Free Market Sugar

Tag: Sugar Market

Indian Sugar Program “Helping” Farmers to Death

(Chuck Muth, Citizen Outreach) – If you think the U.S. sugar program is bad, you should take a look at the sugar industry mess in India.

At least in the U.S. you don’t have farmers committing suicide over government agricultural policies.

According to a recent Business Standard report, the Bharatiya Janata Party (BJP) is planning a ‘Raita Chaitanya Yatre’ (farmer’s rally) to “pressure the state government to address problems being faced by farmers in the state and provide immediate help to them.”

Nalin Kumar Kateel MP said last month that the rally’s purpose “was to wake the state government ‘out of slumber’ on the issues of farmers.”

“Many farmers in the state,” Kateel noted, “especially sugarcane farmers, have committed suicide in the last few months burdened with loans as their crops failed due to drought.”

Indeed, according to an October 18 article in The Hindu, Maruti Manpade, president of the Karnataka Pranta Raitha Sangha (KRRS), a farmer’s movement, said the government’s importation of sugar “was one of the reasons for the suicide of sugarcane growers in the State.”

“While farmers are in distress following the crash in the price of sugar, the BJP’s State unit is holding rallies against the Congress government,” Manpade told the paper. “Instead of playing petty politics and shedding crocodile tears for farmers, [the BJP should] do something to help the farmers.”

Manpade went on to accuse the government “of not forming an alternative agriculture policy for helping farmers” and “said that the visit of Congress vice-president Rahul Gandhi to the State would not prevent farmers from committing suicide but a comprehensive alternative farming policy would.”

Of course, it’s well-intentioned but ill-advised government programs designed to help farmers that are causing the problems in the first place.

Which brings to mind something Ronald Reagan famously once said…

“The nine most terrifying words in the English language are: I’m from the government and I’m here to help.”

When it comes to agricultural policies, the best way for the governments of both India and the United States to “help” is to simply stop helping.

Mr. Muth is president of Citizen Outreach and the publisher of www.NevadaNewsandViews.com. He personally blogs at www.MuthsTruths.com.

October 28, 2015
Ag Committee Hearing: Foreign Subsidies Jeopardizing Free Trade and Harming American Farmers

(Chuck Muth, Citizen Outreach) – The House Committee on Agriculture conducted a hearing on October 21 exploring how foreign government meddling in various agricultural markets was hurting U.S. farmers while making a mockery of the notion of “free trade.”

In opening remarks, Committee Chairman K. Michael Conaway noted that when it comes to government subsidies, “in many cases what foreign countries are doing is patently illegal under their World Trade Organization commitments.”

“Our government,” Conaway declared, “must begin to take on those who are cheating on their trade commitments. These actions by our foreign competitors are undermining our trade agenda and, as we will hear in testimony today, cheating by foreign countries is also causing serious injury to our nation’s farmers and ranchers.”

Such “cheating” is especially pronounced in the global sugar market.

Jack Roney, director of economics and policy analysis with the American Sugar Alliance, testified to the “tremendous distortion” in world sugar prices due largely to government “price protection” for foreign sugar farmers. He further charged specifically that India was in violation of World Trade Organization (WTO) rules.

In addition, the day before the hearing the U.S. International Trade Commission (ITC) “affirmed that Mexico’s sugar industry had harmed American producers by selling subsidized sugar onto the U.S. at below market prices – a practice known as ‘dumping’.” (Source: Agri-Pulse)

The unanimous ruling “means that an agreement signed by the U.S. and Mexican governments to establish a trading structure that caps Mexican imports and stop Mexico’s abuses will remain in effect for at least five years,” according to the American Sugar Alliance.

“U.S. sugar producers want NAFTA to operate as intended and to foster free and fair sugar trade between Mexico and the United States,” said Phillip Hayes, a spokesman for the U.S. sugar industry. The ITC ruling “helps accomplish that goal by upholding the governments’ agreement and addressing the unfair trade practices that were injuring American farmers, workers, and taxpayers.”

“I hope that one day our trade agenda is able to zero out subsidies, tariffs, and other trade barriers around the world, including here at home,” Chairman Conaway concluded in his opening remarks at the congressional hearing. “But, until that day becomes a reality, we cannot and we will not unilaterally disarm America’s farmers and ranchers.”

What he said.

Mr. Muth is president of Citizen Outreach and the publisher of www.NevadaNewsandViews.com. He personally blogs at www.MuthsTruths.com.

