Easter Bunny’s Burden
From Pennsylvania, bad news for chocolate lovers:
The Hershey Company says it is raising wholesale prices by 9.7% on most of its candy products. The maker of Reese’s, Kit Kat, Hershey’s Kisses and Twizzlers cited increased costs for raw materials, fuel, utilities and transportation.
The costs of two key raw materials—sugar and dairy products—are artificially inflated by federal government policies, the effect of which is to harm U.S. consumers and U.S. food producers, such as Hershey.
Senator Richard Lugar has introduced legislation to reform U.S. sugar policies. His timing is good, as world food prices are rising and some experts predict that sugar prices will soar in coming years.
The best ways to combat rising food prices—which particular harm people with moderate incomes—are free markets, open international trade, and vigorous competition. Unfortunately, those pro-growth and progressive policies are absent in the U.S. dairy and sugar industries, which are subject to Soviet-style central planning. (See here and here).
A consultant study last year (not commissioned by Hershey) indicated that high corporate taxes are also a negative with respect to Hershey’s U.S. production:
Lugar Targets Federal Sugar Racket
The federal government has been meddling with sugar production since 1934. Today’s convoluted system of supply controls, price supports, and trade restrictions benefits domestic sugar producers at the expense of consumers and utilizing industries. In other words, sugar producers “win” and the rest of the country “loses.”
Sen. Richard Lugar (R-IN) just introduced the “Free Sugar Act of 2011,” which would abolish the federal sugar racket. In a Washington Times op-ed on his bill, Lugar doesn’t pull any punches:
The collapse of communism brought an end to many of the world’s command-and-control economic systems and central planning by government bureaucrats. But a notable exception is the United States government’s sugar program. A complicated system of marketing allotments, price supports, purchase guarantees, quotas and tariffs that only a Soviet apparatchik could love, the U.S. sugar program has actually lasted longer than the Soviet Union itself.
A Cato essay on agricultural regulations and trade barriers elaborates on points Lugar makes in his op-ed:
- The big losers from federal sugar programs are U.S. consumers. The Government Accountability Office estimates that U.S. sugar policies cost American consumers almost $2 billion annually. (Lugar says it could be as much as $4 billion.)
- The GAO found that 42 percent of all sugar subsidies go to just 1 percent of sugar growers. To protect their monopolies, many sugar growers, such as the Fanjul family of Florida, have become influential campaign supporters of many key members of Congress.
- U.S. food industries that buy sugar are harmed by current sugar policies as well. The employment in U.S. sugar growing is 61,000, which compares to employment in U.S. businesses that use sugar of 988,000. According to a government report, for each sugar growing and harvesting job saved through high U.S. sugar prices, nearly three confectionery manufacturing jobs are lost.
- Numerous U.S. food manufacturers have relocated to Canada where sugar prices are less than half of U.S. prices and to Mexico where prices are two-thirds of U.S. levels.
The federal government engages in a lot activities that are difficult to defend. But when it comes to sugar, the government’s protections are clearly indefensible.
This Should Make You Nervous
From today’s edition of Farmpolicy.com:
The American Farm Bureau Federation, the National Cattlemen’s Beef Association, and the American Sugar Alliance all recently expressed delight that Kansas GOP Senator Pat Roberts will be the new Ranking Member of the Senate Agriculture Committee.
More about the Calorie Police
It’s nice to get quoted in the Los Angeles Times, even if the author obviously didn’t understand what I was getting at. I’ll try to clear up the confusion here.
Does Kuznicki (or anyone else) really think that the goal of a healthy diet is simply to minimize the total number of calories consumed? (Perhaps these are the same folks who swear by Taco Bell’s Drive-Thru Diet.)
A 12-ounce serving of whole milk contains 12 grams of protein, along with 45% of the calcium and 36% of the vitamin D you need each day. The same amount of soy milk also has 12 grams of protein and 14% of the daily recommended intake of iron.
Care to guess how many vitamins and minerals are in a can of Coke?
I certainly don’t think that a healthy diet means only reducing one’s calorie intake. I do, however, believe that the stated goal of the policy was not to improve overall health, but to reduce obesity. And for that, which one do you pick?
a) consume fewer calories
or
b) get more calcium and vitamin D.
Does anyone seriously suggest that (b) is the right choice? Is this what passes for nutritional advice at the Los Angeles Times? Eat whatever you want, and as long as you take your vitamins, you won’t get fat?
