Subsidies

Big Sugar Bailout: USDA to Buy 400,000 Tons of Sugar in a Bid to Make Your Snickers Bar More Expensive

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Here's a sad story: First the government loaned big sugar producers $862 million, secured with the 4 billion pounds of sugar the companies were expecting to produce this year. They did this under a 1934 law designed to allow the U.S. Department of Agriculture to prop up sugar prices. They do the same thing every. single. year.

But then there was a bumper crop of sugar beets and a strong sugarcane harvest. That means prices for sugar fell. But we can't have that! That might mean consumers could get cheap candy! 

So the government buys a lot of sugar in an effort to prop up prices—probably 400,000 pounds tons in this case—and then, by law, must sell it to ethanol producers. But ethanol producers don't really want it, so the government will have to (sorry!) sweeten the deal and sell it at a loss of about 10 cents per pound, or $80 million total.

Sure, this whole thing sounds cockamamie, but maybe it's worth it if the government can avoid a much bigger loss, right? Well, it probably can't, according to today's Wall Street Journal

The USDA is hoping to avert a repeat of 2000, the last time the agency bought sugar on the open market. The USDA bought 132,000 tons of sugar to raise prices, but the effort was generally considered unsuccessful because borrowers ended up handing over 1 million tons of sugar to the agency instead of repaying the loans.

The loan program incurred losses of $295 million that year.

Great. 

Meanwhile, American consumers already radically overpay for sugar and sugar-sweetened products thanks to import restrictions and taxes that prevent foreign producers from competing.