Agriculture Improvement And Reform Act Of 1996 Case Analysis

The Cost of the US http://ageconsearch.umn.edu/bitstream/18431/1/wp010273.pdf li

The FederalAgriculture Improvement and Reform Act of 1996 applied six changes to the sugar program while still maintaining the same support to the sugar grower. The first change is to set the USDA’s loan rate at 18¢ per pound for raw cane sugar and 22.9¢ per pound for refined beet sugar. Secondly, a pound of raw cane sugar and of refined beet sugar forfeited to the government will cost 1¢ and 1.07¢ respectively. Thirdly, taxpayer will no longer have a requirement that the sugarprogram operate at no net cost.Fourthly, ifthe TRQ is 1.5 million tons or less, forfeiting is prohibited. Fifthly, the power of USDA to create marketingallotments for sugar is no longer existed.

Both the estimated costs of the sugar program to sweetener users and the estimated benefits to sugar beet and sugarcane producers were higher in 1998 when the difference between the domestic and world prices for sugar was greater. According to Table 1, it suggests that the sugar program costs domestic sweetener users–sugarcane refiners, food manufacturers, and final consumers–about $1.5billion in 1996 and about $1.9 billion in 1998. There are gains by domestic sugar beet and sugarcane producers which were about eight hundred million in 1996 and about a billion in 1998. Approximately 70 percent of these benefits went to sugar beet growers and processors, where 30 percent went to sugarcane producers. Furthermore, HFCS producers did not receive welfare gains from the sugar program in any years, since substitution between sugar and HFCS is more limited now than they were in the early 1980s. The decreased substitution is augmented because the improvement in technology have helped the HFCS products and created more effective sweetener markets. Hence, HFCS producers don’t need to lower their price to respond to the absence of the sugar program, as HFCS have their own market segments. In short, the sugar program has a marginal effect on corn producers. This finding on HFCS and corn is consistent with the prior studies by Rendleman and