## Facts

- USDA operated a federal sugar support system using non-recourse loans, which could lead to government-held sugar inventories when producers forfeited sugar instead of repaying loans.
- Facing large government sugar stocks and storage costs, USDA created a payment-in-kind (PIK) program for the 2001 sugar crop to reduce the inventory overhang.
- USDA implemented the PIK program by press release rather than through APA notice-and-comment rulemaking.
- The program allowed participating sugar beet producers to destroy part of their crop in exchange for sugar from government storage.
- USDA imposed a maximum bid (cap) per acre for PIK contracts; cane producers alleged the cap’s structure favored beet producers because beet producers typically farm fewer acres per producer.
- Sugar cane growers, processors, and refiners challenged the program, alleging economic injury from (i) a competitor advantage for beet producers receiving sugar below harvest cost and (ii) price depression from increased market supply attributable to “yield slippage.”
- Plaintiffs also alleged USDA failed to satisfy statutory prerequisites under the Food Security Act provision authorizing PIK programs.

## Issues

1. Whether the cane-industry plaintiffs established Article III standing (injury-in-fact, causation, and redressability) to challenge USDA’s PIK program.
2. Whether implementing the PIK program without notice-and-comment violated the APA, and whether any APA error was harmless.
3. Whether USDA complied with the Food Security Act’s requirements governing creation of a sugar PIK program.

## Decision

- The D.C. Circuit reversed the district court’s summary judgment, holding plaintiffs had Article III standing.
- The court held USDA failed to comply with APA notice-and-comment requirements by implementing the program through a press release.
- The court rejected USDA’s harmless-error defense, concluding the lack of notice-and-comment could not be treated as harmless on the record presented.
- The court held USDA also failed to comply with statutory requirements under the Food Security Act for establishing the PIK program.
- The case was remanded to the district court with instructions to remand the matter to USDA.

## Legal Principles

- Competitor and market-price injuries can satisfy injury-in-fact when supported by evidence that an agency program tends to confer a competitive advantage or depress prices; standing does not turn on whether prices rose during a given period for other reasons.
- For APA purposes, informal consultations do not substitute for notice-and-comment procedures when a rule is required to be promulgated through that process.
- Harmless-error doctrine does not excuse a complete failure to provide notice and an opportunity to comment where the effect of participation is uncertain; a court should not assume comments would have made no difference.
- When Congress conditions an agency program on specified findings or constraints, the agency must satisfy and document those statutory prerequisites; failure to do so is unlawful agency action.

## Conclusion

The D.C. Circuit held that sugar cane interests had standing to challenge USDA’s sugar PIK program and set aside the program as implemented because USDA bypassed APA notice-and-comment and failed to meet the Food Security Act’s statutory conditions, remanding to the agency for further proceedings.


Sugar Cane Growers Coop. of Fla. v. Veneman, 289 F.3d 89 (D.C. Cir. 2002)