03/13/2013 09:46 am ET

USDA Weighs Sugar Bailout That May Boost Candy Prices: Report

U.S. sugar producers are poised to get a sweet deal.

The USDA is considering buying 400,000 tons of sugar in an aim to limit supply and boost prices so that sugar producers can pay back government loans that they’re in danger of defaulting on, the Wall Street Journal reports. The move would be an exercise of an untested provision inserted in the 2008 farm bill called the Feedstock Flexibility Program, which allows the USDA to intervene in the market to raise prices.

While the artificial price boost would benefit companies that manufacture sugar, the losers may be the makers of your favorite candies -- like Mars, Hershey and Nestle -- and that may mean higher candy prices.

(Read the full report on the bailout in the Wall Street Journal)

The sugar industry has long benefitted from controversial government subsidies, and it doesn't appear that will change anytime soon: The Senate voted down an amendment just last June that would have slowly stripped the sector of federal government aid, according to Businessweek. Though it’s not uncommon for the government to prop up certain commodities, the sugar subsidy functions differently than most. Instead of sending money to farmers to elevate prices -- like in the case of corn, wheat and rice -- the sugar program limits imports.

A bipartisan group of Senators, who backed the amendment, wrote in an August blog post for The Hill that by tightly controlling the sugar supply, the government is boosting prices and costing the country $3.5 billion and 20,000 jobs per year.

Candy companies, for their part, claim they often have to raise prices or slow down hiring to cope with the artificially high cost of sugar.

It could be difficult to get rid of any sugar subsidies though. Sugar makers spent more than $2 million to lobby lawmakers last year, according to data from Open Secrets cited by U.S. News and World.



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