage payment rate on forfeited sugar, combined with
increased forfeitures, results in higher storage payments.
Separately, CBO projects that the sugar-for-ethanol program (Section 9013 of
the House bill; Section 1501(f) of the Senate bill) would increase sugar demand and
in turn reduce the cost of the sugar price support program by $107 million in the
House bill and $108 million in the Senate bill over five years and $240 million and
$287 million, respectively, over 10 years (Table 3, rows b and e). CBO appears to
assume that USDA’s operation of this program as a guaranteed outlet for surplus and
forfeited sugar limits the drop in domestic sugar prices that would otherwise occur.

Combining both proposed policy changes against CBO’s early 2007 budget
forecast, the net cost of the sugar-related provisions in both bills would be about
$650 million over five years and range from $1.2 billion to $1.3 billion over 10 years
(Table 3, rows c and f). These net cost projections largely reflect the estimated

---

CRS-10
losses incurred as USDA sells surplus sugar for ethanol processing at a price much
lower than the value of the sugar protected by the minimum price guarantee available
under the sugar program.
Table 3. CBO’s Projection of Sugar Program’s Cost under
House and Senate Farm Bills
House-Passed Farm Bill
Senate-Passed Farm Bill
CBO’s
Estimate
Total
Estimate of
Total
Baseline
of House
Projected Cost
Senate
Projected Cost
Projection
Farm Bill
(Current Law
Farm Bill
(Current Law
(Current
Policy
& House Farm
Policy
& Senate Farm
Law)
Changes
Bill Changes)
Changes
Bill Changes)
Program
Outlays, in millions of dollars
Row
Component
5-YEAR ESTIMATE: FY2008 - FY2012
Price
Support
682
+ 84
766
+ 80
762
a
Operations
Sugar-to-
Ethanol
0
— 107
(107)
— 108
(108)
b
Diversion
Total
682
— 23
$659
— 28
$654
c
10-YEAR ESTIMATE: FY2008 - FY2017
Price
Support
1,287
+ 167
1,454
+ 289
1,576
d
Operations
Sugar-to-
Ethanol
0
— 240
(240)
— 287
(287)
e
Diversion
Total
1,287
— 73
$1,214
+ 2
$1,289
f
Source: Derived by CRS from CBO’s March 2007 baseline projection; the detailed CBO cost estimate published in
H.Rept. 110-256, Part 1, accompanying H.R. 2419 (the House farm bill), July 23, 2007, pp. 383, 392; and CBO’s cost
estimate for Senate Amendment #3500 (managers’ amendment) to S. 2302 — the Senate Agriculture Committee’s
reported farm bill, November 6, 2007.

---

CRS-11
Implications of Possible Extension or Expiration of
Current Sugar Program Authority
Expiration. Current sugar program authority expires with the 2007 crop.
Hence, if Congress does not extend the commodity program and related farm bill
authorities, the sugar program’s price support and marketing allotment authorities
would expire on September 30, 2008. Unlike the program crops, there is no
permanent statutory authority for USDA to exercise to support the price of sugar
received by growers and processors. The only tool that USDA would have available
to control supply is tariff headnote authority (chapter 17 of the Harmonized Tariff
Schedule). This allows for imports of sugar at a level that reflect U.S. WTO trade
commitments, with the minimum quota set at 1.256 million short tons. Also, sugar
imports are allowed to enter under other trade agreements (in unrestricted amounts
from Mexico under NAFTA, and under preferential quotas from four Central
American countries and the Dominican Republic under DR-CAFTA). Unless
producers cut back on their production of sugar beets and sugarcane, domestic sugar
prices likely would fall below recent average levels. Some U.S. sugar crop producers
and processors could face serious financial difficulty and the prospect of going out
of business if this scenario lasted for a prolonged time period. U.S. users of sugar for
food and beverage use could benefit from lower prices.
Extension. Should Congress not complete consideration of the farm bill in
this session, one option would be to temporarily extend current farm program
authority. Extending the sugar program for the 2008 and/or 2009 sugar beet and
sugarcane crops would require USDA to continue administering marketing
allotments and the sugar import quota to balance supply with demand. USDA would
be required to manage both tools so that domestic prices are equal to or above loan
forfeiture levels (see above). Also, non-recourse loans would continue to be
available.
Assuming slowly expanding use of HFCS by Mexico’s soft drink industry and
that Mexican 2008/09 sugar production is in line with trends, Mexico’s sugar sector
likely would have a surplus for export to the U.S. market. With the amount of this
surplus likely to be larger than the amount of imports from Mexico and other trading
partners that the current program is structured to accommodate, USDA might face
the scenario of having to suspend marketing allotments. As domestic prices fall
below effective price support levels due to the additional supply, some processors can
be expected to forfeit some of their price support loans. However, USDA as in past
years could find ways to structure its decisions in ways to avert such a scenario.

