Horace Godfrey already had 30 years' experience working with federal farm programs when the sugar industry hired him as a lobbyist in 1969. He liked the challenge, he said.

"Producers were hurting, and I wanted to see if I could get them a little bit better deal," Godfrey said. " 'Course nobody ever believes me."

He's not entirely correct. Nobody doubts that Horace Godfrey got his clients much, much more than "a little bit better deal." What people find hard to believe these days is that the U.S. sugar industry was ever hurting.

Last week, for instance, sugar sold domestically at about 23 cents per pound; on the world market, the price varied between 12 and 13 cents. This means that U.S. sugar producers get nearly double the international price for their product.

Sometimes the margin is not as good, but a lot of times it is much better: For most of the 1980s, the average international price stayed below 10 cents per pound, and in 1984-87, it hovered around 5 cents per pound.

Whatever the margin, the cost is passed on to the American consumer: The average retail price is 42 cents a pound.

Horace Godfrey's sugar program caused this to happen. Federal price supports for the last five years have made it impossible for U.S. sugar producers to make less than 18 cents per pound for their product. Little wonder that Godfrey, a 74-year-old North Carolina farmer with seven children and seven grandchildren "at last count," is regarded as a legend in the sugar industry and an emperor among lobbyists.

His achievements stand in sharp contrast to the pose taken by the United States last week at the Houston economic summit, during which President Bush chastised his fellow chiefs of state for their crop subsidies and called for freer world agricultural markets.

By all accounts, European and Japanese leaders were surprised that Bush chose to make them an issue in Houston. After three days of talks, however, the chiefs of state fashioned a compromise of sorts, promising, Bush said, to "maintain personal involvement in trying to find solutions to the agricultural impasse."

Nothing drives U.S. free traders more quickly up the wall than the European Community's subsidy to its sugar producers -- 30 cents per pound for some sugar. The EC has a complicated three-tiered program dividing sugar production into three categories, each one receiving a different degree of support, and totaling $2 billion last year. The subsidized prices have encouraged European farmers to grow more sugar, transforming the EC from a net sugar importer to an important exporter in about 10 years.

Europe and Japan endure the U.S. polemics because they have more to protect. Not surprisingly, however, some other countries contend that Bush's complaints are a bit like the pot calling the kettle black. Even if ours is cheaper than some of theirs, ours is still a support program, and a very handsome one.

"We would say that the U.S. sugar program is as damaging to the world market as the European, and has the potential to be more damaging," said Chris De Cure, commercial first secretary at the Australian Embassy.

Australia exported 3.1 million tons of sugar in 1989, all but 135,000 tons of it at the world price. In the 1970s, Australia challenged the European sugar program in the General Agreement on Tariffs and Trade (GATT), and did the same thing against the United States in 1987, charging that the U.S. program was illegal. GATT agreed.

Still, black marks from GATT and criticisms from Australia are not likely to shame either Europe or the United States into abandoning their sugar programs. Nobody will change until everybody changes; thus sugar, to the delight of beet growers and cane farmers on both sides of the Atlantic, is at a standoff.

In fact, the international dispute over farm subsidies has even made the Bush administration an ally of sorts of the U.S. sugar program, at least in the short run. Elimination of the price support, administration officials say, amounts to "unilateral disarmament" in current GATT negotiations aimed at lowering trade barriers worldwide.

"What we are seeking is an end to all subsidies," said Deputy U.S. Trade Representative Julius Katz. "We have said that we will get rid of ours to the extent that others get rid of theirs. We do not wish to see our programs substantially altered before the end of negotiations."

As a result, the Bush administration has joined a small, bipartisan group of senators and representatives in sponsoring a modest proposal to reduce the sugar support price to 16 cents per pound for the five-year life of the 1990 farm bill.

The Senate is expected to take up the bill this week, and legislators are anticipating something of a slugfest with subsidies and price supports as the main bones of contention.

In general, congressional representatives, like the Bush administration, would like to see lower farm supports and freer markets. Lawmakers are in a budget-cutting mood, and the farm bill is projected to cost taxpayers $53 billion over the next five years.

But like Bush in Houston, individual representatives would much rather wag their fingers at others than have the spotlight shine on them. It will be no fun seeking reelection in a wheat district in November if Congress lops several million dollars from the federal wheat program.

In this atmosphere, sugar figures to find heavy going. Opponents of farm programs have decided to pick on sugar because they think it is vulnerable, and it could become a test case for the entire farm bill. If sugar supports are cut, other commodities may follow.

Yet the outcome of the debate is far from clear. Both the Senate and House Agriculture committees -- with bipartisan backing -- have approved five-year extensions of the current 18-cent support. Bipartisanship is a tough nut for reformers to crack.

"I think we'll survive," said Dalton Yancey, president of the Florida Sugar Cane League and Rio Grande Valley Sugar Growers Inc. "The hits we're getting are the same hits we've always gotten. We know what the arguments are on both sides, and we are as prepared as we can be."

