U.S. sugar policy, which operates under the Farm Bills overwhelmingly passed in 2008 and 2014, is based on the common-sense notion that supply and demand should be in balance.
Sugar is the cheapest major commodity program because sugar farmers do not receive subsidy checks. To ensure that sugar policy runs at limited cost to taxpayers, the U.S. Department of Agriculture (USDA) has three tools at its disposal. The agency can 1) slow the flood of foreign imports to those required by our trade agreement obligations (note: Mexican imports are unlimited under NAFTA), 2) limit the amount of sugar American farmers can sell, and 3) divert surpluses caused by excessive imports into non-food use.
Each year, the USDA forecasts U.S. sugar consumption and decides whether to limit the amount that U.S. producers can market. At the same time, the USDA allocates market share to 41 foreign countries based on U.S. import commitments in trade agreements, such as the WTO and CAFTA.
If imports create an oversupply situation, then unneeded sugar can be made available to ethanol producers.
By avoiding oversupplies and shortages, sugar prices stay stable. And fair prices eliminate the need for government payments to farmers.