---

CRS-12
Appendix A. Comparison of Proposed Sugar Program Provisions to Current Law or Policy
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
Overview
Current sugar program:
Extends the structure of current
Has provisions largely identical to
program, but:
House bill, but with three notable
Guarantees a minimum price to processors of sugar crops
differences:
(and in turn, producers).
Increases loan rates by almost 3%.
Makes nonrecourse loans to processors at specified loan
Replaces accommodation made for
Increases loan rates by 6-7%.
rates.
sugar import commitments by
Does not include House language
Requires USDA to operate program at “no cost” by
instead guaranteeing minimum
prescribing sugar import shipping
limiting amount of sugar that processors can sell under
85% market share to domestic
patterns (other provisions on
“marketing allotments” and by restricting imports of
production sector. Revises some
USDA administration of sugar
sugar using quotas.
marketing allotment details.
quota though are largely
Accommodates a specified level of sugar imports under
Prescribes USDA administration of
unchanged).
U.S. trade commitments in effect in 2001; if more
sugar import quota authority (i.e.,
Prescribes minimum storage
sugar enters, allotments must be terminated.
removes some discretionary
payments to be paid by USDA to
authority).
processors for forfeited sugar.
Sugar import quotas are based on U.S. trade
Mandates use of surplus sugar (equal
agreement commitments, and authorized separately
to amount that imports exceed U.S.
under U.S. trade laws.
food demand) for ethanol
production.
General Provisions
Requires USDA to operate sugar loan program at no net
Retains no-cost requirement.
Retains no-cost requirement.
cost to the Government by avoiding sugar loan
forfeitures to the Commodity Credit Corporation (CCC).
(section 1301 amends section
(section 1501 amends section
No Cost
156(f)(1) of FAIR Act 1996)
156 (g)(1) and (f)(2)(C) of FAIR
Directive
(7 U.S.C. 7272 (g))
(section 1303(b) replaces section
Act 1996)
(7 U.S.C. 1359bb (b), 1359cc (b)(2))
359b(b) of AAA 1938)
(section 1504(b) replaces section
(section 9013 adds new section
359b(b) of AAA 1938)
9016(b)(C) to FSRIA 2002)
Stipulates that price support and marketing allotment
Stipulates that all amended price
Same as House provision.
provisions are effective only through the 2007 sugar beet
support and marketing allotment
and sugarcane crops.
provisions apply only to the 2008
(section 1501, amends section 156
Effective
through 2012 crop years for sugar.
(j) of FAIR Act 1996)
Period
(7 U.S.C. 7272 (j))
(section 1504(k), adds new section
(section 1301, amends section 156
359l to AAA 1938)
(i) of FAIR Act 1996)
(section 1303(j))

