Sugar Lobby’s Campaign of Distortion to Protect Sugar Program Continues

Clearly, the sugar lobby is desperate to protect the sacred cow sugar program, as is evidenced by a new series of misleading advertisements.  In one, they claim that the U.S. candy industry “boasts bigger profit margins than big oil,” with profits of 35% compared to the oil industry’s 6.7%.  This is not only false, but the comparison is absurd.

In a “Fact Check” email sent yesterday to Congressional offices, among others, the Coalition for Sugar Reform set the record straight.  The email reads in part:

  • First, though the sugar lobby claims the 35% figure reflects candy companies’ profits, that is not true.  The number refers to retailers’ markup on candy – an amount determined by the stores that sell candy, not the companies that manufacture it.  According to Value Line, food retailers’ net profit margins are less than 2%.  
  • Second, food manufacturers’ and candy makers’ net profit margins are on average less than 10% – not remotely close to 35% nor high compared to all industries.
  • Third, this is a misleading apples and oranges comparison.  Comparing retailer markups and net profit margins of oil companies is simply absurd.  

To read the full text “Fact Check,” click here.

The Sugar Lobby is “Playing Games with Jobs Numbers”

The sugar lobby falsely claims that the U.S. sugar program helps sustain 142,000 American jobs and any efforts to reform the program – even the most modest – threaten those jobs.  A recently published Agralytica white paper debunks the 142,000 jobs myth.  The paper reports:

“In farm bill lobbying efforts, sugar producers have said that their industry’s impact on employment is equivalent to 142,000 jobs. They get to that number by starting with an inflated estimate of about 40,000 directly employed in the industry and then using Commerce Department multipliers from an input-output model to calculate indirect employment effects in other sectors. That increases the number by more than 250% to their 142,000. Sugar users could also play that game, increasing the 592,000 directly employed in sugar-using industries with multipliers and saying that 2.1 million jobs are adversely affected by the sugar program.

“It is reasonable to use Commerce Department multipliers in connection with changes at the margin, but not in telling fairy tales about eliminating an industry. And let’s be accurate about the basic facts. Actual employment in the sugar industry is periodically published by the U.S. International Trade Commission (USITC), and is about 18,000, not 40,000 or 142,000.”

To read the full text of the paper, click here.

10 House Ag Committee Members Stand Up for Sugar Reform

Today, 10 Members of the House Agriculture Committee stood up to support American consumers and job creation by voting in favor of an amendment offered by Rep. Bob Goodlatte (R-VA) to make modest reforms to the U.S. sugar program.  Though the amendment failed and the Coalition for Sugar Reform expressed deep disappointment, we commend the 10 Members for their leadership on sugar reform.  They include:

 

  1. Rep. Scott DesJarlais (R-TN)
  2. Rep. Marcia Fudge (D-OH)
  3. Rep. Bob Goodlatte (R-VA)
  4. Rep. Tim Huelskamp (R-KS)
  5. Rep. Tim Johnson (R-IL)
  6. Rep. Randy Neuegebauer (R-TX)
  7. Rep. Reid Ribble (R-WI)
  8. Rep. David Scott (D-GA)
  9. Rep. Marlin Stutzman (R-IN)
  10. Rep. Glenn Thompson (R-PA)

 

Momentum is Building for U.S. Sugar Reform

The Senate voted 50-46 yesterday to table a sugar reform amendment to the 2012 Farm Bill offered by Sen. Jeanne Shaheen (D-NH).  Though the vote was disappointing, it’s encouraging to see that nearly half of the Senate – on a bipartisan basis – understands the importance of debating and reforming the U.S. sugar program.

An article from The Hill, titled “Candy-makers Heartened by Strong Vote Against Sugar Program,” conveys the coalition’s sentiment that the vote is a signal that momentum is building for sugar reform this year.

“A coalition of sugar-using industries, including candy-makers, said Wednesday that it was heartening that 46 senators voted in the floor to end the U.S. sugar program even though the attempt failed.

“The Coalition for Sugar Reform said the vote on a farm bill amendment by Sen. Jeanne Shaheen (D-NH) was a new high-water mark in its quest to end the decades-old system of import quotas and sugar-price supports that make sugar more expensive to buy in the United States.”

To read the full text of the article, click here.

