U.S. SUGAR PROGRAM CUT SENT TO CONGRESS BY USDA The U.S. Agriculture Department formally transmitted to Congress a long-awaited proposal to drastically slash the sugar loan rate and compensate growers for the cut with targeted income payments. In a letter to the Congressional leadership accompanying the "Sugar Program Improvements Act of 1987", Peter Myers, Deputy Agriculture Secretary, said the Reagan administration wants the sugar loan rate cut to 12 cents per pound beginning with the 1987 crop, down from 18 cts now. Sugarcane and beet growers would be compensated by the government for the price support cut with targeted income payments over the four years 1988 to 1991. The payments would cost an estimated 1.1 billion dlrs, Myers said. The administration sugar proposal is expected to be introduced in the House of Representatives next week by Rep. John Porter, R-Ill. Congressional sources said the program cut is so drastic it is unlikely to be adopted in either the House or Senate because politically-influential sugar and corn growers and high fructose corn syrup producers will strongly resist. The direct payment plan outlined by the administration targets subsidies to small cane and beet growers and gradually lowers payments over four years. It also excludes from payment any output exceeding 20,000 short tons raw sugar per grower. For example, on the first 350 tons of production, a grower would receive 6 cts per lb in fiscal 1988, 4.5 cts in 1989, 3 cts in 1990 and 1.5 cts in 1991. The income payments would be based on the amount of commercially recoverable sugar produced by a farmer in the 1985 or 1986 crop years, whichever is less, USDA said. Myers said the administration is proposing drastic changes in the sugar program because the current high price support is causing adverse trends in the sugar industry. He said the current program has artificially stimulated domestic sugar and corn sweetener production which has allowed corn sweeteners to make market inroads. U.S. sugar consumption has declined which has resulted in a "progressive contraction" of the sugar import quota to only one mln short tons this year, he said. This has hurt cane sugar refiners who rely on imported sugar processing. Furthermore, USDA said the current sugar program gives overseas manufacturers of sugar-containing products a competitive advantage. The result has been higher imports of sugar-containing products and a flight of U.S. processing facilities overseas to take advantage of cheaper sugar. USDA also said the current program imposes a heavy cost on U.S. consumers and industrial users. In fiscal 1987, USDA said consumers are paying nearly two billion dlrs more than necessary for sugar. "Enactment of this bill will reduce the price gap between sweeteners and help to correct or stabilize the many adverse impacts and trends which the sugar industry is currently facing," Myers said. The following table lists the rate of payments, in cts per lb, to growers and the quantity covered, in short tons recoverable raw sugar, under the administration's proposal to compensate sugar growers with targeted payments. QUANTITY 1988 1989 1990 1991 First 350 tons 6.000 4.500 3.000 1.500 Over 350 to 700 5.750 4.313 2.875 1.438 Over 700 to 1,000 5.500 4.125 2.750 1.375 Over 1,000 to 1,500 5.000 3.750 2.500 1.250 Over 1,500 to 3,000 4.500 3.375 2.250 1.125 Over 3,000 to 6,000 3.500 2.625 1.750 0.875 Over 6,000 to 10,000 2.250 1.688 1.125 0.563 Over 10,000 to 20,000 0.500 0.375 0.250 0.125 Over 20,000 tons nil nil nil nil