---

CRS-13
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
Price Support
Raw Cane Sugar
Sets loan rate at 18.0¢ per lb.,
Increases loan rate to 18.5¢ per lb. for
Increases crop year loan rate to 19.0¢
the same rate in effect since the 1985 crop.
each of the 2008 through 2012 crops.
per lb. in quarter-cent increments over
farm bill period:
(7 U.S.C. 7272 (a))
(section 1301, amends section
156(a) of FAIR Act 1996)
cents per lb.
2008 -
18.00
2009 -
18.25
2010 -
18.50
2011 -
18.75
2012 -
19.00
(section 1501, amends section
156(a) of FAIR Act 1996)
Refined Beet Sugar
Sets loan rate at 22.9¢ per lb.,
Increases loan rate to 23.5¢ per lb. for
Sets loan rate at 125% of each crop
the same rate in effect since the 1995 crop.
each of the 2008 through 2012 crops.
year’s raw cane sugar’s loan rate, or:
Price Support
Levels
(7 U.S.C. 7272 (b))
(section 1301, amends section
cents per lb.
156(b) of FAIR Act 1996)
(Section 156 (b) of FAIR 1996, as amended)
2008 -
22.90
2009 -
23.45
2010 -
23.77
2011 -
24.09
2012 -
24.42
(section 1501, amends
Section 156(b) of FAIR Act 1996)
In-Process Sugars and Syrups
Expands eligibility to authorize loans also for in-process
Continues availability of loans for in-
Same as House provisions.
sugars and syrups, with price support available at 80% of
process sugars at current level; allows
the raw cane or refined beet sugar loan rate.
processor to obtain a loan if such
(section 1501, amends section
sugars are processed into raw cane or
156(e) of FAIR Act 1996)
(7 U.S.C. 7272 (f))
refined beet sugar.
(section 1301, amends section
156(e) of FAIR Act 1996)

---

CRS-14
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
Specifies that only non-recourse loans be made available
Continues use of non-recourse loans;
Continues use of non-recourse loans;
to processors of sugar beets, sugarcane, and in-process
retains current repayment term.
retains current repayment term.
sugars and syrups derived from each crop, with a
repayment term of 9 months.
(section 1301, amends section
(section 1501, amends section
156 (c), (d), and (e) of FAIR Act
156 (c), (d), and (e) of FAIR Act
Type and
(7 U.S.C. 7272 (d) & (e))
1996)
1996)
Term of
(Note: A non-recourse loan allows a processor who has
Loans
pledged sugar as collateral to obtain a loan from the CCC
to also forfeit, or hand over, the sugar to the CCC with
no penalty if market prices fall below the loan rate when
the loan comes due. The government takes no recourse
beyond accepting the commodity as full settlement of the
loan.)
Reduces interest rate by 1% on price support loans taken
No provision
No provision
out by sugar crop processors, to be equal to CCC’s
borrowing cost.
(7 U.S.C. 7283 (b))
Interest Rate
on Loans
(Note: Final sugar program regulations issued by the
Farm Service Agency apply the same interest rate on
sugar nonrecourse loans as applied to loans extended to
other commodities. USDA’s stated position was that the
farm bill did not establish a specific sugar loan interest
rate.)
Authorizes the CCC to accept bids from sugar processors
Continues PIK authority. Stipulates
Same as House provision.
for sugar held in CCC inventories in return for reducing
that planted sugar beets or sugarcane
production of sugar crops (intended to serve as another
diverted from production can only be
(section 1501, amends section
Payment-in-
tool available to USDA to meet program’s no cost
used as a bioenergy feedstock.
156(g)(2) of FAIR Act 1996)
Kind (PIK)
requirement).
(section 1301, amends section
(7 U.S.C. 7272 (g))
156 (f)(2) of FAIR Act 1996)

---

CRS-15
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
Requires processors of sugar beets and sugarcane, and
Retains current provisions. Also
Similar to House provisions.
cane sugar refiners, to report to USDA on a monthly
requires USDA to collect supply and
basis such information as needed to administer sugar
demand data on Mexico’s sugar and
(section 1501, amends section
programs. Specifies other reporting requirements for
high-fructose corn syrup sectors, to be
156(h) of FAIR Act 1996)
Information
producers of sugarcane and sugar beets and for importers
published in USDA’s monthly World
Reporting
of sugar and syrups not covered by existing import
Agricultural Supply and Demand
quotas. Imposes a civil penalty fine on a person who
Estimates (WASDE) report.
fails to provide such information.
(section 1301, amends section
(7 U.S.C. 7272 (h))
156(g) of FAIR Act 1996)
Authorizes the CCC to provide financing to processors of
No provision
Retains current authority, but
Storage
domestic sugar crops to construct or upgrade sugar
stipulates that loans shall not require
storage and handling facilities.
any prepayment penalty.
Facility
Loans
(7 U.S.C. 7971)
(section 1502, amends section
1402(c) of FSRIA 2002)
When a farmer or a processor of a commodity (e.g.,
No provision
Requires CCC to establish rates for
program crops and sugar) that is eligible for price
paying processors to store forfeited
support forfeits a loan (i.e., hands over to USDA the
sugar, that are not less than 10¢ per
commodity pledged as collateral), USDA covers storage
100 lbs. of raw cane sugar and 15¢
costs until disposition. For sugar, USDA has paid
per 100 lbs. of refined beet sugar.
Storage
processors of raw cane and refined beet sugar to store
Applies to each of the 2008 through
Payments
such sugar in facilities designated as “certified CCC
2011 crop years.
warehouses.” At present, USDA storage payment rates
are 8¢ per 100 lbs. of raw cane sugar and 10¢ per 100
(section 1503, adds new section 167
lbs. of refined beet sugar.
to FAIR Act 1996)
(15 U.S.C. 714b and 714c; 7 CFR Part 1423)

