The United States is one of the world’s largest sugar producers; its production of beet sugar (between 55% and 60%) is slightly higher than that of cane sugar, according to information from the World Trade Organization (WTO).
Sugar beets are grown in four regions (covering 11 states) and mainly in rotation with other crops, while sugar cane is grown in Florida, Louisiana and Texas.
Although the number of sugar beet and sugar cane farms has been declining, production has generally increased due to a combination of several factors: improved crop varieties, use of new technologies, expansion of acreage, and substantial investment in new processing equipment.
As a result of the domestic policies implemented, U.S. sugar prices have remained consistently above world futures contract prices.
The Commodity Credit Corporation (CCC) provides marketing loans with limited callable repayment to sugar processors, who, in turn, repay sugar beet and cane growers at a rate commensurate with the value of the loan.
The 2018 Farm Bill sets loan rates for refined beet sugar ($0.2538 per pound) and raw sugar ($0.1975 per pound) for the 2019 through 2023 crop years.
Sugar production
At the end of the loan term (of a maximum of nine months), or at any time before, borrowers may sell the sugar and repay the loans in full or, if prices are very low, assign the sugar given as collateral to CCC and thus repay the loan.
However, as a result of national policies, the probability that loans will not be repaid is generally low. Other mechanisms, such as the Commodity Flexibility Program (FFP), can also be used to divert surplus sugar for human consumption.
While FFP participants process sugar into ethanol, processors of sugar sold for human consumption receive marketing quotas, and the amount of the overall allocation (OAQ) equals at least 85% of the estimated domestic demand for the marketing year.
Surplus sugar produced in the country cannot be sold on the market for human consumption, and remains in storage at the owner’s expense.
If a processor is unable to market the quantity allocated to him, it may be reallocated to other processors in the same state and, if this does not eliminate the deficit, the remaining quantity may be allocated to processors in other states.
There is no provision that deficits due to underutilization of OAQ must be reallocated to beet sugar processors or vice versa.
If, after reallocation, a shortfall persists, it can be allocated to the CCC to sell the relevant quantity of product by releasing it from its stocks and, if this is insufficient, the shortfall can be allocated to imports.
