Saturday, August 15, 2009

Big Sugar and The Sugar Racket

Wall Street Journal -- Some of America's biggest food companies say the U.S. could "virtually run out of sugar" if the Obama administration doesn't ease import restrictions amid soaring prices for the key commodity. In a letter to Agriculture Secretary Thomas Vilsack, the big brands -- including Kraft Foods, General Mills, Hershey Co. and Mars -- bluntly raised the prospect of a severe shortage of sugar used in chocolate bars, breakfast cereal, cookies, chewing gum and thousands of other products.

The companies threatened to jack up consumer prices and lay off workers if the Agriculture Department doesn't allow them to import more tariff-free sugar. Current import quotas limit the amount of tariff-free sugar the food companies can import in a given year, except from Mexico, suppressing supplies from major producers such as Brazil.

The letter is the latest salvo fired in a long-simmering dispute between U.S. food companies and the sugar industry over federal policy that artificially inflates the domestic price of U.S.-produced sugar in order to support the incomes of politically savvy sugar-beet farmers on the Northern Plains and cane-sugar farmers in the South. Most years, the price food companies pay for U.S. sugar is twice the world level (bold added).

Phillip Hayes, a spokesman for the American Sugar Alliance (
MP: aka "Big Sugar"), a trade group of cane and sugar-beet farmers, said farmers are "absolutely opposed" to expanding the sugar-import quota in part because it would cause the prices received by U.S. growers to sink.

MP: There's another possibility - Kraft, General Mills, Hershey and Mars will simply move their production of sugar-based products out of the U.S. into countries like Canada that don't restrict foreign sugar, which will result in a loss of Amercian jobs.

Exhibit A: In 2003, Kraft moved its LifeSavers production from Holland, Michigan to Canada, resulting in the loss of 600 jobs in Michigan. The reason?

According to the
Mackinac Center for Public Policy:

Sugar is cheaper in Canada, which imports it at the lower, freely traded world price. The U.S., on the other hand, has protected its sugar industry with tariffs or quotas since 1922. The LifeSavers case provides an unusually vivid example of how the impulse to "protect jobs" with tariffs can backfire, actually costing some Americans their jobs. In this instance, sugar protection has put LifeSavers and all U.S. sugar-using industries (like cereals) at a serious disadvantage due to tariffs that raise the cost of sugar 2-to-2.5 times the world price. As a result, U.S. candy producers are exporting less than they could, closing plants, and relocating production to other countries.

Legislators who support protectionist measures portray themselves as sympathetic to workers, rarely admitting to the high costs that trade restrictions impose on consumers, taxpayers, and the industries that use the "protected" product (in this case, companies like Kraft). The ratio of jobs in the U.S. food-processing industry, which uses large amounts of sugar, to jobs in sugar production is at least 7 to 1. The best way to keep LifeSavers and other candy jobs in the United States is to end sugar protection, pure and simple.

Originally posted at Carpe Diem, not for re-posting on Death and Taxes.

10 Comments:

At 8/15/2009 11:20 AM, Anonymous Anonymous said...

ADM used to run commercials on PBS comparing US sugar prices to several other countries most of which had higher sugar prices. Talk about cherry picking!

At the time, US sugar prices were 5 times the world price and ADM was soon to be convicted in a price fixing scandal.

 
At 8/15/2009 12:14 PM, Blogger Bill said...

Of course, it doesnt help matters that the State of Florida and the Feds are attempting to remove 180,000 acres of prime sugar growing land from cultivation in South Florida.
http://www.ussugar.com/news/environment/scaled_back_deal_sweeter.html

Perhaps the government should get out of the sugar business entirely and let the market set the both prices and the demand for American produced sugar.

 
At 8/15/2009 2:51 PM, Anonymous Ἐγκώμιον Shill said...

Who sets the prices in your country, Mr. Reagan?
~~Леони́д Ильи́ч Бре́жнев~

 
At 8/15/2009 3:14 PM, Anonymous Anonymous said...

I think that the government should set up a new department/bureaucracy with a Sugar Czar, and we could affectionately refer to the position as "Sugar Daddy."

Great article...

 
At 8/15/2009 3:23 PM, Anonymous Anonymous said...

Government controls benefit the few at the cost of the many. What else is new???

Wait til Obama care starts.

You ain't see nothing yet, Baby!!!

 
At 8/15/2009 7:21 PM, Anonymous Anonymous said...

"the price food companies pay for U.S. sugar is twice the world level".
The world market price level is set by sugar export subsidies, mostly by EU but also USA.

Or so I'm told.

 
At 8/15/2009 8:18 PM, Blogger OA said...

This kind of artificial price support just hurts the third world farmers who get less for their sugar than they could. And it hurts consumers.

The most ridiculous outcome from the sugar tariffs is we make ethanol from corn instead of sugar.

Sugar takes one less heating step to make ethanol which is why it is energy positive. As in you get more energy than the oil and other inputs to it. Corn ethanol is so close to energy input neutral that there are arguments over whether it is positive or negative.

If they were serious about wanting to replace oil, they'd let both foreign sugar and ethanol in without tariffs.

 
At 8/15/2009 11:53 PM, Blogger bobby said...

Travel a bit through the Caribbean islands, and ask people what has been most responsible for the widespread poverty endemic to the area.

"U.S. sugar import restrictions" is what you'll hear about.

In order to quietly boost profits of some very large U.S. corporations, we've wiped out major portions of the economies of a number of the island countries, and we have done tremendous damage to our image in the area.

 
At 8/16/2009 1:48 PM, Anonymous Heinz Geyer said...

and the most ironic thing is that sugar is BAD for you

 
At 8/24/2009 6:51 PM, Blogger elizabeth said...

sugar creates acid in the lower gut. Cancer loves acid. immune cells love alkaline body fluids. Having not eaten any sugar in 3 years, i don't miss it, have huge energy, have had no colds, allergy attacks, and cancer is gone. If obama is serious about preventive medicine, he'll get on this case and make sure the public is educated about dangers of sugar (and worse the cheap substitute HFCS that is ubiquitous in foods today. Sometimes i feel like Carrie Nation and want to take an ax to the candy racks at all the check out counters...sugar for some people is an addiction, like nicotine, and if it weren't grandfathered in, the FDA would regulate it as a harmful drug, and at the least, keep it out of sight where people are most vulnerable.

 

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