---

CRS-16
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
Supply Management
MARKETING ALLOTMENTS
Requires USDA to establish “marketing allotments” each
Maintains purpose and structure of
Contains language virtually identical
year at a level that maintains market prices above price
marketing allotments.
to House provisions.
support levels in order to avert loan forfeitures.
Adds definition for a new term that
(section 1504 (a) and (b), amends
[Note: Allotments limit the amount of domestically-
applies throughout this part:
sections 359a and 359b of AAA
produced sugar that each processor can sell annually.]
“consumption” refers to sugar used in
1938)
Limit on Sale
human food, beverages, or similar
Requires USDA to estimate the quantities for five supply
products.
of U.S.-
and demand factors to be applied in the formula to be
Produced
followed to set the national overall allotment quantity
(section 1303(a) and (b), amends
Sugar
(OAQ) — the amount of U.S.-produced sugar that can be
sections 359a and 359b of AAA
sold in the domestic market each year. These factors are:
1938)
(1) estimated U.S. consumption, (2) “reasonable” ending
stocks, (3) beginning stocks, (4) sugar production, and
(5) imports for human consumption.
(7 U.S.C. 1359aa & 1359bb)
Specifies the formula that USDA must use to set the
Replaces the formula with
Contains provisions virtually identical
national OAQ to be:
requirement that USDA set the OAQ
to House bill.
at a level sufficient to maintain raw
estimated U.S. sugar consumption
and refined sugar prices that results in
(section 1504 (c), amends section
+ ending sugar stocks
no loan forfeitures to the CCC but not
359c of AAA 1938)
- 1.532 million short tons [to accommodate
less than 85% of USDA’s estimate of
Determin-
U.S. trade commitments in 2002]
human food and beverage use.
- beginning sugar stocks.
ation of
Stipulates that OAQ may not be
Overall
Requires USDA to adjust the OAQ to avoid loan
reduced to an amount less than 85%
Allotment
forfeitures.
of estimated U.S. human use.
Quantity
Requires USDA to suspend allotments when it estimates
Eliminates allotment suspension
sugar imports: will exceed 1.532 million short tons
provision.
[referred to as the “trigger”], and would lead to a
reduction in the OAQ.
(section 1303 (c), amends section
359c of AAA 1938)
(7 U.S.C. 1359cc)

---

CRS-17
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
Sets the split of the OAQ between beet (54.35%) and raw
cane sugar (45.65%). Specifies parameters to be
followed to allocate allotments among states (for cane)
and among processors (for beet). Stipulates that a cane
allotment can only be filled with sugar processed from
sugarcane in the same state; that a beet allotment can
only be filled by sugar refined from sugar beets. Allots
Distribution
325,000 short tons of national cane allotment to Hawaii,
and mandates the balance be allotted equitably to
of National
mainland sugarcane-producing states, using 3 specified
Allotment
factors.
Between
Cane and
Requires USDA to adjust marketing allotments, to reflect
In adjusting allotments to reflect
Contains provisions virtually identical
Beet Sectors
changes in estimates of domestic sugar consumption,
supply and demand changes, prohibits
to House bill.
stocks, production, and imports. Requires allocations for
USDA from reducing the OAQ to an
each processor, and the amount that a Louisiana
amount less than 85% of estimated
(section 1504 (c), amends section
sugarcane producer can harvest, to be increased or
domestic consumption.
359c of AAA 1938)
decreased by the same percentage that allotments are
modified.
(section 1303(c), amends section
359c of AAA 1938)
(7 U.S.C. 1359cc)
Details factors that USDA must use to fairly and
No change
No change
equitably distribute each state’s cane allotment among
processors in that state. Prescribes different factors to be
followed to distribute Louisiana’s cane allotment among
that state’s cane processors. Prescribes the process
USDA must follow to make available an allocation from
Allocation of
a state’s existing allotment to a new processor of
Allotments
sugarcane (“new entrant”). Spells out the process and
Among Cane
amount that USDA can take from a mainland state’s cane
Processors
allotment to allocate to a new processor in a state where
sugarcane had not previously been processed (“new
entrant state”). Stipulates that cane allotments for
mainland states shall be reduced to accommodate any
allotment made to a new entrant state.
(7 U.S.C. 1359dd)

