Perspective

Sugar kings' latest con is hard to swallow

By A TIMES EDITORIAL
Published October 21, 2007

The audacity of the U.S. sugar industry to protect its anti-free market practices knows no limits. Now that cheaper Mexican sugar will be allowed to compete with the overpriced domestic product under NAFTA treaty provisions, politically savvy sugar growers have come up with a novel way to keep the game tilted in their favor - turn sugar into tax-subsidized ethanol. It worked for corn farmers, so the sugar kings didn't even have to invent a new con.

For decades, the federal price support system for sugar worked this way: The federal government limited domestic production and discouraged imports with tariffs so that the cost of sugar remained high in the United States compared with the cost in the rest of the world. While not so good for consumers, the scheme let sugar producers make out like bandits. One company - Flo-Sun of Florida - gets an estimated $65-million a year extra from the price-support system, according to the Center for Responsive Politics.

What's wrong with turning sugar into ethanol? Nothing, if market forces prevail. As proposed in the farm bill being considered by Congress, however, it makes no sense.

First, ethanol producers that now use corn don't want to be forced into investing in new machinery, the New York Times reported. A small amount of sugar can be added to the corn fermentation process, but that wouldn't be nearly enough to account for excess domestic production.

So lawmakers beholden to the sugar industry would have the federal government (taxpayers, in other words) buy tons of sugar at a premium price and sell it to ethanol distillers at a deep discount. Mark Keenum, an under secretary of the U.S. Department of Agriculture, says the government would buy sugar for 22 cents a pound and sell it for 4 to 7 cents a pound. "You can easily do the math and look at the loss potential," he said. The Congressional Budget Office figured the cost at $660-million.

To its credit, the Bush administration opposes this proposal, although it supports subsidies to the corn-based ethanol industry, which don't make economic sense either. Perhaps ethanol produced cheaply enough and without tax bailouts can compete with petroleum products one day. Yet welfare for wealthy sugar and corn farmers will never be a credible substitute for an energy policy.

[Last modified October 22, 2007, 09:18:23]