By: John Dunham
May 17, 2018
The farm bill is considered by Congress just once every five years. Each time, it’s accompanied by a number of amendments introduced by policymakers hoping to modernize our nation’s food and agricultural supply chain. It’s been reported this year that roughly 100 amendments have been proposed to the 2018 farm bill – one of which proposes to update the decades-old U.S. sugar program.
The sugar program is the only crop subsidy program that hasn’t been reformed in more than 80 years. This byzantine program of quotas, price supports and marketing and production restrictions leads to higher prices for sugar in the U.S. economy, and higher costs for food processors like bakers, pasta sauce makers, ice cream producers, candy manufacturers and more.
Basic principles of economics say that as supply increases, prices go down. By reducing costs for small businesses and food manufacturers, while not substantially changing support for the nation’s sugar farmers, these minor technical changes to the sugar program will lead to increased capabilities for companies throughout the United States to create more jobs.
Estimating the impact of the Foxx-Davis amendment approach to modernizing the sugar program, these modest changes could lead to an increase of roughly 1,500 jobs in food manufacturing. On the sugar processor side, there is about a $110 million cost, which represents less than ten percent of the economic benefit to processors. Overall, sugar growers provide one job for every $185,000 in sales and profits.
Comparing these job gains against losses in the sugar processing industry suggests that for every $7,432 in excess profits lost to sugar growers, food manufacturers could create an additional full-time-equivalent position. Creating a more robust market for sugar is an inexpensive way to benefit the economy. I’d say $7,000 is worth a full-time job.
The proposal does not remove a safety net for farmers; rather it reduces unintended burdens placed on consumers that result from the complicated system of price supports. Additionally, while my estimate acknowledges a very marginal impact on sugar producers, it underscores a much more noteworthy impact on jobs in the food manufacturing industry, and the stability of the food market overall.
In addition to these benefits, the Foxx-Davis amendment will help level sugar prices over the seasons, ensuring that manufacturers don’t experience damaging price spikes or short-term shortages, both of which could substantially increase the price of products containing sugar during certain parts of the year.
Rather than benefiting the American economy, the current U.S. sugar program costs businesses and consumers as much as $4 billion. No matter your party, this amendment makes economic sense. Congress should vote yes to fix the sugar program.
John Dunham is managing director of John Dunham & Associates. Dunham specializes in the economics of how public policy issues affect products and services.