---

CRS-18
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
Details different factors to be used to allocate the
Clarifies the process that USDA must
Contains provisions virtually identical
national beet allotment among beet sugar processors.
follow to assign a beet sugar
to House measure.
Specifies steps USDA must take to distribute a beet
allocation to a new entrant. Revises
processor’s allocation if the firm permanently ends
the factors used by USDA to
(section 1504 (d), amends section
operations or sells its assets and/or a factory to another
determine the size of an allocation
359d of AAA 1938)
beet processor. Prescribes the process for USDA to
assignment to a new entrant that
distribute a portion of the beet allotment to a new firm
constructs a new sugar beet
that begins to process beets, or buys and reopens a closed
processing facility, or acquires and
Allocation of
factory and/or a factory with a production history.
opens a facility that last operated
Allotments
Stipulates that USDA make specified adjustments in the
before 1998. Stipulates the details
Among Beet
beet allocations of other beet sugar processors when
associated with a transfer of a beet
Processors
these types of events occur.
allocation to a new entrant which
acquires an existing factory with
(7 U.S.C. 1359dd)
production history, to be allowed only
by mutual agreement between the
new entrant and the company holding
the factory’s allocation.
(section 1303(d), amends section
359d of AAA 1938)
Directs USDA to reassign unused cane and beet sugar
Specifies that the requirement that any
Contains identical House provision.
allocations (e.g., sugar that a processor does not have
reassignment of a processor’s unused
available to sell) first to other cane and beet processors,
cane and beet sugar allocation that is
(section 1504(e), amends section
respectively; second to other states and in turn processors
met by imports, must be met by
359e of AAA 1938)
Reassignment in other states in the case of cane, or to other processors
imports “of raw cane sugar.”
of Allotment
in the case of beet sugar; third to sales of sugar in CCC’s
and
inventory; and fourth to imports.
(section 1303(e), amends section
Allocation
359e of AAA 1938)
Deficits
[Note: Cane allocation deficits can only be reassigned to
cane processors; similarly, beet allocation deficits can
only be assigned to beet sugar processors.]
(7 U.S.C. 1359ee)

---

CRS-19
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
Requires USDA to obtain assurances from each
processor that its marketing allocation will be shared
fairly and equitably among those producers that deliver a
crop that adequately reflects their production histories.
Allows sugar beet growers to petition USDA, in case a
beet refiner closes, to redistribute allocations to those
beet processors to which they will now deliver sugar
beets. Allows sugarcane producers in Louisiana to
similarly petition USDA when a sugarcane mill closes.
Prescribes the process and factors to be used by USDA to
Clarifies use of terms in Louisiana-
Contains provisions virtually identical
Producer-
establish how much sugarcane each producer in
specific provisions, and repeals
to House bill.
Louisiana can harvest, when USDA determines that the
authority for USDA, if petitioned by
Related
amount of sugarcane produced is larger than needed to
sugarcane growers in Louisiana, to
(section 1504 (e) and (g), amends
Provisions
fill Louisiana’s cane allotment and provide for a normal
modify processor allotments in that
sections 359f and 359g of AAA
inventory level of ending stocks [known as
state to accommodate their request to
1938)
“proportionate shares” provision]. Allows USDA to
change the mill to which they deliver
transfer farm acreage base history of a Louisiana
sugarcane when the mill to which
producer to other land parcels, if agreed to by all owners
they had delivered closes.
of the farm.
Details requirements and process for
(7 U.S.C. 1359ff and 1359gg)
transfers of farm acreage base history
in Louisiana.
(section 1303 (f) and (g), amends
sections 359f and 359g of AAA
1938)

