An economic history of the United States sugar program

Abstract

The United States Sugar Program has utilized tariffs, import quotas, domestic processor marketing allotments, and a non-recourse loan program to raise U.S. sugar prices. The intent of the program has been to increase the incomes of U.S. sugar beet and sugarcane producers and processors. This thesis analyzes world and domestic sugar market conditions surrounding major changes in the sugar program. A theoretical model is developed in which sugar beet processors are depicted as monopsonist purchasers of sugar beets as inputs into sugar production. This model suggests that incentives exist for sugar beet producers to vertically integrate into processing activities. It also shows that vertical integration incentives are greater in the presence of a tariff equivalent than in the absence of a tariff equivalent. The model, along with a review of Congressional hearings, is used to explain the lobbying pressures surrounding passage of major sugar program changes. The study shows that resources expended on lobbying in favor of a sugar program increase when the world price is relatively low.