WSJ Spot On About the Need for Sugar Reform

An editorial in today’s edition of The Wall Street Journal, titled “A Sugar Showdown,” pinpoints exactly why the sugar program must be reformed in the 2012 Farm Bill.  It reads in part:

“The program provides about $1.4 billion each year to fewer than 5,000 large and mostly prosperous beet and sugar cane producers. But according to a 2011 American Enterprise Institute study by North Carolina State economist Michael Wohlgenant, it costs consumers about twice that amount, mostly in higher food prices. It’s a conveniently hidden tax and a regressive one too. When Big Sugar says the program imposes “no net cost” on the budget, they’re not talking about the family budget. Americans pay about 50% more than the world price of sugar.

“This giveaway survives because sugar cane producers in Florida, Louisiana, Texas, and Hawaii have formed an alliance with sugar beet producers in about a dozen states, from Michigan and Minnesota through North Dakota and Wyoming in the Great Plains. Corn producers also like the import restrictions because the higher the price of sugar, the more demand for cheaper corn-based sweeteners. That’s a lot of Senators.

“As with every trade barrier—for steel, cars, planes, microchips—sugar quota defenders make a flag-waving appeal to save domestic jobs by keeping out low-priced, and in some cases subsidized, imports from places like the Caribbean islands and Central America. Except that sugar quotas that are designed to keep prices artificially high cause a net loss of jobs.

“A Commerce Department study in 2006 found that for every agriculture job that is saved by the program, the U.S. loses as many as three jobs, mostly in the food industry, which has higher costs due to the sugar quota. A 2011 Iowa State study found that eliminating price supports and quotas would create 20,000 jobs for food processors, bakeries and candy makers.”

To read the full text of the editorial, click here.

 

U.S. Sugar Program Isn’t a ‘No-Cost’ Policy, Says Heritage

In a blog post, titled “End the U.S. Sugar Program,” Heritage Foundation trade policy analyst Bryan Riley points out that claims that the U.S. sugar program operates at “no cost” aren’t true. He writes:

“Last month, Americans paid 49 percent more for raw sugar than if they were allowed to freely import it. Clearly the sugar program is not a ‘no-cost’ policy, as sugar producers assert, since it increases prices for everyone who buys sugar or products that contain sugar.

“Sugar producers have invested heavily in lobbying activities and political donations to keep the sugar program in place. Sugar accounts for just 1.9 percent of the value of total U.S. crop production, but sugar producers fund 55 percent of crop-related political action committee donations and 34.2 percent of crop-related lobbying expenses.”

Read the full blog post and see the related graphic here.

Reps. Pitts & Davis Sound Bipartisan Call for U.S. Sugar Program Reform

In joint written testimony for the record for a House Agriculture Committee Subcommittee on General Farm Commodities & Risk Management hearing on the 2012 Farm Bill, Representatives Joe Pitts (R-PA) and Danny Davis (D-IL) called on the Committee to ‘reexamine’ and reform the U.S. sugar program. They wrote:

“… Left unchanged, the current sugar program will continue to hurt American workers by overly restricting the supply of sugar in the U.S. market, thereby excessively driving up the cost of domestic sugar and encouraging the relocation of good American manufacturing jobs to Canada, Mexico, and other foreign countries.

“Left unchanged, the current sugar program will continue to hurt American consumers by increasing the price of every product made with sugar. A November 2011 study by researchers at Iowa State University found that comprehensive reform of the federal sugar program would save American consumers up to $3.5 billion each year. This cost amounts to about $40 per year for a family of four, which is a significant government cost for those families on a tight budget.

“Left unchanged, the current sugar program will continue to put inflexible government regulations between buyers and sellers of sugar, making the market less efficient and less able to respond to shifts in supply. The sugar provisions added to the 2008 farm bill took has taken away the ability of the Secretary of Agriculture to ensure the U.S. market is adequately supplied with sugar throughout the marketing year, causing unnecessary tight inventories and thereby artificially raising the cost of sugar dramatically above the already high world market prices for sugar.

“…We have witnessed the destructive consequences of sugar policy on employment in our states, and therefore, we now call on the Agriculture Committee to bring about real reform of the federal sugar program. This committee should seize the opportunity to reform American sugar policy as part of the 2012 farm bill.”

Read the full testimony here.

AEI Critical of Wasteful U.S. Sugar Program

In its recent paper, American Boondoggle: Fixing the 2012 Farm Bill, The American Enterprise Institute cites an abundance of waste in the 2012 Farm Bill.  In its discussion of the sugar program, AEI states:

It does raise U.S. sugar prices well above world prices in most years, typically increasing domestic prices paid for sugar by almost 100 percent.

