Quantifying the Price Effects of Over-Quota Sugar Imports on the U.S. Domestic Market

This study evaluates the effects of Tier 2 over-quota sugar imports on the U.S. sugar market at the request of U.S. Senator John Hoeven. Using a partial equilibrium trade model calibrated to the USDA Needs Formula and a reduced-form stocks-to-use regression estimated from WASDE data, the analysis finds that Tier 2 imports lowered U.S. domestic raw sugar prices by about 5 to 8 cents per pound during FY2025 to FY2026. The price effect arose mainly because over-quota imports displaced administered imports from Mexico that had helped stabilize domestic supplies and support the targeted 13.5 percent ending stocks-to-use ratio. As Tier 2 imports increased, Mexico’s allocation under the Needs Formula was compressed and excess supply accumulated above the policy target. Estimated annual revenue losses range from $0.9 to $1.5 billion. A refined-adjusted estimate that applies amplified raw-to-refined pass-through to both the beet and cane segments implies an industry-wide loss of $1.3 to $1.8 billion, with the sugar beet segment absorbing the majority.