U.S. Department of Agriculture is considering buying 400,000 tons of sugar to help sugar processing companies avoid defaulting on $862 million in government loans, according to The Wall Street Journal. Which companies? We do not actually know. Somehow the sugar loans are a secret. The Department of Agriculture officially won’t say which companies have received loans. It won’t even say how many companies received loans.
The government is considering buying 400-thousand tons of sugar to stave off a wave of defaults by sugar processors, reports Hampton Pearson.
The U.S. sugar industry has benefited from subsidies, price-supports, and import restrictions for decades. There is no good reason for this. If the entire U.S. sugar complex, from farmers to processors, collapsed, the only thing most U.S. taxpayers would notice would be lower prices.
It’s no great mystery why these subsidies persist. It’s pure special interest politics. The benefits are concentrated in a handful of companies, while the costs are widely distributed. The sugar growers and processors recycle their subsidized gains into political contributions to both parties, ensuring the subsidies and protections stay in place. When the General Accounting Office assessed federal sugar programs in 2000, it found that the trade restrictions cost manufacturers and consumers nearly $2 billion annually.
Even with all these sweetheart deals, however, the sugar processors apparently are in trouble because the sugar crop was so large this year that prices have been under pressure. Rather than reading this as a sign that this is a business that is just too unprofitable to exist in the U.S., however, it looks like the sugar sector is going to get bailed out.
One mystery is why candy makers and cake makers don’t band together to defeat the sugar lobby. Surely this hurts their bottom line. (Note to the private-equity folks who are buying Hostess: call your Congressman.)
John Carney, CNBC