Sugar deal a sweet dream for ethanol

In the down-is-up world of American biofuels, success carries enormous costs.
The latest evidence of these costs is an amendment tucked into the House version of the 2007 farm bill: As Mexican granular sugar flows into the U.S. in 2008, the U.S. Dept. of Agriculture will oversee a supply-balancing program where the extra sugar can be purchased, at government-subsidized prices, by American ethanol makers.
Sweet, eh?
Moreover, if you think American corn growers are angered by seeing part of their fast-growing ethanol market legislatively handed to imported sugar, think again.
Ethanol, after all, is the rabbit hole that swallowed logic and economics long ago.
NAFTA. When passed in 1993, the North American Free Trade Agreement gave the U.S. a 15-year reprieve from unrestricted, low-cost Mexican sugar exports. The Mexicans hated the delay, but it was a key compromise cut by both Presidents Bush (the first one) and Clinton to get NAFTA through Congress.
During the resulting moratorium, however, U.S. high fructose corn syrup – made from taxpayer-subsidized, cheap American corn – poured into Mexico to replace that nation’s granular sugar in much of its soft drink industry.
Now, 15 years later, the piper must be paid.
Or, as Phillip Brasher of the Des Moines Register noted in his late-July story on the Mexican sugar dance: “Yes, high fructose corn syrup will be sent to Mexico to displace the sugar that will then be shipped to the United States. Taxpayers can then pay for buying surplus sugar and converting it to ethanol.”
Protection? The U.S. sugar industry doesn’t explain the swap so starkly. To it, the House plan is an extension of current sugar import policy – a tangle of mandated, USDA-administrated quotas, tariffs and loans – that protects American producers from a tidal wave of vastly cheaper imports.
In short, the fact that we have a domestic sugar price support program (as do most nations) leads us to need another program to handle the 2008-and-thereafter unrestricted Mexican imports.
“If this provision were not in place,” explains Phillip Hayes of the American Sugar Alliance, “there could be very costly, massive domestic (USDA loan) forfeitures by U.S. sugar producers.”
Not cheap. But avoiding those potential forfeitures by directing subsidized sugar to ethanol makers won’t be cheap either.
Although the Congressional Budget Office doesn’t break out the exact cost of “Feedstock Flexibility Program” – the official name of the sugar idea – it estimates the House Ag Committee’s 2007 “bioenergy program