In a typical year, the sugar program increases sugar expenditures by domestic consumers by about $2.4 billion and generates about $1.4 billion in extra income for sugar producers…

In most years… the sugar program benefits the relatively wealthy few at the expense of almost all consumers.

As the figures quoted above indicate, the sugar program is an expensive way to transfer income – wasting $1 billion to transfer $1.4 billion. That is, the program costs about $0.66 for every $1 received by cane or beet farmers, or sugar processors.

Given that current world sugar prices are well above the price-support level and the industry is especially healthy, this would be an ideal time to end the program.

Read the full text here.

“Sugar Program Isn’t Sweet for Consumers or the Economy,” Says CEI’s Fran Smith

In an op-ed in The Daily Caller yesterday, Fran Smith, Board Member and Adjunct Fellow at the Competitive Enterprise Institute wrote:

“Don’t look now, but here comes the farm bill, one of those catch-all legislative behemoths littered with wasteful programs and supported by entrenched special interests. The bill comes up for reauthorization every five years and is a lobbyist’s dream — impacting everything from farm subsidies to food safety — and industry and interest groups are working furiously to protect their sacred cows, so to speak.

“Given the inability of Congress to agree on much — and the fact that this is an election year — most observers give a new farm bill little chance of passing. Rather, it’s likely that Congress will kick the can down the road by passing an extension of current law. Wasteful spending on unnecessary programs will continue, and an opportunity will be missed — hurting U.S. consumers, taxpayers and workers.

“An egregious example of a sacred-cow program that should be cut is the sugar program, which began during the Great Depression as a means to help domestic sugar farmers and refiners survive. Under this central planning scheme, the federal government restricts the sugar supply, fixes the domestic price at high levels and keeps out competition.

Despite record world prices for sugar, the program continues to impose unnecessary price supports, strict production and marketing controls and outdated import quotas. The program is counterproductive, antithetical to a free market economy and has long outlived its usefulness.

The program protects about 4,700 sugar farms in the U.S. These are not your small mom-and-pop farms. The average size of a sugar cane farm is over 1,000 acres, and almost 60 percent of production comes from farms over 2,000 acres.

“The U.S. sugar program is a classic public choice case of concentrated benefits and dispersed costs and an example of how special interests can trump the public interest. A small number of sugar producers receive enormous benefits, while the costs are spread across the U.S. economy, hitting consumers and the sweetener-using industries.

Opponents of reform argue that the sugar program operates at no cost, but that is misleading at best. Essentially the sugar program operates as a cross-subsidy, with consumers paying the bills. It operates as a hidden, regressive tax on a vast array of food and beverage products — not only candy, but cereals, breads and other baked goods, canned fruits and vegetables, mayonnaise, dressings and sauces, jellies and preserves.”

Read the full text here.

Short-Term Fixes Not Enough to Solve Sugar Conundrum

On Tuesday, the Sweetener Users Association (SUA), a member of the Coalition for Sugar Reform sent a letter to Under Secretary of Agriculture Michael Scuse, urging USDA to increase sugar imports immediately.  The association wrote:

“Today’s World Agricultural Supply and Demand Estimates sharply illustrate the need for a substantial and immediate increase in the tariff-rate quotas (TRQs) for raw and refined sugar, as well as a reallocation of existing TRQs and other steps, in order to assure adequate supplies at reasonable prices during the balance of this fiscal year and into the next season.

“… Compared to projections made as recently as March, today’s projections have reduced total U.S. supplies for 2011/12 by 250,000 short tons, raw value (STRV).  This reduction includes a reduction in expected imports from Mexico of 385,000 STRV.  Ending stocks are now projected at just 6.8% of total use, well under half of a normal level even under the most conservative assumptions.  Clearly, there is no case to be made for delaying a major TRQ increase.”

This is the second such request SUA has made in recent weeks.  SUA sent a letter to Under Secretary Scuse on March 28, urging USDA to take immediate action on April 1 to increase sugar supplies to meet market demand.

What action USDA will take is unclear, but what is certain is that these short-term fixes — increasing and reallocating the TRQs — are only a Band-Aid solution for a long-term problem.  While a very substantial TRQ increase is definitely needed immediately, the big picture reality is that Congress must reform the current U.S. sugar program in the 2012 Farm Bill.

The program’s restrictive import provisions put an unnecessary stranglehold on the market and keep it undersupplied — slowing down or bringing to a halt production lines, which impacts sugar-using companies’ ability to create and sustain jobs.

At a time when job creation is paramount, sugar reform should be a no-brainer.