Senate sugar vote pleases producers
By CAROL RYAN DUMAS
U.S. sugar producers are pleased the U.S. Senate struck down a proposal to gut U.S. sugar policy on Wednesday, and consumers should be as well, said a representative of the sugar industry.
Gutting U.S. policy would make U.S. food manufacturers dependent on a volatile foreign sugar supply, which is less reliable, lower quality, less safe, and produced less responsibly than U.S. sugar, said Jack Roney, director of economics and policy analysis for American Sugar Alliance.
Dependence on foreign sugar led to rationing in the U.S. during World War II and is the reason Congress developed a sugar policy, he said.
Gutting that policy would initially flood the U.S. with foreign sugar, put U.S. farmers out of business and lead to higher sugar prices, he said.
That scenario has played out in Europe when the European Union in 2006 reduced its sugar price support by one-third. Sugar imports flooded the market, domestic production plummeted -- 83 sugar mills shut down -- and 120,000 jobs were lost, he said.
Now the price of sugar in the EU is 20 percent higher than before the reform, he said.
The initiative to gut U.S. sugar policy is a dangerous effort by candy makers to reduce the price of sugar, but it's a gamble that is not likely to pay off, he said. Foreign sugar supplies are volatile, and sweetener users are likely to be faced with inconsistent supply and higher prices, he said.
Opponents of U.S. sugar policy, however, claim the policy costs consumers an additional $3.5 billion a year, harms economic activity and sends U.S. jobs overseas.
Those arguments are ridiculous, Roney said.
Without U.S. sugar policy, the U.S. would lose 142,000 jobs and $20 billion a year in economic activity, he said.
The estimate of an extra $3.5 billion a year is based on the U.S. price being 16 cents higher than the world "dump" price for excess sugar. Those prices are about the same now, and imported sugar would be more expensive because of the cost of transportation.
In reality, the U.S. price of sugar is 14 percent lower than the average world price and 24 percent lower than the average price in developed countries, he said.
"American consumers pay some of the lowest sugar prices in the world," he said.
In addition, the estimates assume U.S. sugar users could satisfy all their needs without the price rising and that manufacturers and retailers would pass the savings on to consumers, he said.
In the first place, the cost of sugar in a $1.39 candy bar is only 2 cents, so any pass through would be negligible. In addition, there's likely to be no cost savings to the consumers. Prices to U.S. sugar farmers have been down 55 percent in the last two years, and the price of sweetened foods in grocery stores has gone up, he said.
As for the 112,000 manufacturing jobs opponents claim were lost between 1997 and 2009 due to U.S. sugar prices, Roney said production of sweetened products during any period of job loss has risen consistently.
That's due to increased efficiency and better mechanization in manufacturing, he said.
Production of sweetened products has risen 40 percent since 2006, and government statistics show jobs in the sweetened products sector have risen a half percent since then while jobs in the non-sweetened products sector has dropped 3 percent.
As for the claim that companies are moving or outsourcing jobs overseas due to U.S. sugar prices, that is just callous, misleading and wrong, he said.
"What they are fleeing is union wages," he said.
The average union wage for employees of candy operations in northern Illinois and Pennsylvania is $19 an hour, compared with 51 cents an hour for a Pennsylvania chocolate maker that just opened a new plant in Monterey, Mexico. Wages and other costs saving such as health insurance and meeting environmental standards are the real reasons for jobs going overseas, he said.
Sugar producers were happy to see the amendment to reform sugar policy in the Senate farm bill, offered by Sen. Jeanne Shaheen, D-N.H., voted down, but they won't be surprised to see a similar effort in the House when it takes up the farm bill in June, he said.