Sugar price support program

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The federal program that maintains a minimum price for sugar. The new program covers the 1996-2002 crops of sugar beets and sugarcane. Under the FAIR Act of 1996, sugar processors benefit from a price guarantee only when nonrecourse loan policy is in effect (i.e., USDA projects that fiscal year imports of sugar will be equal to or greater than 1.5 million short tons). Should projected imports be below 1.5 million short tons, only recourse loans will be available to processors (i.e., no price guarantee exists). Loan rates are frozen through FY2003 at 18 cents/lb. for raw cane sugar, and 22.9 cents/lb. for refined beet sugar. Processors benefit, though, from a slightly higher level of price support accomplished by USDA administering an import quota in such a way that market prices are kept above loan forfeiture levels. Should a processor forfeit on a nonrecourse loan if market prices fall below his forfeiture level, a forfeiture penalty is imposed (i.e., 1 cent/lb. for raw cane sugar, 1.072 cents/lb. for beet sugar). Should this occur, the price guarantee level would be lower than a processor received in the past. The FAIR Act of 1996 repealed both the program’s no cost requirement (in effect since FY1986) and standby authority (in effect during FY1992-1996) to impose marketing allotments under certain conditions.

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