USDA Reports Confirm: Foreign Sugar Subsidies as Sour as Ever

If you thought the global sugar market was cleaning up its act after being named one of the world's most distorted commodity markets - think again.

Every year, the U.S. Department of Agriculture puts together thousands of reports, published as part of the Global Agricultural Information Network (GAIN), including annual reports that detail many ways foreign governments are intervening in their domestic sugar markets. The foreign subsidies and market controls detailed in these GAIN reports influence how sugar is sold on the highly volatile world sugar market, and ultimately underscore the importance of U.S. sugar policy. These reports do not delve into all the ways foreign countries support their sugar industries, such as through exchange rate and credit policies, nor do they quantify those supports as some other reports might (see, for example, 2021/22 calculations of $17.6 billion in support to the Indian sugar industry).

We've saved you some time and pulled every mention of sugar, compiled into an easy-to-read report here.

For most sugar-producing countries, protecting their domestic farmers, processors and markets are their primary policy objectives to ensure food security and economic stability. In fact, we found the GAIN reports detailed some sort of government intervention in 28 countries! These 28 countries typically supply 85% of the world's exports, with more than 70% of the world's exports coming from just three countries (Brazil, India, and Thailand).

Nearly every GAIN report we reviewed indicated that foreign countries are increasingly concerned about the competition that their domestic sugar crop farms and mills are facing from cheap, imported sugar. Essentially, most sugar-producing countries cannot compete with the highly subsidized world market and have protections in place to maintain a strong domestic industry. To do that, most countries have implemented some form of trade restriction, ranging from banning or limiting exports to increased import duties and other import controls.

The most extreme example of government oversight can be seen in India. It's no surprise that India is the poster child of bad behavior here, as it subsidized its sugar industry by a whopping $17.6 billion in 2022 - even after being found in violation of its World Trade Organization commitments on sugar in December 2021.

Outside of government export controls, several countries also offer incentives to promote domestic sugar, such as rebates (i.e., tax cuts) for use of domestically produced sugar and ethanol blend requirements using sugarcane ethanol.

These reports show that the world market is neither a free nor fair market. Until a true free market can be developed - one where every country drops their market-distorting subsidies - Congress should continue to support a strong U.S. sugar policy in the Farm Bill. U.S. sugar policy is designed to cost taxpayers nothing while supporting family farmers, good American manufacturing jobs, and our national food security. Talk about sweet!