Agricultural Economic Report No. (AER-711) 75 pp

April 1995

Sugar: Background for 1995 Farm Legislation

This report address considerations in the 1995 farm bill debate for sugar, including market conditions, policy proposals, trade agreements, and the interactions between policy and markets for selected commodities. Current U.S. sugar price support programs have their origin in 1981 legislation. The price support program has resulted in significant expansion of the industry in the last decade. Beet sugar production has expanded in many regions, but has contracted in some western regions, particularly California. Cane sugar production has expanded in Florida, Louisiana, and Texas, but has shrunk in Hawaii where costs are high. National average costs of producing beet and cane sugar have been declining in the last decade, and returns have exceeded costs. Average production costs of refined beet sugar are below those of refined cane sugar. Overall sugar demand has been growing at about 2 percent a year since 1986, when the rapid replacement of sugar by high-fructose corn syrup ended. Sugar imports under quota have fallen to levels close to the minimum provided by law. Prospects are for sugar production and consumption to continue to rise. No major impacts on the industry are expected from the GATT Uruguay Round or NAFTA.

Keywords: Sugar, sugarcane, sugar beets, price supports, import quotas, imports, exports, cost of production, returns, high-fructose corn syrup, corn sweeteners, world sugar, low-calorie sweeteners

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