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U.S. to buy
surplus sugar to
lift prices
The decision to purchase
From staff and wire reports
150,000 tons will provide welcome
relief to Hawaii growersThe government plans to pay about $57 million to buy and store 150,000 tons of surplus sugar -- the biggest such purchase ever -- to bail out farmers who have produced so much of the stuff that prices have dropped 25 percent over the past year.
Sugar growers, who say their livelihood is threatened by low prices, welcomed the move.
Stephen Holaday, vice president of Hawaii's biggest sugar grower, Alexander & Baldwin Inc., said today that the amount being bought is less than half the 370,000 tons that growers earlier this year urged the government to buy. He said he was not sure how far it will go to help prices.
"I think it's more a signal to the marketplace that the government is going to step in and support sugar prices," said Holaday, who is plantation manager at A&B's 37,000-acre Hawaiian Commercial & Sugar Co. operation on Maui.
Sen. Daniel K. Akaka said he had urged Glickman to make the purchase, which "will help Hawaii's growers at a time when they need it most." The Hawaii Democrat said sugar prices hit a 20-year low this spring.
The American Sugar Alliance issued a statement yesterday quoting testimony given earlier by Hawaii grower Alan Kennett, president and general manager of Gay & Robinson Inc. on Kauai. Sugar farmers in Hawaii and on the mainland "want what all other program crops want, a fair opportunity to farm and make a reasonable living," Kennett told Congress earlier this year.
"American sugar producers' competitiveness and their disastrously low prices parallel the plight of other American farmers. Sugar farmers do not want to be treated more favorably than other farmers, just equally," he said.
In late February, Kennett told the Star-Bulletin that Gay & Robinson's sugar operation expects to lose $1 million this year and might have to close if prices don't improve. He could not be reached for comment today.
The Agriculture Department has put off the decision about what to do with the sugar it is buying. The department has considered donating it overseas or else selling it at a steep discount for refining into ethanol, a fuel additive normally made from corn.
Growers have been threatening to forfeit to the government as much as $550 million worth of sugar pledged as collateral on federal marketing loans.
"We are acting to help address dramatically low sugar prices," Agriculture Secretary Dan Glickman said in announcing the planned purchase late yesterday. "By buying U.S. sugar now, we expect to save as much as $6 million in administrative costs that the government might otherwise incur from expected loan forfeitures later this summer."
Senate Agriculture Committee Chairman Richard Lugar criticized the buyout today and said he may try to stop the purchase when the Senate votes on the fiscal 2001 agriculture budget in the next few weeks. "This purchase will only stimulate more sugar production, adding to the problem created by a U.S. sugar policy that guarantees a price to sugar producers that is two to three times the world market price," the Indiana Republican said.
A coalition of candy- and food-makers, consumer advocates and environmental groups that oppose the sugar program had urged the administration to let prices fall.
Jack Roney, former Washington lobbyist for the Hawaiian Sugar Planters Association and now director of economics for the American Sugar Alliance, said manufacturers don't pass along savings on sugar to consumers.
"In the three and a half years since the start of the Farm Bill, with wholesale refined sugar prices down 26 percent, the price of ice cream is up more than 9 percent, cookies and cakes are up almost 8 percent, candy is up about 7 percent, as is the price of cereal," Roney said.
The announcement of the bailout, after U.S. markets closed yesterday, initially sent domestic sugar prices surging in New York today, but the closing price was lower. Refined sugar for July delivery rose as much as 0.7 cent, or 3.7 percent, to 19.81 cents a pound on the Coffee, Sugar & Cocoa Exchange, before closing at 19.1 cents a pound, down a fraction of a penny. International prices rose. Raw world sugar for July delivery climbed 0.15 cent, or 2.3 percent, to 6.78 cents a pound.
The government did not rule out buying more sugar. Farmers expect the Clinton administration "will take further action, as needed, to avoid costly forfeiture of sugar under loan to the government," said Ray VanDriessche, president of the American Sugarbeet Growers Association. The government guarantees farmers a minimum price for domestic sugar through the loan program and quotas on imports, but increases in domestic production are making it difficult for USDA to control domestic prices. Growers who put sugar up as collateral for a federal loan have the right to forfeit the crop to the government if prices fall below the guaranteed price.
Star-Bulletin reporter Russ Lynch,
the Associated Press and Bloomberg News
contributed to this report.