The United States has always been a net sugar importer but also has had some sort of "sugar program" since 1894 to ensure that domestic producers retained at least a portion of the market.

The modern system began in 1934 with the first of several "Sugar Acts" that set support prices periodically for the next four decades. Under the Sugar Acts, the secretary of agriculture dictated the support, known as the "price objective," and maintained it by manipulating import quotas -- creating scarcities to make the price go up, creating a glut to make the price go down.

Congress voted to eliminate the sugar program in 1974 for many of the same reasons that people object to it today: It protects the domestic industry against competition from cheap imports, and it encourages higher prices for consumers.

This caught Godfrey, then representing Florida cane growers, somewhat by surprise, for sugar had never had what he called "a serious challenge." Godfrey had administered farm programs in North Carolina for 25 years before coming to Washington to run commodity programs for the Agriculture Department during the Kennedy and Johnson years. He was an insider, and insiders are not supposed to be surprised.

In the two years after the end of the program, international prices first skyrocketed, then plummeted, plunging the domestic industry into a depression. In 1976 Godfrey asked the Agriculture Department for a price support but was told that sugar did not qualify under current legislation.

"We fixed that with one simple little amendment, as they say on the Hill," Godfrey said. His first ally was Rep. Thomas S. Foley (D-Wash.), then chairman of the House Agriculture Committee, now speaker of the House and, Godfrey said, "my candidate for president."

His amendment sponsor was Rep. E "Kika" de la Garza (D-Tex.), from the heart of Texas's sugar country, now chairman of the Agriculture Committee. The sugar industry has always chosen its friends wisely.

The industry received a price support of 13.5 cents in 1977 and got it renewed at 16.75 cents in 1981 and 18 cents in 1985, the current price. The 1985 farm bill also included a "no cost provision" -- the Agriculture Department was empowered to throttle imports to keep the price of sugar above 18 cents, thus ensuring that the government would never have to buy surplus sugar.

This results in no budget cost, as the industry is fond of saying, and thus no cost to the taxpayer. Opponents note, however, that the cost of the program is borne by shoppers who pay higher prices in supermarkets.

"Consumers are paying $2.4 billion more per year," said Rep. Thomas J. Downey (D-N.Y.), one of the sponsors of the 16-cent revision in the House. "I don't think the sugar policy is good for our country. If you look carefully at this program, they have gotten away with murder, and I don't blame them for trying to keep it."

Nonsense, respond industry spokesmen. "The $2.4 billion is an absolutely fictitious number," said Luther Markwart, president of the American Sugarbeet Growers Association. "It assumes that we can satisfy our needs with imported sugar at 4 cents a pound. This is ridiculous."

Markwart claims that a 2-cent reduction in the price support will cost beet growers $100 per acre -- "devastating." The cane growers' Yancey says the reduction will cost the Florida industry $60 million "right off the top."

For Rep. Jerry Huckaby (D-La.), a sugar state congressman and the industry's bulldog supporter on the Agriculture Committee, 2 cents is Armageddon:

"First of all, Hawaii goes out of business because they're our highest cost producer; next, California probably goes out of business because they have more lucrative alternatives to beets; third, some of Louisiana and various beet areas in the Midwest will be severely impacted."

Huckaby, aware that there is an "anti-agriculture mood" in a budget-conscious Congress, anticipates a fight with "viable competitors" in the Downey camp and in the Bush administration.

Like most sugar advocates, he regards the administration as a formidable enemy that wants to preserve the sugar program only long enough to bargain it away in GATT: "If the administration could get what it wants in GATT, we'd be gone in about two seconds."



1934-74: The Sugar Act of 1934 established a "price objective" for sugar. The USDA would choose a preferred price, then maintain it by cutting sugar imports if domestic costs declined and increasing them if costs grew too high.

1974-76: No price support program in place. Prices leaped up in 1974 and 1975 due to speculation, then declined sharply when debate opened on the Fiscal 1977 farm bill.

1977: The current loan rate system was established, guaranteeing growers 18 cents per pound. Farmers take out loans to cover planting and cultivation costs. After the harvest, they repay the loan with interest.

1985-present: A modified version of the loan rate system with a "no cost provision" is used. By carefully adjusting imports and exports of sugar, the USDA guarantees the government will never have to buy surplus sugar. The program has no budget allocation.

1990: House and Senate agriculture committees back the 18-cent price support for sugar for the next five years. The administration and opponents have banded together to demand a reduction to 16 cents.



Feed grains: $3.9 billion

Wheat: $500 million

Cotton: $675 million

Rice: $475 million

Honey: $37.2 million

Dairy: $677 million

Wool and mohair: $101 million

NOTE: Feed grains include corn, sorghum, barley and oats. Figures shown here reflect the 1989 crop and marketing year.

SOURCE: U.S. Department of Agiculture.