U.S.-Mexico Sugar Deal Means Higher Prices for Consumers

Washington Post
Editorial

Excerpt: … As the season of candy canes and chocolate Santas approaches, sugar is selling for 24 cents per pound on the U.S. commodities market, about 9 cents above the world price. This differential is due not to market forces but rather to government intervention. Specifically, U.S. sugar producers persuaded the Commerce Department to threaten Mexican producers with tariffs for allegedly subsidizing sugar exports to the United States. In late October, U.S.-Mexican negotiations produced a preliminary deal under which the United States would refrain from imposing tariffs if Mexico’s industry accepted price and quantity controls on its exports; the expectation that U.S. supplies will tighten accordingly has driven up prices.

On its merits, the U.S. producers’ case against Mexico was, at best, hypocritical. It’s true that the Mexican government owns about a fifth of the country’s sugar industry, which implies a subsidy, though precisely how much is hard to quantify. Yet U.S. producers, though nominally private, have benefited from federal subsidies and protections since the New Deal, including per-country quotas on imports.

Read the full editorial here.

U.S. Sugar Soars Above World Prices

Wall Street Journal
By: Alexandra Wexler

Excerpt: … Sugar is getting dearer in the U.S. even as it is getting cheaper in most other places. Prices in the global market traded near 5½-year lows in September, though they have rallied a bit since. In the U.S. futures market, the sweetener is 58% more expensive than on the global market. …

U.S. sugar prices are typically a few cents higher than the world rate due to government policies that restrict imports and support growers. But the gap blew out this year after the government threatened to slap taxes on imported Mexican sugar at the behest of U.S. growers.

Read the full article here.

U.S. Sugar Policy: Sweet for a Few, Sour for Most

Wall Street Journal
Op-ed By: Burleigh C.W. Leonard, Former Special Assistant to President Reagan for Food and Agriculture

“The United States and Mexico signed agreements last week that would restrict the amount of sugar Mexico can export to the U.S. The deal has been praised for avoiding a trade war, but it is symptomatic of a policy that imposes a heavy toll on the economy. It also undermines the U.S. government’s position in current international trade negotiations. …

“What makes this result so ironic is the U.S. is as guilty as Mexico of subsidizing sugar growers. Our sugar policy is designed to artificially lower the supply getting to market via a complex mix of domestic marketing controls and import quotas. Domestic growers sell their sugar at prices that are anywhere from 50% to 100% higher than the price of sugar on the world market.”

Read the full op-ed here.

Why Those Halloween Candy Treats Are So Expensive

The Daily Signal
Commentary By: Preston Turner, The Heritage Foundation

Excerpt: “Your Halloween candy is costing you more than it should—because of a government program.

“For decades, the federal sugar program has artificially kept the price of sugar excessively high. According to the most recent data from the U.S. Department of Agriculture, it cost 37.5 cents to buy a pound of wholesale refined beet sugar in the United States, yet it only cost 19.2 cents for a pound of refined sugar on the world market.

“Yearly fiscal data tell a similar story. From 2000 to 2014, the average price for a pound of wholesale refined beet sugar in the U.S. was 32.5 cents. The average price for a pound of refined sugar on the world market was just 17.5 cents.”

The full piece can be found here.

Why the Sugar Program Should Be Eliminated

The Daily Signal
Commentary By: Daren Bakst and Bryan Riley, The Heritage Foundation

Excerpt: “Rep. Ted Yoho, R-Fla., has introduced a resolution that allegedly would eliminate domestic sugar subsidies after numerous other countries got rid of their subsidies.

“This ‘zero-for-zero’ plan, which has been pushed by U.S. sugar growers, is based on a seriously flawed premise: that the United States shouldn’t eliminate damaging economic policies if other countries have similarly self-destructive policies.

“Subsidies are bad policy regardless of what other countries do. They can distort markets, increase costs to consumers and taxpayers, reduce competition and discourage innovation, among other things.

“The U.S. sugar program is no exception. Under this program, the federal government tries to control how much sugar can be sold in the country through price guarantees, marketing allotments that limit how much sugar processors can sell each year and import restrictions that reduce the amount of imports.”

Read the full piece here.