October 26, 2015
TPP provides light at end of the sugar subsidy tunnel

(Chuck Muth, Citizen Outreach) – Critics of Rep. Ted Yoho’s “Zero for Zero” resolution who say it can’t be done should heed the wisdom of getting out of the way of people already doing it.

Z4Z – in which the United State would eliminate its sugar program of relatively minor import restrictions and tariffs in return for other nations simultaneously eliminating their own, far more aggressive direct subsidies to sugar famers and producers – needs to be negotiated.

“Wishing” is not a realistic means to the end.

An example of how this could, if Congress pursues such a course, resolve much of the world’s problem in the heavily distorted sugar market is the recently finalized Trans-Pacific Partnership (TPP) agreement.

Under the agreement – with give and take on both sides – Hal Conick of Confectionery News notes that “Australia would be allowed to provide an additional 65,000 metric tons of sugar to the US” which will be duty free and with no quota tariff.

“In addition,” Conick notes, “US export tariffs to Vietnam, which currently stand at 20%, will be eliminated by 2026.” And Canada will be allowed to export “an additional 9,600 metric tons of refined beet sugar as part of the agreement.”

While most U.S. sugar producers, given their druthers, would have probably preferred that things stay just the way they are, they accepted the deal because it wasn’t so egregious as to drive them out of business. But that was the end goal of candy makers, who clearly wanted more.

“Of course we wanted more, but this is what we’ve got,” said Rick Pasco, president of Sweetener Users Association (SUA). “There will be future opportunities with trade agreements.”

And that is exactly the point of Rep. Yoho’s Z4Z resolution. Everything is and should be negotiable, including the subsidies of our trading partners.

Rather than pursuing futile efforts to eliminate the U.S. sugar program unilaterally – leaving our domestic sugar industry vulnerable to a greatly distorted and artificially cheap global market – Congress should pursue trade agreements on sugar through the World Trade Organization (WTO) or other appropriate vehicles.

It’s not a question of whether or not such agreements could be negotiated.

It’s a question of whether or not policymakers are willing to stand up for America’s farmers and demand real subsidy reforms abroad.

As TPP has shown, where there’s a will, there’s a way.

Mr. Muth is president of Citizen Outreach and the publisher of www.NevadaNewsandViews.com. He personally blogs at www.MuthsTruths.com.

October 15, 2015
India’s Sugar Woes in an Imperfect Global Market

(Chuck Muth, Citizen Outreach) – Well, here we go again…

Those in Congress who believe in unicorns and a global free market in sugar need only take a look at this Reuters story, “Govt plans incentives for sugar mills to pay cane growers: sources,” published on Tuesday by the Business Standard in New Dehli…

“The (Indian) government is likely to give incentives to sugar mills to pay cane growers, government and trade sources said on Tuesday, as part of efforts to help sugar companies saddled with large stocks and lower prices. ‘We are working out some sort of subsidy for mills so that farmers can be paid on time,’ a government source said.”

Some…sort…of…subsidy. Doesn’t sound very “free market” to me.

While in an ideal world the U.S. wouldn’t have a sugar program at all, the one we do have includes some relatively minor quotas and tariffs on imported sugar.

But U.S. sugar farmers and sugar mills do NOT get direct government subsidies like those being mulled for Indian sugar farmers and mills – which will artificially lower the cost of Indian sugar and further exasperate the distorted global sugar market.

In somewhat related news, Bloomberg reported that “Shree Renuka Sugars Ltd., the biggest Indian refiner, filed for bankruptcy protection in Brazil” this week.

Seems the current global sugar glut – particularly bad in both India and Brazil – has driven down prices at the same time a drought in parts of both countries is threatening the current crops and future productions.

This, too, should prove instructive to the Rose-Colored Glasses caucus on Capitol Hill.

Sure, the cost of global sugar outside the U.S. is cheap today.

But if unfettered access of cheap sugar to the U.S. market today resulted in a crippling or death of our domestic sugar industry tomorrow (see, “Shree Renuka Sugars, Ltd.”), what would happen to those sugar prices when unforeseen circumstances – like drought – wipe out artificially cheap sugar imports and replace them with sky-high sugar imports?

Can you imagine the cost of Oreos and Hershey bars when U.S. consumers are left at the mercy of manipulative foreign governments once they get unrestricted access to our domestic market and destroy the U.S. sugar industry?

The U.S. sugar program isn’t ideal for a perfect world.

But it’s the best we’ve got in the imperfect world we actually live in.

Mr. Muth is president of Citizen Outreach and the publisher of www.NevadaNewsandViews.com. He personally blogs at www.MuthsTruths.com.

