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Corn growers riled by policy

The Daily Advertiser | 20 January 2008

Corn growers riled by policy

Philip Brasher
Gannett News Service

The new year brought a milestone for U.S. and Mexican farmers. Under the North American Free Trade Agreement, duties on corn, sugar and other farm commodities have now ended.

That was supposed to clear the way for Mexico’s growing soda industry to sweeten most soft drinks with U.S. corn syrup rather than more expensive Mexican-grown sugar. That’s a longtime goal of American corn growers and agribusiness giants such as Cargill Inc. and Archer Daniels Midland Co., which process corn into high-fructose corn syrup.

Now, they worry that the goal may not be realized.

U.S. and Mexican sugar growers have agreed on a plan to control sugar trade between the two countries. The plan, on which U.S. industry officials briefed congressional aides last week, would restrict the amount of surplus Mexican sugar that could be shipped to the United States as soft-drink makers shift to U.S. corn sweetener.

The plan puts no limits on the amount of U.S. corn syrup that could be shipped to Mexico, says Jack Roney, director of economics and policy analysis for the American Sugar Alliance, which represents U.S. sugar growers.

But that assurance isn’t good enough for U.S. corn processors and their allies in Congress, who say that tinkering with NAFTA would give Mexico an excuse to restrict corn syrup imports again.

"We now have NAFTA fully enforced. We have free trade in sugar. We have free trade in high-fructose corn syrup, and we want to make sure we don’t have any interference," said Sen. Chuck Grassley, the top Republican on the Senate Finance Committee, who has battled with Mexico for years over the sweetener trade.

The sugar industry’s plan needs approval from the Mexican and U.S. governments. The Bush administration has not announced a position. Some of the agreement’s provisions would be written into a new farm bill now pending in Congress.

Food and candy companies have long complained that U.S. sugar policy keeps sugar prices artificially high by limiting imports. A coalition that includes General Mills, Kellogg, Kraft Foods, Hershey and Sara Lee denounced the growers’ agreement Friday as an attempt to undo NAFTA.

Bruce Babcock, an economist at Iowa State University, said the dispute ultimately means little for corn farmers, given that grain prices are soaring. About 4 percent of U.S. corn is used to make high-fructose corn syrup, compared with about 25 percent that goes into fuel ethanol.

U.S. sugar growers, however, face a political problem if their Mexican counterparts lose their soft drink market and ship their excess sugar to the United States. That’s because the new farm bill is likely to require the U.S. Agriculture Department to buy up that surplus Mexican sugar and sell it at a steep discount for processing into ethanol.

Babcock said the cost of that sugar-to-ethanol program could undermine political support for the U.S. sugar policy. The USDA traditionally has kept domestic sugar prices artificially high - at little or no cost to taxpayers - by strictly limiting imports of cheaper foreign sugar.

"What the sugar guys are trying to do is to forestall what they know will be the demise of the sugar program because of NAFTA," Babcock said.

 source: Daily Advertiser