Big Sugar: Florida’s Sugar Industry and its Influence on U.S. Economic Policy

Research Article by Todd Benschneider:

Taxpayer subsidies of United States agricultural commodities have survived over 90 years of political attacks since their introduction in The Farm Bill of 1922. Today U.S. taxpayers pay nearly 20 billion dollars per year in direct farm subsidies, of which about 3% are spent on the Federal Sugar program. Farm Bill critics claim that farm price subsidies are counterproductive and restrict international trade. Supporters of the Federal Sugar Program argue that price supports are needed to compete in the international marketplace against the most economically advanced countries of the European Union and Japan that spend twice the amount per capita in agricultural subsidies. Subsidy supporters argue that price supports level out the peaks and valleys of price fluctuations which result in economic and government stability (Sumner, 2008).

In 1996, in response to growing voter outrage over the taxpayer support to some of Florida’s wealthiest and politically connected elite, Al Gore launched an attack on Florida’s sugar industry, promising to cut the subsidies to wealthy sugarcane growers and rescue the Florida Everglades from further agricultural contamination. However, Gore underestimated the political clout that the sugar growers possessed and found he was unable to deliver on that very heavily publicized campaign promise (Roberts, 1999).

The political influence that sugar growers continue to accumulate could be attributed to the millions of dollars in campaign contributions made by Florida sugar producers. According to investigative journalist Paul Roberts (1999):

“from 1990-1998…. sugarcane producers spent at least $26 million on everything from referendums to supporting Jeb Bush for governor in 1998 ….. and, America’s sugar industry is among the most subsidized on the planet, enjoying a domestic price of 22 cents a pound while producers in much of the rest of the world get about 8 cents. Each year, critics say, the federal sugar program not only adds $1.4 billion to consumers’ bills but funnels some $560 million of it back to domestic producers, who then funnel some back to Congress, which ensures the program’s reauthorization under the once-every-six-years Farm Bill. It’s a classic political love triangle, obscenely lucrative for the big corporate farms–Florida Crystals makes an extra $64 million annually under the program, followed closely by U.S. Sugar, at $55 million.”

Public backlash for Florida’s sugarcane industry is often attributed to several highly publicized expose’s that showed taxpayer money funnels straight into the pockets of wealthy sugar baron heirs, who use the monies to buy additional political alliances. Outspoken critics, such as Senator Charles Schumer of New York, described the subsidy as “one of the most invidious, inefficient, Byzantine, special-interest, Depression-era federal programs.” And according to Paul Roberts (1999) current perception has grown to believe that rather than provide aid to small family farms that the sugar subsidy actually serves to pamper several billionaire Miami playboys. Roberts describes in his Harpers article The Sweet Hereafter:

“The (Fanjul) brothers’ reclusiveness isn’t surprising. Whereas Fairbanks and U.S. Sugar have continued to bank on their image as sugar pioneers with close ties to the land, the Fanjuls have no such cachet. Rich, controversial, and Cuban-born, with Palm Beach mansions and a $500 million fortune (note: 2012 estimates of Fanjul brothers combined net worth estimate nearly to $100 billion) the brothers are easy targets for muckrakers from 60 Minutes to the National Enquirer, most of whom portray the Fanjuls, in not so subtle racist undertones, as symbols of why America is going down the toilet.”

Ending the cycle excesses allotted to Florida sugar barons are difficult to implement, because those subsides include allocations for many small farm operators in the mid-west who produce sugar beets, honey, maple syrup and corn. These subsidies are woven into the fabric of the American food supply chain and the sugar industry has grown so essential that price subsides are needed to create a diverse collection of producers. The governmental support functions as a hedge against shortages that would occur if any large region would suffer catastrophic crop losses (de Gorter etal, 2008).

Critics of the 1.4 billion dollar Federal Sugar program claim that it adds about 14 cents to every pound of sugar produced in the United States when compared to world sugar exports on the open market.  of which $560 million is sent directly to producers and estimates that $50 million goes directly into the pockets of the Fanjul family (Van Wyk 2013). Supporters of the domestic sugar program argue that foreign produced sugar also reaches the global marketplace with the aid of price supports from their exporting countries. In fact on supermarket shelves US sugar retails for around 39 cents per pound, priced much lower than sugar sold in France for 68 cents or Japan at $1.04 per pound (Pye-Smith, 2002). Paul Roberts (1999) summarized global sugar market data with: “When analysts factor in all sugar programs worldwide, the adjusted world price is around 16 cents a pound–or about a nickel less than American consumers are forced to pay.”