September 30, 2015
India’s Sugar Export Policy is “Almost Criminal”

India’s sugar plantation is ranked second in world’s sugar industry.

(Chuck Muth, Citizen Outreach) – India is the world’s second largest producer of sugar, behind only Brazil. Its sugar industry is also a basket case.

Let’s start with the fact that growing sugar requires huge amounts of water. Indeed, according to a column this week by Ajit Ranade in the Pune Mirror, sugar crops in Maharashtra take up “3 percent of arable land, but consume more than 60 percent of the water.”

Now, add in the fact that certain sugar-producing regions in India are suffering from a second year of crippling drought. Indeed, a prime government objective in some parts is “tanker mukt” – meaning free of water tankers being required to deliver drinking water.

Nevertheless, India as a whole is drowning in the crop.

“The glut of sugar,” Ranade writes, “if not exported, will cause domestic prices to collapse. Which would lead to massive losses for sugar factories that are already in the red. This in turn means the factories will not be able to pay the sugarcane farmers.”

That would add insult to injury, as “there are huge payments overdue to farmers” already. As such, courts are mandating that factories pay farmers their arrears with money they don’t have.

It’s become a major fiscal problem, Ranade notes, because “the central and state governments have to draw money from the general treasury (i.e. taxpayer collections) to bail out sugar factories so that sugarcane farmers can be paid.”

To offset the subsidies from the government, the government is pushing for exports at a time when “the international prices are trending lower and sugar prices are almost 35 per cent lower than last year.” Meaning, India will “have to export larger and larger quantities to make up the same earnings in dollars.”

“If you factor in the drought situation,” Ranade concludes, “where humans and cattle are thirsting for drinking water, this export policy seems almost criminal.”

Yet, the Indian government stubbornly refuses to discourage sugarcane production.

This is the global “free market” that some in Congress want U.S. sugar producers to compete in without the minimal protection of import quotas on countries such as India where government meddling and manipulation have produced artificially lower prices rather than true free market prices.

As messed up as India’s sugar industry is, why on earth would anyone in Congress want to throw our high-producing/subsidy-free sugar farmers to such government subsidized wolves?

Mr. Muth is president of Citizen Outreach and the publisher of www.NevadaNewsandViews.com. He personally blogs at www.MuthsTruths.com.

September 22, 2015
Donald Trump and the U.S. Sugar Program

(Chuck Muth, Citizen Outreach) – A serious drought in India could result in the nation’s sugar farmers getting the short end of the stick in order to direct dam and canal water to people and animals, the Indian Express reports.

“It is high time mill owners explored modern technology to minimise the use of water during plantation and crushing,” declared former Congress minister and sugar mill owner Harshvardhan Patil.

Ah, but there’s the rub. Such modernization will cost money. And India’s sugar industry is struggling with low prices right now and doesn’t have extra capital laying around for infrastructure improvements.

In fact, the industry has been bailed out multiple times by the government in recent years, which has only further depressed global prices to low levels that barely cover half the cost of production.

To really fix the problem, India needs prices that actually reflect production costs, but that means India will lose out to lower-cost, more efficient competitors like Brazil, Thailand, Australia, and maybe even the United States.

Indeed, American sugar farmers are already among the most efficient sugar farmers on the planet. Which means the problem isn’t that the cost of U.S. sugar is too high – especially considering the fact that the cost of a pound of U.S. sugar today is right around where it was 30 years ago.

No, from a free market standpoint the cost of U.S. sugar is probably just about right. It’s the government subsidies to less efficient foreign sugar producers that is warping the global price of sugar and artificially driving it down.

Without those government crutches, U.S. sugar farmers can not only compete with, but beat any and all foreign competitors. It’s the foreign government subsidies that are the problem, not the U.S. sugar program of limited quotas and tariffs on imported sugar.

By the way, this situation is neither new nor constrained to sugar. In a recently uncovered 1988 interview of Donald Trump by Oprah Winfrey, Trump criticized U.S. foreign trade policies…

“We let Japan come in and dump everything into our markets,” Trump said. “It’s not free trade. If you go to Japan right now and try to sell something, forget about it, Oprah. Just forget about it. It’s almost impossible. They don’t have laws against it. They just make it impossible.”

The same could be said today about the sugar market, where subsidies and government manipulation reign supreme.

If you want a market of free-flowing sugar where prices respond to supply and demand conditions and reflect costs of production, forget about it. Just forget about it. It’s almost impossible because of foreign governments. It’s not free trade.

