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Thanks, Florida!

Florida just bought 300 square miles of cane fields in the everglades to return them to wetlands. They paid $1.75 billion. That buys out US Sugar that was responsible for 10% of the US sugar lobby. In April, in response to one of Rand's posts, I wrote that we needed to find a way to buy out big sugar. For 6 MT times $0.10 implicit subsidy/lb, that's $1.2 billion/year. US Sugar's share of that is $120 million per year. So $1.75B is a pretty good price for their concession.

Sweet deal, Rand! Thanks for taking one for the team as a Floridian to lower sugar prices nationwide.


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Rand Simberg wrote:

While I think this is good as far as it goes, I'd rather have seen action at a federal level to get rid of the subsidies and tariffs, and just put them out of business without us having to pay the to do so.

And without doing that, I don't see how this drops sugar prices in the US. They'll continue to be propped up by the tariffs. All it does it help restore the Everglades.

Karl Hallowell wrote:

Actually this is a good sign. In a scenario where tariffs and subsidies are mostly removed, one expects the smarter players to start selling off their sugar concessions in anticipation of the leveling of the sugar market. Doesn't mean it'll happen, but looks to me like big money is heading for the exit.

Jonathan wrote:

I don't know. I too would prefer to see the federal price supports and import quotas eliminated, but so far that's been politically impossible. The bigger question may be whether similar deals can be worked out with US Sugar's competitors. If so, then it's probably worth doing such deals ASAP even if it costs taxpayers a lot of money up front, because sugar subsidies are so costly to the public that in the long run it's worth a huge amount to eliminate them, and buyouts may be the only way to do it. But if such deals aren't doable it's conceivable that US Sugar's market share will ultimately be taken over by the other domestic sugar companies. The industry's willingness to deal probably depends heavily on how it perceives the odds of repeal of price supports. Eliminating one player may do some good by reducing total political contributions.

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About this Entry

This page contains a single entry by Sam published on June 28, 2008 7:24 AM.

Caulking Up The Leaks was the previous entry in this blog.

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