The USDA is probably going to “intervene” in the sugar market, for only the zillionth time

posted at 9:31 pm on March 12, 2013 by Erika Johnsen

While the Obama administration has been working overtime to push their sequestration-scaremongering campaign, all about how $85 billion in cuts means that we won’t be able to afford White House tours or as many border patrol agents, it is amazing to me that stuff like this somehow never even gets a mention. Hey, how about the federal government stops playing sugar daddy to a bunch of entrenched special interests and tries allowing the free market to function like it’s supposed to, maybe? Is that too radical, do you think?

The U.S. Department of Agriculture runs a whole host of farm-and-rural programs and subsidies that in practice function as little more than corporate welfare for agribusiness, but one of the most onerous results of the government’s persistent interference is that the American sugar market now operates like a federally-sponsored racket, to the benefit of a handful of farmers but the detriment of the economy at large. The feds have piled on complex loan programs, import barriers, and production quotas, all of which are specifically meant to help keep domestic sugar prices artificially high — which means that not only are Americans’ taxes being devoted to protecting domestic sugar producers from free-market competition, but that consumers across the country are paying higher prices, too.

But of course, government interference reliably begets still more interference. Behold, the unnecessarily complicated and self-defeating vicious cycle that is the federal government’s unwavering support of the U.S. sugar market, via the WSJ:

The U.S. Department of Agriculture is likely to buy sugar in the domestic market this year in order to drive prices up and prevent defaults on loans made to sugar processors, according to a USDA economist.

The USDA estimates it would need to buy 400,000 tons of sugar to boost prices to an “acceptable level,” said Barbara Fecso, an economist at the department. A purchase of 400,000 tons would amount to about 4.4% of projected U.S. sugar production in the marketing year that ends Sept. 30. …

To entice ethanol producers to buy the sugar, the USDA’s Commodity Credit Corporation is expected to sell it at a loss of about 10 cents a pound, or $80 million total, Ms. Fecso said.

“If we acquire [sugar] in a down market, we have to get rid of it because we don’t want to own sugar, so we’re going to lose money,” Ms. Fecso said. “No matter how we dispose of it, there’s going to be a loss, so if we sell it [to ethanol producers], at least we’re getting something in return for it.”

Gee, thanks. It’s really too magnanimous of you to determine exactly what an “acceptable level” of sugar prices looks like on our behalf, the economic ripple effects be damned.


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