If you want free global trade in sugar, then every sugar producing nation needs to go cold turkey on subsidizing their sugar industries, or the U.S. really has no choice other than to protect our national interests by limiting their access to our markets.

Mr. Muth is president of Citizen Outreach and the publisher of www.NevadaNewsandViews.com. He personally blogs at www.MuthsTruths.com.

September 16, 2015
Unable to Beat Sugar Meddlers, Nigeria Joins Them

Sugar has been regarded as a strategic product by countries all over the world.

(Chuck Muth, Citizen Outreach) – When most Americans hear “Nigeria,” what usually comes first to mind is “email bank scam.”

But in an article published last week by This Day Live, Abdullahi Yunusa weighed in with some very interesting observations about the global sugar market and Nigeria’s national and economic interests.

Indeed, Yunusa warned that “The sugar industry is too important a sector to be neglected.”

But not just for Nigeria. As Yunusa points out, “sugar is regarded as a strategic product” by countries all over the world…

“The raison d’etre for investment in sugar production stems from its potential to generate employment in the hundreds of thousands, save foreign exchange, enhance rural industrialization, create wealth and alleviate poverty. It is equally important to stress that the use of sugar is widespread and covers both domestic and industrial applications, such in the pharmaceuticals, confectionery, soft drinks, breweries, dairies, bakeries etc.”

This, in addition to sugar’s use in some energy production.

Noting how critical sugar is to “national food security,” Yunusa outlined “stringent fiscal measures” that other countries have put in place to protect their domestic industries, including some minor tariffs and import quotas that make up the U.S. sugar program.

“India,” Yunusa writes, “doesn’t allow the export of a grain of sugar until after Diwalli Festival, even in surplus years; this is to ensure food security and prevent social upheaval.” The government also “fixes prices at which sugarcane and sugar is sold in the domestic market.”

For its part, Brazil also “strictly regulates” its sugar industry and is eyeing a new export tax on ethanol “to boost local supplies and stabilize prices.”

And “Sugar-producing countries like Pakistan and Indonesia have also put into place stringent measures that will protect their economies.”

With the rest of the world setting such a bad example, is it any wonder that Nigeria – which imports some 95 percent of its sugar – is not only eyeing expansion of its own sugar industry, but expanding the government’s meddling in that industry, as well?

Indeed, to protect local sugar farmers the Nigerian government recently “opted to increase the tariff on imported sugar as a way of discouraging imports.” New rates “between 50%-80%” were approved.

Recognizing that there’s no “free market” in global sugar, Nigeria has apparently decided that if you can’t beat them, join them. And such government interference in the sugar market – for new and old players alike – will continue until all parties somehow come together and agree to disarm unilaterally.

Mr. Muth is president of Citizen Outreach and the publisher of www.NevadaNewsandViews.com. He personally blogs at www.MuthsTruths.com.

September 9, 2015
Did the U.S. Sugar Program kill Oreo cookies?

(Chuck Mutch, Citizen Outreach) – In a recent Daily Signal column, Bryan Riley was in near hysteria over the loss of 600 jobs baking Oreo cookies in Chicago after Nabisco announced it was moving its manufacturing operation to Mexico. According to Riley, the decision was directly related to the current U.S. sugar program of relatively minor import tariffs and quotas.

“The leading ingredient in Oreos is sugar,” Riley wrote, “and U.S. trade barriers currently require Americans to pay twice the average world prices for sugar.”

As such, Riley continued, “Sugar-using industries now have a big incentive to relocate from the United States to countries where access to their primary ingredient is not restricted.” He went on to claim that the “obvious connection between the lost jobs and sugar quotas was missed by many observers.”

Well, to the extent it was missed, it’s because it isn’t there.

The fact is a pound of sugar today costs almost the same as it did in 1984 – way back when Ronald Reagan was president. And after doing a little checking at FoodTimeline.org, I learned that in 1984, the cost of a 20-ounce package of Oreos cost $1.79. Today, a 14.3-ounce bag of Oreos costs $4.49.

So, the price of a bag of Oreos today costs more than twice what it cost back in 1984 – and for a smaller bag! – while the cost of the sugar itself in those cookies costs pretty much the same.

Clearly, it is NOT the cost of sugar that has driven up the price of Oreos or driven Nabisco out of Chicago. In fact, Nabisco’s move from the U.S. to Mexico has nothing whatsoever to do with the cost of sugar in Chicago. It’s the cost of labor in Mexico.

The Chicago Tribune reported that the bakery was being relocated “because the three unions that represent workers either did not make a proposal to keep the work or their concession packages were inadequate.”

