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Sugar Proposal Expected to Draw Fire : Under Reagan Plan, Farmers Would Be Paid Not to Grow Beets, Cane

March 09, 1987|WARD SINCLAIR | The Washington Post

WASHINGTON — In an effort to protect jobs in U.S. food-processing industries and relieve consumers from artificially high prices, the Reagan administration this week will propose paying farmers more than $1 billion during the next four years to stop growing sugar beets and cane.

The plan, certain to kick up political dust when it reaches Capitol Hill, would offer direct payments to the growers as an inducement to give up cane and beets and clear the way for the importation of cheaper sugar.

Daniel G. Amstutz, under secretary of agriculture for international affairs and commodity programs, acknowledged that the proposal could face tough going in Congress, in part because of potentially controversial payments to farmers that could hit $1.1 billion.

"Some of the acreages in cane are huge. And there is the possibility of some gigantic payments, especially to four or five large corporations," he said. "We would lower the federal support prices and make 'transition' payments to farmers to go to other crops. . . . We'll still produce cane and beets, but not as much. This would be a stimulus to efficiency."

But, Amstutz said in an interview, "we would turn around the erosion of jobs and we would eliminate a consumer tax, with the returns to the gross national product far, far exceeding the $1.1 billion the program would cost."

In 1981 and again in 1985, as it crafted farm legislation, Congress overrode objections by consumers and food processors as it rejected similar attempts by the administration to scuttle the sugar support program.

The 1985 farm law set the guaranteed price for domestic cane and beet sugar at 18 cents per pound--about triple the world rate--and stipulated that the program should be run at no cost to the treasury by regulating sugar imports on a quota system to make up the remainder of domestic needs.

The administration's new proposal would lower the support rate to 12 cents a pound, which Amstutz said would assure continued beet and cane production by the most efficient growers.

Farmers who could not afford to grow sugar for 12 cents a pound would be able to take the "transition" payments to protect them from the impact of a cut from today's 18-cent support level.

An Agriculture Department analysis of the current program shows that domestic cane and beet production have increased as consumption has gone down; cheaper corn sweeteners have taken more of the market; sugar imports are down by 55%, while there has been a 150% increase in imported sugar-containing products.

USDA's study said that administration of the program at no budget expense requires the government to maintain artificially high prices that will cost sugar users $2 billion extra in fiscal 1987 and that will add $1.2 billion to the cost of high-fructose corn sweetener, which is generally priced just under the cane and beet levels.

The analysis also argues that lower quotas forced by the farm law have had a "severe impact" on many sugar-exporting countries, particularly Third World nations that rely heavily on exports, and opened the way to trade expansion by the Soviet Union.

The Dominican Republic and the Philippines have lost about $250 million in each of the past two years because of the U.S. quota cuts. To make up for its lost U.S. sales, the Dominican Republic has signed a three-year sugar contract with the Soviets and announced plans to diversify its agriculture to grow grain and other crops.

"We literally export jobs with the current program," Amstutz said, "because we provide an incentive to (baking and confectionary) companies to do their manufacturing outside the United States," Amstutz said. "If this could be debated and voted on the economics of it, there is no question we would prevail. But this is really going to be an uphill political battle."

Horace D. Godfrey, a veteran sugar industry lobbyist who has been involved in a number of previous political frays, agreed that there will be a fight, but he predicted that the administration proposal will not get to first base.

"I don't think this will go anywhere," Godfrey said. "The administration has tried these things before and every vote in the last five years has gone two to one for the sugar people. . . . And you know it won't save the consumers anything. It won't cut the cost of a candy bar or a bottle of pop."

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