TESTIMONY BY CONGRESSWOMAN PATSY T. MINK
Senate Agriculture Committee
Hearing on U.S. Sugar Policy
July 26, 2000
Thank you, Mr. Chairman, for the opportunity to present testimony on a topic of enormous importance to my district, to the State of Hawaii, and to this nation's rural economy.
I would like to focus my remarks on two subjects: First, the severity of the crisis facing American sugar growers. Second, the flawed General Accounting Office Report on U.S. sugar policy.
U.S. raw cane sugar prices have plunged from 22.6 cents per pound last July to less than 17 cents per pound this month. This is the lowest level we have seen in nearly 20 years--since 1981 when there was no U.S. sugar policy.
Because of flat producer prices since 1985 and rising sugar production costs, Hawaii's sugar industry has shrunk in the past 10 years from 12 sugar companies to just three. An industry that used to be one of Hawaii's largest and was a major employer on four islands is now present on only two islands--Kauai and Maui.
One plantation on Kauai closed earlier this year; another announced two weeks ago that it will close next year. These plantations had been operating for nearly a hundred years.
The loss of 10 plantations in my district represents an economic, social, and environmental disaster for my district and my state.
One might think that these agricultural jobs lost are being readily absorbed by the tourism and other industries, but, sadly, this has not been the case. It is a difficult job transition to make. Most of the jobs are considered heavy equipment and industrial type work, not easily converted to hotel-restaurant work.
For example, on the Big Island of Hawaii, formerly the biggest sugar-producing island, most of the former cane land is idle and many former cane workers are still unemployed. And erosion of the formerly lush, irrigated cane lands is causing dust storms where there once were clear skies and green fields wherever the eye could see.
Hawaii's remaining producers continue to achieve the highest yields of sugar produced per acre, and per worker, in the entire world. And they do this while adhering to some of the world's highest standards, and highest costs, for worker wages, benefits, safety and protection, and for air and water quality.
Contrast the sugar produced in Hawaii and on other American farms with the sugar produced on the world dump market, which is dominated by generously subsidized European sugar and by sugar from developing countries with deplorably low standards for workers and the environment. Brazil, for example, the world's biggest sugar exporter, still allows tens of thousands of children to toil in its cane fields.
This Committee will probably hear repeatedly today about a General Accounting Office report on sugar policy.
In 1993 the GAO issued a fundamentally flawed report on U.S. sugar policy. At my request, the U.S. Department of Agriculture reviewed the 1993 report; they found multiple errors in facts and methodology and have condemned the report on numerous occasions.
In June 2000, the GAO updated the 1993 report. It repeats the same flawed analysis.
This time, at the insistence of myself and a large number of my House colleagues, comments by USDA and by the U.S. sugar industry were included in the back of the final report.
Career analysts at the U.S. Department of Agriculture in their 11-page criticism, beginning on page 55, said the report "suffers in a number of regards relative to both the analytical approach and . . . the resulting conclusions." USDA concluded: "GAO has not attempted to realistically model the U.S. sugar industry. The validity of these results are, therefore, suspect and should not be quoted authoritatively."
USDA explained: "First, the cost/benefit evaluation methodology . . . is not adequately developed or justified (and key omissions) obscure or distort the meaning and significance of the results. Second, the report provides poor to non-existent documentation of the economic model used in the analysis. The model description is confused and provides no basis for possible replication or validation. Third, there are a number of inconsistencies between the results presented and the modeling description or alternative data sources that undermine confidence in the results."
The U.S. sugar industry experts also blasted the report. A 16-page criticism submitted by the American Sugar Alliance, beginning on page 78, concluded: "The methodological underpinnings of the GAO study are so fundamentally flawed, the tone is so biased, and the errors, omissions, misrepresentations, and contradictions are so numerous, that the study should be scrapped and redone."
The experts at USDA and ASA agreed on the two most fundamental flaws of the GAO report:
In fact: The so-called "world market" for sugar is just a dumping ground for surplus sugar from countries that subsidize sugar production and exports. World dump market prices have averaged less than half the world average cost of producing sugar for most of the past two decades.
In fact: A straightforward assessment of the cost or benefit of U.S. sugar policy to American consumers can be obtained by comparing the actual prices paid by consumers here and abroad: (1) U.S. retail sugar prices are 20% lower than the average of other developed countries. American consumers save $2 billion per year on their sugar purchases compared with what they would pay at the developed-country average retail price. (2) In terms of minutes of work required to buy one pound of sugar, the U.S. is third lowest in the world. Sugar is more affordable only in Switzerland and Singapore.
In fact: History unequivocally shows the food manufacturers and retailers pass no savings along to consumers when the price they pay producers for their sugar drops. From 1990 to 1999, the wholesale producer price for sugar dropped by 11%, but retail sugar prices rose 1% and sweetened product prices--for items such as cereal, candy, ice cream, cookies, and cakes--rose. Since the 1996 Farm Bill began, wholesale refined sugar prices are down more than a third, but the retail refined sugar price has risen, not fallen, and sweetened-product prices are up 6%-10%.
There are numerous other errors, flaws, and omissions in the GAO report. The following are just a few.
In conclusion, Mr. Chairman, the U.S. sugar industry has provided high quality sugar at low, stable prices and has paid nearly $300 million to the U.S. Treasury during the 1990s.
With producer prices at 20-year lows, sugar farmers need help. They deserve our help, just as we have helped other farmers in crisis.
In FY1999 alone, net outlays by USDA's Commodity Credit Corporation for both regular and emergency farm support was $6.2 billion for feed grains, $3.4 billion for wheat, $1.9 billion for cotton, $1.3 billion for soybeans, $911 million for rice, $480 million for dairy, and $113 million for tobacco. Outlays for these commodities will be far higher in FY2000.
In 1999, sugar producers paid $51 million in marketing assessments and received no support payments or emergency aid.
The Congressional Research Service has provided me with a list of states ranked by emergency farm assistance received in FY2000. My state of Hawaii was right at the bottom--with only $500,000 in assistance. Farmers in both Texas and Iowa received more than $1 billion in emergency farm assistance.
There is probably no part of the country more vulnerable to the sugar price crisis than Hawaii, but the problem is national. Growers in 16 states are in serious trouble.
Thank you for the opportunity to testify.