According to the farm bill, when sugar prices fall too low, the government must buy sugar to bring it back up. Good for Nebraska sugar beet farmers, but not food companies who say too much support goes to growers and consumers are footing the bill.
Americans consume a lot of sweets. Even discounting all the high fructose corn syrup you find in soft drinks, the average consumer takes in about 40 pounds of refined sugar in a year, according to the USDA.
That means food companies from Nestle to Hostess and small neighborhood candy stores have to buy sugar. Lots of it. And those bakers and snack food makers say the government gives too much support to sugar farmers at consumers' expense.
Much of the time, food companies say, they have to pay twice the international price of sugar because of government intervention on behalf of American sugar beet and sugar cane growers. The subsidized sugar program helps domestic growers get a better price by setting production targets, buying back sugar if the price drops too low and limiting imports.
Rob Flesher, owner of Pease’s candy shops in Springfield, Ill., has three retail stores and also sells his candies and nuts in about 30 more stores across the central part of Illinois.
Photo by Bill Wheelhouse, Harvest Public Media
Rob Flesher says companies like his pay more for sugar thanks to government sugar supports.
Photo by Bill Wheelhouse, Harvest Public Media
Flesher’s Spingfield, Ill., candy shop always needs an Abraham Lincoln-related treat.
Sugar producers, of course, see things differently. The American Sugar Alliance (ASA) represents sugar beet growers in 14 states. The ASA’s Jack Roney said sugar producers would be out of business without the government program, because it would allow cheaper foreign sugar to flood the market. Mexico and Brazil, for instance, spend billions to prop up their own sugar producers.
“We need to have some kind of buffer to the subsidized foreign sugar,” Roney said. “Otherwise we would be wiped out by farm producers who are not more efficient, but who are subsidized.”
The sugar growers back a plan that would do away with the U.S. program but only if foreign governments stop subsidizing their sugar industries.
The sugar business isn’t large by agricultural standards, accounting for about one percent of farm revenue, but government support for sugar is nothing new. In 1789, Congress imposed a tariff on foreign sugar. Protections for U.S. growers came along in the Depression. It’s now a part of the farm bill, although there has been an effort from companies that buy sugar to eliminate or scale back the U.S. sugar program.
It has turned into one of those battles that largely happens inside the beltway in Washington D.C., where both sides have aggressive lobbying operations and plenty of trade organizations lined up to lend support.
The sugar industry says jobs are at stake: They say there could be more than 140,000 jobs lost if the program is nixed. However, Iowa State Agricultural Economist John Beghin says his research makes him think otherwise.
Beghin said if you do away with sugar regulations, the price would go down for consumers and about 20,000 jobs could be created in the first few years, as candy manufacturers would slow their moving of factory jobs overseas. He pegged the consumer savings at $10 per person, about $3.5 billion in total. That savings would come as sugar prices fell to international market levels and products become a bit cheaper.
Beghin said since 2000, the U.S. sugar prices have been twice that of sugar on the foreign market. Recently, though, thanks to a surplus, sugar prices have fallen.
For the sugar producers, claims from candy manufacturers prices would go down if the government stepped out of sugar subsidies ring hollow. With current prices lower, Roney asks why those savings haven’t been passed on to the consumer.
“We look at what has happened to the price of sugar on the grocery store shelf and we look at the prices of products that are highly sweetened and we find that the prices of those products continue to rise,” Roney said.
If the sugar supports were cut out corn farmers would feel it too. While ethanol production is the main driver for corn prices, Beghin said farmers would lose a few cents per bushel as corn sweetener prices would likely drop if refined sugar prices fell. It is not an issue corn growers discuss much, at least not publically. Neither the National Corn Growers Association, nor processor ADM have any public stances for or against the sugar portion of the farm bill.
Those trying to get rid of the program saw reason for optimism this year, as an amendment to the farm bill that would have scaled back the program narrowly failed. However, the government’s involvement appears strong. As efforts to hash out a farm bill continue, the sugar program is included in both the House and Senate versions that are going to conference committee.
In July, the U.S. Department of Agriculture purchased $43 million worth of sugar to help prop up domestic prices. It is the first time that direct intervention has been needed in 13 years.