Question

The text discusses the sugar price floor. A loan program for sugar farmers creates the price floor. The program allows farmers to borrow money for production expenses from the Department of Agriculture. When a loan falls due, a farmer must repay it, plus interest—unless the price of sugar falls under 18 cents per pound. If that happens, the farmer can repay the loan, at the rate of 18 cents per pound, by turning sugar over to the Department of Agriculture.

Use the following sources to research the loan program. List three arguments in favor of maintaining the program and three in favor of eliminating it, or reducing its scope. Finally, write your own conclusion regarding what should be done with the program, including references to the sources you used.

1) The American Sugar Alliance - "a national coalition-dedicated to preserving a strong domestic sweetener industry."

2) The Coalition for Sugar Reform - is an alliance of consumer, food and beverage manufacturers, trade advocacy, environmental, taxpayer watchdog organizations, responsible government advocates, think tanks and other interests.

The first argument in favor of keeping the Sugar policy has to do with helping the American farmer by insuring them that the price floor for sugar will always be at 18%. With the price floor intact they don’t have to worry about the demand of sugar going down causing the price to dry up. After reviewing figure 3.9 in the text book, the demand for sugar in this country is far below the $.18 the government is willing to buy it for. This is good thing for the sellers (farmers) because it allows them to sell a product at a higher price than it would probably sell for if the prices were determined by the market mechanism. The second point in keeping the policy intact, according to the “American Sugar Alliance (ASA)” the policy doesn’t effect the American tax payers and it helps candy bar companies keep their over head down and profit margins up because the cost of sugar in their products hasn’t went up in 30 years but the price of candy bars have. The final argument in keeping the policy intact, consumers are getting a good deal on goods at the grocery store according to the ASA. People around the world an average pay 14% more than the US does.

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The current U.S. sugar program allows the U.S. sugar farmers to survive in case of the overproduction of sugar and a plummet of its price. It maintains the price at a certain level per pound by limiting the sugar imports and it provides loan to farmers in case ...

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