(Chuck Muth) – OK, so here are two of the talking points being peddled by critics of the current U.S. sugar program…
1.) Candy-makers and other sugar-product manufacturers could be buying sugar on the world market cheaper than the cost of domestic sugar.
2.) Because manufacturers are buying domestic sugar for more than the cost of world-market sugar, consumers are paying more than they should.
Now here are the facts these critics aren’t telling you…
1.) The cost of domestic sugar today is pretty much the same as it was thirty years ago.
2.) As such, consumers are paying more for sugar products today because of factors other than the cost of sugar, including the rising cost of labor, taxes, regulatory compliance and…um, profit-taking.
3.) The cost of world-market sugar is artificially low thanks to foreign government subsidies.
4.) If the U.S. sugar program was unilaterally eliminated, the flood of artificially cheap, foreign-subsidized sugar would inevitably drive some U.S. sugar producers out of business.
5.) Once land currently being used for sugar farming is paved over for parking lots, shopping centers, homes and commercial properties, you can’t convert it back to farm land.
6.) Which means if the cost of foreign sugar goes up for some reason – government unrest, Mother Nature, etc. – American manufacturers would be stuck paying it if the domestic sugar industry is decimated.
This is an important point in light of a Reuters story this week about the world’s #2 producer of sugar.
“India is likely to hold off at least until the start of the monsoon season before making any changes to sugar policy despite a jump in domestic prices that choked off exports.”
The operative words here are “choked off exports.”
If that means the current glut of sugar on the world market shrinks, it will also mean the cost of world market sugar will increase. So the artificially cheap foreign sugar could soon end up costing more than the cost of American sugar.
A stable, reliable and dependable domestic sugar supply is a far better policy objective for this important agricultural commodity than short-term world market “blue light specials.”