U.S. Can’t Get Enough Sugar For Dum Dums With Import Curb

Bloomberg
By: Luzi Ann Javier and Marvin G. Perez

Spangler Candy Co. saw last month just how tight and costly U.S. sugar supplies are. For the first time in at least 38 years, the company couldn’t get the sweetener it needed to make Dum Dum Pops and candy canes.

When a power failure halted shipments from Spangler’s main supplier, Chief Executive Officer Kirk Vashaw scrambled to find alternatives. He came up 25 percent short, forcing a cut in candy output at the Bryan, Ohio-based company his family has run for four generations. Sugar is 70 percent of his ingredient costs. While the disruption lasted a day, Vashaw says inventory is getting tighter than when prices surged to a record in 2010.

U.S. food companies can’t get enough sugar even as the world heads for a fifth straight year of surpluses. Imports are restricted by tariffs first imposed two centuries ago to protect cane farmers, and a trade dispute is slowing deliveries from Mexico, the top foreign supplier. The gap between U.S. and world prices reached the widest in two years, adding to costs for buyers including Hershey (HSY) Co. that already are charging more for candy to cover increases in cocoa and dairy products.

“There’s not a lot of sugar to sell right now,” said Frank Jenkins, the president of South Norwalk, Connecticut-based JSG Commodities, the largest U.S. sugar broker. “We’re going to need to increase imports, otherwise we’re going to run out of sugar or prices will continue to rise.”

Read the full article here.

Big Sugar Has Finally Gone Too Far

The Hill
Blog Post By: Thomas Schatz, President, Citizens Against Government Waste

The latest example of Big Sugar running to Uncle Sugar to protect the industry’s sweet deal at the expense of taxpayers and consumers occurred on March 28, 2014, when domestic sugar producers filed complaints about Mexican sugar imports to the U.S. International Trade Commission (ITC) and the Department of Commerce (DOC). The petitioners claim that Mexican sugar is being dumped in the U.S. market and receives unfair subsidies from the Mexican government, thereby injuring U.S. sugar producers.

While the agencies have agreed to investigate the two complaints, which is a routine decision in such cases, it would be an insult on top of injury to both taxpayers and consumers if they rule in favor of Big Sugar.

Read the full blog post here.

Sugar Shakedown: How Politicians Conspire with the Sugar Lobby to Defraud America’s Families

Heritage Foundation
By: Mario Loyola

The sugar program, a government-created cartel administered by the U.S. Department of Agriculture (USDA), costs consumers an estimated $3.5 billion annually and has reduced employment by more than 127,000 jobs since 1997. Through production and import controls, the USDA shifts the cost of the program in the form of higher prices to consumers, which also allows supporters in Congress to claim that the program costs nothing to the federal budget. Congress should reform or eliminate the sugar program and require the Congressional Budget Office to assess the real economic costs and benefits of all price-support programs.

Read the full analysis here.

Trade Groups Weigh in Against Sugar Negotiations

POLITICO Influence
By: Byron Tau

In a Tuesday letter to Commerce Secretary Penny Pritzker, Agriculture Secretary Tom Vilsack and USTR Michael Froman, a number of major trade associations urged the Administration not to enter negotiations with Mexico on a managed trade agreement in response to antidumping complaints filed by U.S. sugar producers. Among the signers were the Coalition for Sugar Reform, American Bakers Association, American Beverage Association, American Frozen Food Institute, Chicago Area Retail Bakers Association, Competitive Enterprise Institute, Council for Citizens Against Government Waste, Food Marketing Institute, Grocery Manufacturers Association, Independent Bakers Association, International Dairy Foods Association, National Confectioners Association, National Foreign Trade Council, National Consumers League, Retail Bakers of America, Snack Food Association, Sweetener Users Association and the U.S. Chamber of Commerce.

Read the full article here.

U.S. Sugar Users Oppose Efforts to Broker Mexico Trade Deal

Reuters
By: Chris Prentice

U.S. food manufacturers and sugar users have urged top U.S. government officials to reject pressure to negotiate a trade deal with Mexico to end a months-long dispute over allegations of cheap sweetener imports from across the border.

In a letter sent on Tuesday, groups representing candy makers, soda companies, and other food manufacturers said any move to restrict imports could incite retaliation from Mexico on other products, undermine free trade across the continent under the North American Free Trade Act, and threaten over $220 billion in U.S. exports to Mexico.

Read the full article here.