COPY OF THE LETTER TO THE VICE PRESIDENT TRANSMITTING THE ADMINISTRATION'S RECOMMENDATION FOR 1965 SUGAR LEGISLATION

Hon. HUBERT H. HUMPHREY,
President of the Senate.

DEPARTMENT OF AGRICULTURE,

Washington, D.C., August 17, 1965.

DEAR MR. PRESIDENT: We submit herewith a proposed bill to amend and extend the Sugar Act of 1948, as amended. The proposed legislation would extend the act for 5 years to December 31, 1971, and would increase marketing quotas for domestic areas by 580,000 tons beginning with the current year but would assign all market growth to the foreign quotas until such quotas reach approximately the same proportion of the market as provided under the current act. With annual national requirements of 9.7 million tons, the marketing quota for the domestic beet sugar area would be increased by 375,000 tons to 3,025,000 tons and the quota for the mainland cane sugar area, by 205,000 tons to 1,100,000 tons. These quotas would be unaffected by any change in requirements between 9.7 and 10.4 million tons but would absorb 65 percent of any reduction from or addition to requirements outside of that range, apportioned between the two areas in relation to their basic quotas.

The Republic of the Philippines, in addition to its present quota of 1,050,000 tons, would receive 10.86 percent of market growth between 9.7 and 10.4 million tons.

As under present law, 57.77 percent of foreign quotas other than for the Republic of the Philippines would be reserved for Cuba. This reserve during the period that it is not being serviced by Cuba would be apportioned among countries rather than handled globally as under the 1962 amendments to the act.

Permanent quotas for foreign countries other than the Philippines and the Cuban reserve would be apportioned among those countries on a uniform basis, i.e., their exports to the United States in 1963 and 1964, a period when higher prices could have been realized by exporting to other markets. However, most of the market growth would be prorated only among the developing countries in the group.

The President would be authorized to withhold the quota for any foreign country whenever he finds that such action would be in the national interest and the quantity so withheld would be prorated to quota countries of the Western Hemisphere. The President could likewise determine that a country's quota should be restored in the national interest in any manner he finds appropriate except that the entire quota would need to be restored for the third calendar year following such finding.

Deficits in domestic area quotas and in foreign country quotas would be allocated-47.22 percent to the Philippines and the balance

to Western Hemisphere countries on a pro rata basis. The Philippines' share would be reduced if quota is restored to Cuba.

From early 1963 through midyear 1964, sugar was scarce throughout the world. Nevertheless, the United States obtained adequate supplies substantially (about $30 per ton on average) below the international price. This was possible because of increased production on the mainland of the United States and through the cooperation of numerous foreign supplying areas. The proposed amendment would enable the two mainland domestic areas to market sugar in future years at levels only slightly below their present restricted production. Our total import requirements at the current level of sugar consumption would be apportioned to individual countries in accordance with their record of supplying this market in 1963 and 1964. Foreign quotas were determined administratively in this manner for 1965 in the absence of specific statutory direction. The various countries, thus, would be able to continue their sugar exports to the United States generally in line with their recent and current marketing arrangements. The price disadvantage which foreign countries sustained when they committed 1963 supplies to this market was not nearly so great as when they committed 1964 supplies. Accordingly, the proposal would assign double weighting to 1964 performance. Increases in foreign quotas stemming from rising sugar consumption would be assigned principally to developing countries.

The bill provides that a country's quota would be reduced in subsequent years for any unjustified failure to fill its quota. The reduction would amount to the smaller of the shortfall or the amount by which its exports to the United States in the shortfall year were less than 115 percent of its preceding year's quota. During any period when quotas are suspended by the President, the Secretary would be required to determine consumption requirements and foreign quotas on the basis provided in the act and if à country fails to ship into the United States the amount of the quota so estimated, its quota would be reduced in subsequent years. During periods of short supplies and high world prices, quota countries would thus have an incentive to supply this market in order to protect their quotas over the long term.

Reservation of additional acreage for new sugarbeet factories is not proposed because any additional acreage so reserved would result in accentuating possible further cutbacks in the production of present sugarbeet growers and eventually of those who will produce in localities where new factories will be completed in 1965 and 1966.

Along with farmers and processors in domestic areas and in foreign countries, U.S. cane sugar refiners are substantially affected by the allocation of quotas under the Sugar Act. This industry transforms from raw to refined form practically all of the sugar consumed in the United States, except for the refined sugar which is produced in a single operation from sugarbeets in sugarbeet factories. Despite the larger quota proposed for the domestic beet sugar area, sales by the refining industry during the term of the extension are expected to be substantially larger than in the preceding 5 years if sugar consumption in the United States increases at anything like the rate of past years.