Corn syrup's DC attack on sugar could hit Minnesota beet industry

WASHINGTON – An unexpected declaration of war by corn syrup makers against sugar refiners in the nation's capital will likely resonate in Minnesota's Red River Valley.

The Corn Refiners Association, a trade group made up of four giant agribusinesses including Minnetonka-based Cargill, has hired lobbyists to gut a part of the U.S. sugar program that lets sugar makers pay back government loans with sugar instead of cash. Minnesota's nation-leading sugar beet growers consider the program's controversial but long-standing combination of price supports, loan guarantees and import quotas crucial to their survival.

"This is the first time that I'm aware of where you've got one ag group hiring lobbyists to attack another ag group," said U.S. Rep. Collin Peterson, D-Minn., a 25-year House member and one-time chairman of the House Agriculture Committee.

It is also the first time the century-old corn refiners group has so directly challenged the legendary sugar lobby. "The sugar program has become an embarrassment," refiners association president John Bode said. "Since the [2013] farm bill, there have been substantial defaults [on government sugar loans]. … We think it's reasonable to limit the potential taxpayer loss."

The sugar program lets sugar refiners borrow money from the government and put their product up as collateral. In 2013, oversupplies of sugar drove down prices and led some refiners to forfeit sugar rather than pay cash for loans. The sugar program does not allow the government to sell forfeited sugar for food in the U.S. So the government was forced to sell at very low prices in the world market or to U.S. ethanol makers. As a result, the government collected hundreds of millions of dollars less than what sugar companies owed.

Still, the corn refiners' new strategy puzzles some agricultural economists. They say high U.S. sugar prices have historically allowed U.S. corn syrup makers to charge more for their products. Gutting the sugar loan program could actually lower the syrup industry's profits by driving down sugar prices and forcing lower syrup prices to maintain markets, said Gary Brester of the University of Montana.

"The argument," Brester explained, "has always been that the corn syrup people loved the sugar program."

No longer.

"Our members compete successfully around the world," Bode said. "They are not afraid of the free market."

The corn refiners' move openly aligns them for the first time with the Coalition for Sugar Reform, a group of soda-pop producers, candy makers, confectioners, free-market advocates and consumer groups who revile the sugar program.

Cargill is on board with changing the loan program, but did not call for scrapping the entire sugar program. The company "fully" backs the Corn Refiners Association's strategy "to publicly support an effort by the Coalition for Sugar Reform … to limit non-recourse loan payouts under the sugar loan program," Cargill officials said in an e-mail. Restricting the loan program will "level the playing field" for corn producers and sugar producers.

This sets up a battle of lobbying giants that includes American Crystal Sugar, a financial juggernaut based in Moorhead, Minn., that annually makes campaign contributions to hundreds of members of Congress and spends millions more to lobby them in behalf of the sugar program.

Kevin Price, American Crystal's Washington lobbyist, declined to comment on the corn refiners' aggressive new challenge and referred the Star Tribune to the American Sugar Alliance, a trade group.

"It would be unfortunate, to say the least, if any members of the agricultural community were actively working to reopen the farm bill and aiding agriculture's opponents in their quest to gut the safety net on which all U.S. farmers depend," Sugar Alliance spokesman Phillip Hayes said in an e-mail.

Peterson, currently the ranking minority member of the House Agriculture Committee, said the committee's Republican chairman has said he will not reopen the five-year farm bill for changes.

Bode said that opponents of the sugar program will try to amend the agriculture appropriations bill instead.

That too will be a heavy lift.

Minnesota politicians vowed to fight for the sugar beet industry, which despite recent problems remains one of the state's economic mainstays.

Peterson's congressional district in western Minnesota includes the bulk of the state's sugar beet farms and many of its cornfields. But Peterson said the corn refiners' war on sugar created no new competition among his constituents.

"I've talked to the corn farmers," he said. "They didn't know about this. I'm more committed to the sugar program than ever."

The Minnesota Corn Growers Association, the nation's largest state growers association, did not ask the corn refiners to take action, nor did the group have any say in the decision, officers said.

"The sugar program is not high on our radar," said Bruce Peterson, a Northfield corn farmer and the group's president.

In statements to the Star Tribune, U.S. Sens. Al Franken and Amy Klobuchar reiterated support for the sugar program in reaction to the corn refiners' move.

"The sugar program supports more than 20,000 jobs in the Red River Valley of Minnesota and North Dakota," Klobuchar said. "Minnesota is the fifth-largest agriculture state in the country, and this attempt to reopen the farm bill would be detrimental to agriculture all across the state."

Franken called the sugar program "critical to jobs and economic development."

"The program simply protects Minnesota sugar growers who would be at big competitive disadvantage to countries like Brazil and Mexico that deeply subsidize their own producers. … I think it's misguided to try to eliminate it."

The Corn Refiners Association obviously does not agree. Bode conceded that the sugar industry boasts "one of the best, most effective lobbies in Washington." Corn syrup forces also recognize that it may take years to undo the sugar program.

"There are 70 members of Congress who have never voted on the sugar program," Bode said. "We want to make an impression on them before they do. We want to have the sugar program in 2016 presidential debates. What we plan to do is tell the truth in a very public way."

Staff writer Allison Sherry contributed to this report.

Jim Spencer • 202-383-6123