Divided support clouds sugar-to-ethanol program as House farm bill debate nears

Source: Amanda Peterka, E&E reporter • Posted: Friday, June 14, 2013

A little-known program that allows the Department of Agriculture to buy up excess sugar in the market and sell it to ethanol producers is taking heat as the House gears up to debate a five-year reauthorization of farm programs.

Several lawmakers will likely introduce amendments to roll back the program, as well as the broader system of federal support for the sugar industry, when debate on the farm bill begins as early as next week. The program has come under fire as USDA considers using it for the first time since its creation in 2008 in response to falling sugar prices.

“This is a sugar boondoggle that was added in the 2008 farm bill,” Rep. Charlie Dent (R-Pa.) said yesterday.

The debate over the Feedstock Flexibility Program pits sugar users, such as candy manufacturers, against sugar producers.

Under the program, USDA is authorized to buy up extra sugar in the market until prices reach a target level and then sell that sugar to U.S. ethanol producers that can use it to produce advanced biofuel that qualifies for credit under the renewable fuel standard.

Earlier this year, the department sent a proposal to the White House that would set in motion the program. U.S. sugar prices have dropped about 11.5 percent since November 2012 because of an oversupply in the market, according to commodity price indexes (Greenwire, April 9).

Opponents of the program — namely candy manufacturers, beverage makers and others that use sugar as an input — cite its potential costs and market distortion.

In a May report, the Congressional Budget Office projected that using the program would cost $51 million this fiscal year and nearly $240 million over the next 10 years.

The program’s opponents, who are arrayed in the Coalition for Sugar Reform, are more generally opposed to all supports for sugar producers. The overall federal sugar program, the coalition charges, has been responsible for keeping U.S. sugar prices at record levels since 2008.

From 2008 to 2011, sugar prices were an average of 46 cents a pound, compared with 28 cents under older farm policy, according to a report released by the coalition in early June. The report estimated that federal sugar supports have cost consumers an average of $3.7 billion a year since 2008, as well as thousands of jobs in the sugar-using food and beverage industries.

Opposition to federal sugar supports spans the partisan divide. Last month, Sen. Jeanne Shaheen (D-N.H.) led a bipartisan coalition of senators who attempted to repeal the Feedstock Flexibility Program and reform other sugar supports through a Senate farm bill amendment that was ultimately unsuccessful.

“The impact on every one of our constituents, our consumers, is pretty clear,” Rep. Jim Moran (D-Va.) said yesterday. “The sugar program advocates say that this costs us nothing, but they ignore that the price of sugar is higher every single day that this policy remains in effect.”

Supporters contend that eliminating the program would hurt sugar producers and point to the large profits of confectioners over the past few years. The sugar program, producers argue, was designed to run at no cost to the government.

Feedstock Flexibility, they say, is needed to help stem a flood of subsidized imports entering the U.S. market.

“The Feedstock Flexibility Program, which is one tool being considered, would save taxpayers money because it would be much cheaper than the alternative — costly loan forfeitures caused by severely depressed market prices,” the American Sugarbeet Association said when USDA first began mulling use of the program.

The argument over the program bubbled up at a markup yesterday of the fiscal 2014 agriculture appropriations bill when Dent — whose home district includes the chocolate capital of Hershey, Pa. — attempted to add an amendment that would have lowered the loan rate that triggers the program.

“The bottom line is that this is an issue that should have been dealt with a long time ago,” Dent said, adding that his amendment would save $9 million in fiscal 2014.

He ran into opposition, though, from leaders of the House Appropriations Committee who argued that the farm bill was a more appropriate vehicle for such an amendment.

“The issue should be debated in the context of the 2013 farm bill and not the agriculture appropriations bill,” said Rep. Robert Aderholt (R-Ala.), chairman of the House Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Subcommittee.

Dent later withdrew his amendment.

When the farm bill was in the House Agriculture Committee, lawmakers rejected an amendment by Rep. Bob Goodlatte (R-Va.) that would have put in place broad reforms to federal sugar supports, including the repeal of the Feedstock Flexibility Program.

Dan Holler, communications director for the conservative group Heritage Action for America, said that he expected to see more support in the House than in the Senate during floor debate on the farm bill.

“I suspect that we will see some sort of sugar reform, whether elimination of a program or the whole thing or some minor reforms,” Holler said. “I suspect we’re going to see something like that on the House floor next week, especially with the Senate taking action on it and really getting some momentum behind a willingness to do something.”