On May 13, 2002, President Bush signed the 2002 U.S. Farm Bill, which the legislation calls The Farm Security and Rural Investment Act of 2002. The new law replaces the 1996 Farm Bill and will have a duration of six years. It is divided into ten titles (Table 1 ). The total cost during the six years is estimated at more than $27 billion. The law covers almost 20 commodities under Title I, with sugar as one of them.
General Features of the Sugar Program
The essential features of the Sugar Program were not changed by the new legislation. In general, the program consists of a loan rate, which is the legislated price per pound at which processors can obtain financing from the government by committing raw cane sugar as collateral. The price is maintained through a process of import quotas intended to balance supply and demand. After the 1996 legislation, loans became recourse and nonrecourse. Loans are recourse when the Tariff Rate Quota (TRQ: a two-tiered tariff scheme implemented by the United States on October 1, 1990, to satisfy GATTs ruling on U.S. quotas) on sugar imports is at 1.5 million tons or below. When the TRQ exceeds 1.5 million tons loans become nonrecourse. (A recourse loan means that the U.S. Department of Agriculture can demand repayment of the loan at maturity, regardless of the price of sugar. In contrast, nonrecourse loans require that the government accepts the sugar when the loan matures in lieu of loan repayment in cash, at the option of the processor.) Through the years, there have been variations in these general features of the program. It has also included or eliminated regulations concerning the no-cost provision, marketing controls, market stabilization price, re-export program, payment of a service fee, etc. This document provides a detailed comparison of the provisions in the1996 and 2002 farm bills and a brief summary of the changes made to the sugar loan program.
Main Changes in the 2002 Legislation
Very briefly, the changes in the Sugar Program of the 2002 Farm Bill are as follows:
Terminates marketing assessments.
Makes in-process sugars eligible for loans.
Re-institutes the “no-cost” provision.
Grants the USDA’s Commodity Credit Corporation (CCC) authority to establish a pre-plant, payment-in-kind program for sugar beet and sugarcane processors.
Excludes sugar loan recipients from the requirement of paying an interest rate that is one percentage point above the CCC’s cost of borrowing.
Caps the minimum payment requirement for sugar beet growers.
Eliminates the forfeiture penalty.