1. Retains inventory management approach
   • No payments to producers
   • USDA balances sugar supplyand demand to avoid sugar loan forfeitures and government cost
     • Controlling domestic sugar sales: When U.S. production exceeds USDA’s determination of allowable sales, U.S. sugar producers store surplus at their own expense (“blocked stocks”)
     • Controlling imports: Tariff-rate quota (TRQ)
       • But Mexican imports under NAFTA uncontrolled
         
         
2. New market balancing mechanism: Limited sucrose-ethanol program
   • To be used onlywhen imports over supply the domestic market
   • Not to be used to clear domestically produced blocked stocks
     • USDA would estimate import-over supply amount and invite bids from sugar producers to supply sugar and from ethanol producers to buy sugar; bid basis will maximize efficiency, as lowest bidding sugar producers and highest bidding ethanol producers participate
       • Deal with uncertainty of Mexican imports–may not be needed in some years
       • Help to reduce U.S. dependence on foreign oil
         
         
3. Minimum Overall Allotment Quantity(OAQ): U.S. producers’ allowable sales
   • Set at no less than 85% of domestic consumption–allotments no longer trigger off with import surge
     • Consistent with 86% share during the six years of the 2002 Farm Bill
   • Forty exporting countries retain guaranteed preferential access to U.S. market under WTO and FTA rules; Mexico access unlimited
     • U.S. producers’ allowable sales of sugar into the U.S. market drop if U.S. consumption drops; exporting countries sales to the U.S. market do not drop if U.S. consumption drops
   • Production in excess of OAQ: Still to be stored at producers’ expense
     
     
4. Import management
   • Set initial TRQ attrade-agreement-mandated minimum (WTO + CAFTA+ Peru); TRQ increase before April 1 (Oct-Sep crop year) only in case of crop emergency
     • Increase TRQ on April 1 if domestic production, plus initial TRQ, plus Mexican imports inadequate to meet domestic demand
     • TRQ can still rise if needed; only timing of added imports affected
     • U.S. likely to remain world’s second largest sugar importer
       
       
5. Loan rate increase: Three-quarters of acent per pound, raw value, phased in over four years –no change for 2008 crop; ¼ cent increases in crop years 2009-11
   • Raw cane loan rate rises graduallyfrom 18.00 cents/lb in 2008 to 18.75 cents in 2011(=4.2% increase); proportionate increase for refined beet sugarloan rate
   • First loan rate increase since 1985 (Inflation since 1985: 93%)

American Sugar Alliance, May 2008