---

CRS-20
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
IMPORT RESTRICTIONS
Under the Harmonized Tariff Schedule (HTS) of the
No change
No change
United States (trade law — not farm program
legislation), USDA sets the size of each fiscal year’s raw
and refined sugar import quotas at not less than 1.256
million short tons. This reflects the U.S. market access
commitment made under the World Trade
Organization’s (WTO) 1994 Agreement on Agriculture.
(19 U.S.C. 3601, Presidential Proclamation No. 6763,
chapter 17 of HTSUS)
Reflecting current bilateral free trade agreements
(FTAs), the HTS specifies separate preferential sugar
Import
import quotas for partner countries (i.e., the five covered
Quotas
by the Dominican Republic-Central American FTA).
(chapter 99 of HTS, reflecting FTA commitments
approved under various laws)
Effective January 1, 2008, Mexico is allowed to ship
duty free an unlimited amount of sugar to the U.S.
market (under terms of the North American Free Trade
Agreement).
(NAFTA, Chapter 7, Section A, and Annex 302.2 —
Schedule of the United States, as approved by section
101 of P.L. 103-182 (7 U.S.C. 3311(a)) )
The United States under its WTO trade commitments
Prescribes (tightens) USDA
Contains language identical to House
under a tariff-rate quota (TRQ) agrees to allow a
administration of sugar import quota
provisions prescribing USDA’s
Sugar Import minimum 1.256 million short tons of foreign raw cane
authority. Requires USDA to set
authority to set sugar TRQs.
Quota
sugar and refined sugar to enter each year. Exercising
TRQs for raw cane sugar and refined
HTS authority, USDA has discretion to increase the
sugar at the minimum level necessary
(section 1504 (j), adds new section
Adminis-
quota quantity when domestic supplies are inadequate to
to comply with U.S. trade agreement
359k of AAA 1938)
tration
meet U.S. demand at reasonable prices.
obligations.
Under HTS authority, the U.S. Trade Representative
Before April 1 in each fiscal year, in
(USTR) allocates a portion of the sugar import quota to
case a U.S. sugar shortage occurs due
(continued on next page)
(continued on next page)

---

CRS-21
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
each of 40 eligible countries, largely based on each
to weather events or war, requires
country’s share of total sugar exports to the U.S. market
USDA to increase the supply of sugar
in the 1975-81 period. Under a 1982 presidential
by reassigning cane and beet allot-
proclamation, USTR issued regulations that established a
ment deficits to imports of raw cane
certificate for quota eligibility (CQE) system for
sugar, including increasing the WTO
imported sugar, which delegates administering authority
TRQ for raw cane sugar. If a sugar
Sugar Import to USDA. A CQE, issued by USDA to the entity that
shortage still exists after USDA takes
Quota
manages sugar exports in a country that receives a quota
such action and sales of domestic
Adminis-
allocation, must be presented to U.S. Customs to take
sugar “have been maximized,” USDA
tration
advantage of quota access and for such sugar to be
is allowed to increase the refined
allowed entry into the U.S. market.
sugar TRQ, as long as the increase
continued
does not result in loan forfeitures. On
(HTS, chapter 17, additional note 5; 19 CFR Part 2001,
or after April 1 of each year, grants
Subpart A)
USDA discretion to increase the sugar
supply only through an increase in the
TRQ for raw cane sugar, as long as
the threat of forfeitures is avoided.
Through FY2005, USDA disbursed CQEs specifying
Requires USDA to establish “orderly
No “shipping patterns” provision
amounts allowed to enter in specified time periods to
shipping patterns” for major suppliers
countries with sizable shares of the total sugar import
of sugar to the U.S. market under
quota. USDA’s initial intent in announcing “shipping
announced allocations of sugar TRQs.
patterns” was to spread out the flow of sugar into the
Limits rate at which sugar can enter,
U.S. to protect sugar prices (i.e., ensure that sugar from
depending upon the size of a
multiple origins did not enter bunched up and in turn
country’s allocation (i.e., those with
depress prices). Since FY2006, USDA has not
an alloca-tion of at least 100,000
announced shipping patterns, citing the changes that
metric tons (MT) can only ship up to
have occurred over time in the domestic marketing of
25% of the total each quarter; those
cane sugar.
with alloca-tions between 45,000 and
100,000 MT cannot ship more than
half in the first 6 months of each
year).
Required USTR in calendar years 2002-2007 (in
Same as House provision.
consultation with USDA) to reallocate unused country
Repeals 2002 provision requiring the
quota allocations (“shortfalls”) to other quota-holding
reallocation of sugar quota import
(section 1504 (i))
countries with sugar to sell.
shortfalls.
(7 U.S.C. 1359kk)
(section 1303 (i), and adds new
section 359k of AAA 1938)

