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A Tale of Two Dumpings: Santa vs. Sugar

Just as Ol’ Saint Nick prepares to dump a ton of toys under the Christmas trees of good little girls and boys, “India is planning to dump a mountain of sugar on the world, and traders say the controversial move could knock the wind out of a global sugar market that is already grappling with a glut.”

That’s the story from the Wall Street Journal’s Vibhui Agarwal, who reports that “Five years of bumper crops have led to a giant sugar stockpile in India.” And it’s government meddling in the market that’s causing the problem, as Agarwal notes…

“Many countries protect their sugar farmers and support sugar prices with subsidies and price controls. Unworried about demand, the farmers are producing more sugar than their countries, or the world, need.”

Being in that boat, the Indian government is pushing refiners to dump “at least 4 million tons of that sugar onto international markets by September next year,” a move that commodity traders say could slash already historically low global sugar prices by an additional 15 percent.

And while that price reduction would both help prop up domestic sugar prices for farmers in India while benefiting consumers elsewhere, such a move by the world’s #2 sugar producer could be devastating for refiners, as well as international competitors Brazil (#1) and Thailand (#3).

But those countries are complicit in the same practices that have so exasperated the situation in India. As Agarwal reports…

“The Thai government controls its country’s sugar production and distribution by subsidizing its farmers, spending more than $1 billion a year while requiring them to export up to 80% of the production. Brazil spends more than $2.5 billion on supporting sugar production through loan programs.”

Which is why the Global Sugar Alliance, a lobbying organization representing sugar refiners, has “called for rolling back all sugar subsidies in favor or a free market.”

And that is exactly what Rep. Ted Yoho (R-Florida) has proposed with his zero-for-zero resolution in Congress.

The United States itself has a comparatively modest sugar program of import quotas and tariffs that protects domestic farmers from artificially cheap subsidized sugar from foreign countries that Yoho wants eliminated…but ONLY if and when those foreign competitors eliminate their extensive subsidy programs. No universal disarmament.

Passage of Yoho’s resolution next year should be at the top of every free marketer’s wish list for Santa this year.