Eleanor Barkhorn in The Atlantic rounds-up the reactions.
Last week the Wall Street Journal reported some bad news for Americans with a sweet tooth: the U.S. faces a sugar shortage so severe, it could “virtually run out of sugar.” Big food companies like Kraft Foods Inc., General Mills Inc., Hershey Co., and Mars Inc. wrote a letter to Agriculture Secretary Tom Vilsack warning him of the shortage and asking him to ease trade restrictions on the commodity, which are structured to encourage companies to buy domestic sugar. What if the government doesn’t drop the quota on importing foreign sugar? The companies say they’ll lay off workers and raise prices on their products–from chocolate bars to breakfast cereal.
Stephen Colbert reacted to the news with his signature dramatic flair. After a Home Alone-style yelp, he ripped open a 5-pound bag of Domino sugar, and poured it over himself. “Can you imagine an America with no sugar?,” he asked. “Juice would contain nothing but 10 percent juice. And we’d all be eating uncaramelized apples.”
Daniel Griswold at Cato:
Protectionism is not just a consumer issue. As we elaborated in a 2005 Cato study on the high cost of U.S. farm programs (see pp. 4-6), trade barriers against agricultural commodities such as sugar also raise costs for U.S. producers, forcing them to raise prices, and thus reducing sales, output, and employment. Artificially high domestic sugar prices have forced thousands of domestic manufacturing jobs to be “shipped overseas” to countries that allow sugar to be imported at world prices.
If the Obama administration wants to encourage the domestic production of sugar-containing products, it should raise the quotas as far as they can and allow American companies to buy sugar at world prices.
Juliet Lapidos in Slate:
After the Wall Street Journal and a number of other news sources picked up the story on Thursday, the American Sugar Alliance countered that we’re far from a shortage; in fact, we have a surplus. Could we ever really run out of sugar?
No way. American sugar producers churn out approximately 8.5 million metric tons per year. The USDA also allows about 1.3 million metric tons to cross our borders from 40 different sugar-producing countries, and, under NAFTA rules, an unlimited amount from Mexico. (Mexican imports will be about 1.45 million tons for the current fiscal year.) Since American consumers use only about 10 million tons in a year, producers frequently end up with excess sugar, which is then stockpiled in warehouses. If producers couldn’t keep up with demand—due to poor growing conditions or a change of policy in Mexico, say—they would first dip into these stockpiles. If there were still a shortage, the USDA would simply increase its import quotas. In 2006, after back-to-back-to-back hurricanes (Katrina, Rita, Wilma) during the 2005 growing season, the USDA became worried about the domestic sugar supply and promptly pushed up the yearly limit. Most Americans never noticed.
Meg Marco at The Consumerist
Bruce Watson at Daily Finance:
Part of the problem lies in a worldwide sugar run as Brazil diverts part of its sugar crop into ethanol production and monsoons have wiped out much of India’s sugar crop. All told, the Department of Agriculture expects sugar supplies to drop by 43 percent over the next year.
In many ways, the government is caught in a squeeze play. On the one side, there are domestic sugar beet and cane growers who are strongly invested in maintaining a high price for American sugar. Perhaps more importantly, they also have a very strong lobby that helps them to control import quotas. This ultimately translates into an American sugar market that is priced at two to three times the global market rate and American companies that make billions per year in inflated profits.
One solution is to use high fructose corn syrup (HFCS); as the price of sugar rises, the compound becomes comparatively cheaper and thus more attractive to food manufacturers. However, as more customers become aware of the health dangers associated with HFCS, many food companies are shying away from it. In fact, even the soft drink industry — long a bastion of HFCS — has begun experimenting with new sugar-sweetened sodas.
As they currently stand, sugar quotas are driving up food costs, weakening international trade and driving an already-overpowered corn industry. As the price of candy bars is poised to shoot up, perhaps it is time for the government to put Big Sugar on a big diet.
Paul Kedrosky at Seeking Alpha:
With sugar spiking to all-time highs, there is a potential behavioral upside. Much as happened with higher oil prices, which changed driving behavior, higher sugar prices could materially change people’s behavior, steering them away from sweets and refined sugar products, which wouldn’t be such a bad thing.