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CRS-22
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
Sugar Diversion
No provision.
For FY2008 through FY2012,
Contains language virtually identical
requires USDA to purchase sugar
to House provisions.
from those firms that sell sugar (equal
to the quantity of imports that USDA
(section 1501, adds new section
estimates exceeds U.S. food demand),
156(f) of FAIR 1996)
and to sell such sugar to bioenergy
producers, in a way to ensure that
sugar price support program
provisions (see above) operate at no
cost and avoid loan forfeitures.
Requires USDA to use competitive
procedures in entering into contracts
with sellers and buyers of sugar, and
to sell any sugar held in CCC’s
Sugar-for-
inventory, for this purpose. Specifies
Ethanol
that bioenergy buyers of sugar take
possession of sugar within 30 days of
purchase and that CCC take steps to
minimize storage costs on sugar
transferred from seller to buyer.
Specifies that sugar purchased from a
processor of a crop shall count against
the processor’s marketing allocation.
Requires USDA to use CCC
resources, including “such sums as
are necessary,” to implement this new
authority.
(section 9013, adds new section 9016
to FSRIA 2002)

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CRS-23
House-Passed 2007 Farm Bill
Senate-Passed 2007 Farm Bill
Provision
Current Law/Policy
(H.R. 2419)
(Senate Amdt. to H.R. 2419)
Other Trade-Related Provisions
In 1992, the United States withdrew as an International
Requires Secretary of Agriculture to
Contains House provision.
Sugar Organization (ISO) member with its decision not
work with the Secretary of State to
to sign a new international sugar agreement (ISA)
restore U.S. membership in the ISO
(section 1504)
U.S.
because of the requirement that each member country’s
within one year of enactment.
Membership
budget contribution be based on its ability to pay, rather
in
than on its position in the world economy and benefits to
(section 1302)
International
be derived from ISO membership. Unlike earlier
Sugar
agreements, the 1992 ISA (still in effect) does not have
Organization
any economic provisions to control sugar prices. The
ISO is an international body focused on improving
conditions in the world’s sugar market through debate,
analysis, special studies and transparent statistics.
The U.S.-Mexican agreement (July 2006) on bilateral
No provision
Expresses sense of the Senate that the
market access for sugar and high-fructose corn syrup
U.S. and Mexican governments
included the creation of a joint industry/government task
should coordinate the operation of
force to (1) help both governments prepare for the
their sugar policies to be consistent
elimination of tariffs on sweeteners in January 2008 and
with U.S. international commit-ents,
(2) periodically review product shipments against this
and that the United States should
agreement’s tariff import quotas to ensure that they are
consult with Mexico on policies to
promptly and fully utilized.
avoid disruptions of each country’s
Sugar in
sweetener markets [sugar and high-
NAFTA
fructose corn syrup] in order to
maximize benefits for growers,
processors, and consumers of sugar,
while supporting the interests of corn
growers, corn refiners, and sweetener
users, in both countries.
(section 1505)
Appendix Notes
FAIR 1996 — Federal Agriculture Improvement and Reform Act of 1996 (1996 farm bill)
FSRIA 2002 — Farm Security and Rural Investment Act of 2002 (2002 farm bill)
CFR — Code of Federal Regulations
Sugar price support provisions are codified at 7 U.S.C. 7272.
Sugar marketing allotment provisions are found in Part VII of subtitle B of title III of the Agricultural Adjustment Act of 1938, and are codified at 7 U.S.C. 359aa
et seq

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