Laurie Guzzinati, a spokeswoman for the company, explained that there was a “$46 million gap between the cost of operating in Chicago and in Mexico” and that the unions representing the workers “did not provide a measurably impactful way to close the gap.”

Look, I have no problem with folks such as Mr. Riley criticizing the U.S. sugar program. I criticize it myself. But it is intellectually dishonest – when you look at the facts – to blame the U.S. sugar program for the decision of a cookie-maker to relocate its manufacturing operation from Chicago to Mexico.

It’s just not true. The facts speak for themselves. You could look it up.

Mr. Muth is president of Citizen Outreach and the publisher of www.NevadaNewsandViews.com. He personally blogs at www.MuthsTruths.com.

September 1, 2015
Sugar program opponents not entitled to their own facts

The high cost of sugar is the cause of higher prices of food products today.

(Chuck Muth, Citizen Outreach) – I understand why free market advocates are opposed to the U.S. sugar program of modest tariffs and import quotas that don’t cost taxpayers a dime. I’m a free marketer myself and want the sugar program to go away, as well.

However, I live on Planet Reality, not Planet Nirvana. And the reality is we now live in a global economy and you can’t have a free market when your competitors are playing with corked bats.

And it does the debate no good when opponents use false and misleading arguments to buttress their case. For example…

In a recent column, Leslie Paige of Citizens Against Government Waste claimed American consumers are paying for the sugar program “through a hidden tax on sugar-containing products – including everyday staples like bread, pasta and peanut butter – that are more expensive as a result of the high cost of sugar in the United States.”

But that claim is simply and demonstrably not true.

The fact is, the cost of a pound of sugar in the U.S. today – though arguably higher than some other countries whose governments provide generous and direct subsidies that distort the true cost – is right about where the cost of a pound of sugar was 30 years ago.

On the other hand, the cost of, for example, of a Hershey’s chocolate bar is now more than THREE TIMES the cost of Hershey’s chocolate bar 30 years ago.

Clearly it’s not a “hidden tax on sugar-containing products” that’s driven the cost of a Snickers through the roof.

Here on Planet Reality it’s the rising cost of not-so-hidden government taxation and regulation, with a healthy side order of profit-taking, that has resulted in Oreos costing more on supermarket shelves.

And, let’s not forget the hidden costs of skyrocketing wages and mandated benefits on the American labor force. How else but raising prices are U.S. manufacturers, including candy manufacturers, supposed to pay for minimum wage hikes now moving into the $15-per-hour-range?

No, the way to eliminate the U.S. sugar program isn’t to fall for the false argument that the cost of domestic sugar is responsible for soaring food prices, but to persuade other sugar-producing nations to eliminate their market-distorting subsidies for their own sugar industries so that a global free market can truly be free.

Mr. Muth is president of Citizen Outreach and the publisher of www.NevadaNewsandViews.com. He personally blogs at www.MuthsTruths.com.

August 25, 2015
Defending Rubio’s defense of U.S. sugar farmers

(Chuck Muth, Citizen Outreach) – James Bovard’s recent USA Today column attacking Sen. Marco Rubio’s (R-Fla.) support of U.S. sugar policy is built on the false assumptions that a global free market in sugar exists and that supporting U.S. farmers is at odds with being conservative.

Every sugar-producing country in the world subsidizes its sugar industry with policies that are more lucrative and trade-distorting than America’s. U.S. sugar policy costs $0 because it consists of loans that are repaid with interest instead of subsidy checks.

For this investment of $0, U.S. grocery shoppers get prices that are below world averages. And U.S. food manufacturers currently pay the same for sugar as they did in the 1980s, helping them expand production and add jobs here at home.

As for Rubio, his clear position demonstrates conservative values.

He believes all sugar subsidies around the world, including U.S. sugar policy, should be abolished so that a true free market that rewards efficiency can form. But he smartly opposes America acting in isolation without concessions from abroad to bring about real reform.

Real reform that protects U.S. interests while moving towards a true, global free market can be achieved by Congress adopting Rep. Ted Yoho’s “Zero for Zero” resolution calling for the end of the current U.S. sugar program in return for the simultaneous end of sugar subsidies by other sugar-producing nations.

The real question is not of Rubio’s conservative credentials. It’s how any politician could support policies that help less efficient foreign countries gain control over our food supply.

Mr. Muth is president of Citizen Outreach and the publisher of www.NevadaNewsandViews.com. He personally blogs at www.MuthsTruths.com.

August 19, 2015