The American Sugar Cartel
Issue   |   Wed, 05/07/2014 - 13:48

America has a sweet tooth. Today, the average American consumes 3,550 pounds of sugar — the equivalent of 1,767,900 Skittles — over his or her lifetime. From assorted chocolates on Valentine’s Day to trick-or-treating on Halloween, nearly all American holidays are celebrated with some sugary sweets.

A few weeks ago, millions of American children sprung out of bed to find what the Easter Bunny had brought them. Nothing seems to make a child happier than a basket full of candy. Typically a happy child equals a happy parent, but these parents wouldn’t be so happy if they knew how much the “Easter Bunny” overpaid for those treats.

.Since 1982, American consumers and businesses have been forced to pay, on average, more than twice the world price of sugar. Last year, the price of sugar per pound was 41 percent or 26.5 cents higher in the United States than in the rest of the world. This disparity is a direct result of special interest and protectionist policies that have been in effect since the Great Depression. Not only have these policies outlived their intended lifespan by 76 years, the 2008 Farm Bill added further market-shorting schemes that economist Tom Earley describes as, “Soviet bloc-style: control everything.”

The foundation of these sugar programs is an elaborate system of quotas and tariffs that limits the sugar imported from each of the world’s forty sugar-exporting countries. Each of those nations is designated a specific quantity of sugar that they may sell in the States at a low tariff rate. Once that limit is reached, however, the rate skyrockets to 62 percent, making further international trade virtually impossible. In fact, these quota and tariff combinations are devised and enforced so that a minimum of 85 percent of sugar consumed in the Unites States is produced domestically.

The Department of Agriculture (USDA) then regulates how much of that 85 percent each domestic firm is permitted to sell in the domestic marketplace. If a company exceeds its allotted quantity of sales, it is fined three times the value of its “illegal” sales. If that’s the stick, here’s the carrot.

The USDA also loans taxpayer dollars to domestic producers in order to guarantee them a minimum price and virtually zero risk on the sugar they produce. These loans allow domestic sugar producers to sell their product if market conditions deem it profitable or, under adverse conditions, to tender their sugar as collateral to the government. The government absorbs all the losses. In August, sugar processors forfeited 85,375 tons of sugar; September’s forfeiture nearly quadrupled that totaling 296,500 tons of sugar.

In 2013 alone, the sugar industry ceded $278.6 million worth of sugar to the United States government. That is enough to fill about 11,400 full size industrial dumpsters, and the government must pay to store it until a buyer is arranged. The 296,500 tons forfeited in September alone cost $575,000 per month for storage; thus, the government often sells the sugar at a loss to limit such carrying costs. In the past, the government has given it to nursing homes and prisons. Now, the government is actually required by the Feedstock Flexibility Program to sell the sugar to ethanol producers at a loss. In August and September, the USDA lost $56 million in such sales to ethanol producers.

Nevertheless, the American Sugar Alliance contests that without current federal policy, “at least 90 percent of the 142,457 sugar-producing jobs would be in danger.” No one wants an American to lose his or her job, but we must ask ourselves “what is the cost of saving those jobs?”

A 2006 study done by the U.S. Department of Commerce concluded “for each one sugar growing and harvesting job saved through high U.S. sugar prices, nearly three confectionery manufacturing jobs are lost.” While these programs may protect the sugar producing industry, they force all other sugar-using industries to operate on narrower margins or to move manufacturing abroad. As a result, between 1997 and 2011, sugar-using industries experienced a 17 percent (127,000 jobs) decline in employment while the non sugar-dependent food and beverage sectors grew by more than 3 percent. Bobs Candies Inc., the largest producer of candy canes, moved more than half of its production from Albany, Georgia to Reynosa, Mexico in 2002. Since then, it has merged with another company, and moved all production abroad. Jelly Belly Candy Co. moved it’s manufacturing to Thailand in 2007, and has since expanded its overseas operations twice. In 2010, Atkinson Candy Co. moved 80 percent of its peppermint-candy production from Texas to Guatemala, which allowed them to sell their treats for 20 percent less. Eric Atkinson, the president of the company, said, “It wasn’t like we did it for profit reasons. We did it for survival reasons.”

If those costs are not steep enough, consider this. The Congressional Budget Office reported that the U.S. sugar programs will cost American taxpayers $629 million over the next 10 years — $374 million from Feedstock Flexibility Program alone — and force consumers to pay an additional $3.5 billion each year. Put another way, U.S. taxpayers will have to pay $374 million to safeguard a system that already costs them $255 million so that they will be charged an extra $35 billion.

If you’re still not convinced, maybe the idea of having Coca-Cola made with actual sugarcane will do the trick.

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