However unjustified the payments to the wealthy Fanjul family seem in the present political environment, it would be easy to overlook how sugar subsidies came into play and how the Fanjul family gained its political favors. The Fanjul family sugar venture began as a heavily subsidized pro-American propaganda tool at the height of the cold war. The Fanjul family, at one time, controlled the sugar production in Cuba until their family’s cropland was confiscated by Fidel Castro during the Cuban Revolution. The Fanjul family was forced to flee to Florida without much of their Cuban wealth and the plight of the once powerful Fanjul family became world news. The US government seized the international publicity as a propaganda opportunity and provided support to the Fanjuls to launch an American based sugar venture with the hope that their success would advance global support for American capitalism. If successful the new American sponsored Fanjul empire could also be used by politicians flood the world market with taxpayer subsidized sugar and devastate the rival Cuban economy that relied heavily on sugar exports. Success of American sugar would provide clear proof that capitalism would prevail over communism, and hopefully slow the communist global expansion (Warben, 2004).

However, today using tax dollars to support land that can barely support sustained sugar production no longer makes economic or political sense. “Paying lavish subsidies to produce sugar in Florida makes as much sense as creating a federal subsidy program to grow bananas in Massachusetts,” quips James Bovard of the virulently anti-subsidy Cato Institute. “The only thing that could make American sugarcane farmers competitive would be massive global warming (Roberts, 1999).”

Despite the widely publicized excesses and abuses of farm subsidies in general and the sugar program in specific, one simple truth continues to recur: Despite decades of  opposition, commodity subsidies including agricultural price supports have continued to survive unhampered by the best efforts of disgruntled taxpayers and political opposition. Price support advocates insist that price support programs are much more complicated than the limited perspective seen as increasing producer profits. Supporters of subsides suggests that subsidies need to protected in the interests of national security and global self-sufficiency. Many supporters believe that it is vital to economic growth to maintain domestic supplies of social and industrial staples such as agricultural commodities, petroleum, mining and timber. While most analysts agree that Americans could import these same commodities for lower costs than they are supplied domestically; however, doing so would result in dependence on those exporting nations which may be a larger risk that than the cost of subsidizing domestic production (De Gorter etal, 2008).

A supporting argument could be made that the United States is not alone in subsidizing major commodities, in fact every one of the top ten countries in GDP per capita production also subsidizes raw materials and agricultural commodities (Sumner, 2008). It could be argued that regardless of the drawbacks of taxpayer price supports that a century of economic natural selection suggests that the benefits of these supports outweigh negative impact that they have had on these nations’ economies. In Daniel Sumner’s article Agricultural Subsidy Programs he summarized:

“The highest national average support equivalent rates, across all major commodities, are offered in Norway, Switzerland, and Iceland, with average subsidies of about 65–75 percent of the value of production, and in Japan and Korea, with support rates of 60–65 percent. The lowest subsidy rates (less than 4 percent) are found in Australia and New Zealand. The average support rate in the European Union is about 35 percent of the value of production (Sumner, 2008).

It also seems worth noting that according to 2005 data published on the United Nations Development Programs website (data.undp.org/dataset/GDP) that four of the five countries providing the highest percentage of agricultural subsidies are also among the top twelve ranked countries in GDP per capita. Decades of agricultural subsidies among prosperous companies would suggest that it would be unlikely to conclude that the cost of the farm subsidy programs outweigh the economically stabilizing benefits. The website also provides a “Quality of Life Index for 2014” that ranks the top countries in the following order: Switzerland, United States, Germany, Sweden and Finland in terms of standards for living. All five top countries are also criticized for commodity subsides and production quotas (Zhu, 2010).

In conclusion, while the obvious costs and abuses of the Florida Sugar Industry are very similar to the drawbacks found in the national welfare system. In the American welfare system there are many obvious cases of abuse and excess; however, it would be difficult to predict how the economic impact if the social safety nets were removed. Much like the commodity subsidies, social welfare programs exist in every global superpower. Cutting costs on welfare programs has historically resulted in increased spending on law enforcement, expense in housing prisoners and mediating the costs of property crimes. The explosion in destitute poverty could quickly climb as citizens who have failed to assimilate into the workforce could no longer provide essential food and shelter, the civil unrest that often coincides extreme poverty often results in political instability. So much like welfare programs, the stability that results from supporting prices of commodities such as the sugar, oil and timber industries are not an easily measured expense to those of us who see only a small slice of how such subsidies are spent.

Historically individual grain and livestock farmers are capped to receive a limit of $100,000 per year in taxpayer subsidies to support their single family production operations, many with annual revenues of less than $200,000 per year. However; the design of the sugar program circumvents per farmer subsidy caps by way of subsidizing the market price of sugar by the pound rather than allocated as grain farmers in per acre farmed. This form of price support lends itself to exploitation by the two large corporate producers who control the production of 80 percent of American grown sugarcane, and as a politically embarrassing result funnels between $50 and $100 per year into the pockets of two immigrant billionaires: Alfy and Pepe Fanjul. Several million per year that the Fanjul brothers then kick-back to state and federal politicians who protect the sugar bill from tax reformers, environmentalists, labor lawyers (Pye-Smith, 2002). However, if history repeats itself, economic Darwinism will prevail and like the fate of many fortunes before, America can expect that it will be unlikely that this subsidized monopoly will survive for the heirs of the Fanjul fortune in the hundred years to come.

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