The policy we’re talking about was not intended to make sure that people get all their vitamins and minerals. It was intended to curb obesity. And for that purpose it will do essentially nothing, as I noted, I still think correctly, in the original post.
Pepsi Throwback and the Sugar Racket
This weekend while watching a football game with a friend, I saw a commercial for Pepsi “Throwback.” This is a new product containing real sugar instead of high-fructose corn syrup. My friend was incredulous when I explained that soft drinks manufactured for sale domestically generally don’t contain sugar because government protection of the U.S. sugar industry from imports make its use cost-prohibitive.
I am intrigued that Pepsi would market a sugar-based product. In perusing the Internet for news about it, I found countless stories applauding the product but blaming Pepsi and Coke for continuing to use inferior-tasting high-fructose corn syrup. For example, Pepsi Throwback’s Wikipedia page states that soft drink manufacturers switched to high-fructose corn syrup decades ago because of rising sugar prices, but it doesn’t mention that government policy was behind the price increases.
A Cato essay on agricultural regulations and trade barriers explains the government’s sugar racket and its destructive effects. Here are the key points:
- The federal government guarantees a minimum price for sugar in the domestic market by maintaining a system of preferential loan agreements, domestic marketing quotas, and import barriers.
- USDA data show that U.S. sugar prices have been more than twice world market prices.
- The Government Accountability Office estimates that U.S. sugar policies cost American consumers about $1.9 billion annually.
- U.S. food industries that buy sugar are harmed by current sugar policies. The employment in U.S. sugar growing is 61,000, which compares to employment in U.S. businesses that use sugar of 988,000.
- According to a U.S. Department of Commerce report, for each sugar growing and harvesting job saved through high U.S. sugar prices, nearly three confectionary manufacturing jobs are lost.
- Numerous U.S. food manufacturers have relocated to Canada where sugar prices are less than half of U.S. prices and to Mexico where prices are two-thirds of U.S. levels.
Chicago has been particularly hard hit, with many candy companies moving production abroad. One might think that our president, a Chicagoan, would be willing to take on the powerful domestic sugar lobby. But as Dan Griswold discussed in October, Obama’s USDA ignored a plea from domestic sugar-using industries and kept quotas at their current restrictive level.
What about high-fructose corn syrup? Government policy artificially increases the price of sugar, but its corn subsidies artificially reduce the price of corn, which helps make high-fructose corn syrup more cost-effective in products like soft drinks. Major high-fructose corn syrup manufacturers, such as Archer Daniels Midland, benefit from federal programs and they spend lots of money lobbying policymakers to keep them going.
In his classic 1995 Cato policy analysis, “Archer Daniels Midland: A Case Study in Corporate Welfare,” James Bovard recounts ADM’s long-standing influence behind the government’s sugar racket:
Although ADM does not directly produce sugar, Congress and the USDA have created a price umbrella under which ADM’s production of high-fructose corn syrup – a sugar syrup – has become immensely profitable. ADM got into corn fructose production very heavily around 1974, just as sugar prices peaked on world markets. After ADM invested heavily to increase its capacity to produce high-fructose corn syrup ninefold, sugar prices plummeted from 65 cents to 8 cents per pound.
[ADM Chairman Dwayne] Andreas told Business Week in 1976, “If it was a mistake, I’d say it was my mistake.” Business Week noted, “One industry source suggests that ‘Dwayne looks at this as sort of a waiting game, basing his unflappability on the predicted passage of a new sugar bill.’ Such a bill is expected to provide an ‘umbrella’ – that is, to put supports under sugar at a level where high-fructose corn syrup will be at least reasonably profitable. Andreas contributed heavily to the 1968 and 1972 campaigns of Humphrey, Jackson and Nixon. With both parties covered, ADM may reasonably anticipate some legislative help.” That help came in the form of a new sugar bill in 1981.
For ADM, cheaper inputs (corn) plus a more expensive substitute (sugar) equals nice profits at U.S. taxpayer and consumer expense.
Pepsi Throwback will only be available for U.S. consumers to enjoy until February 22nd. After that, Americans looking for Pepsi or Coke with real sugar in it will have to go to Mexico. Hopefully, Mexican politicians won’t put up a wall along the border to stop Americans from sneaking into the country and taking all their good soft drinks.
Update: Several readers have pointed out that “Passover Coke,” which contains sugar instead of high-fructose corn syrup, can be found in certain metropolitan areas around Passover. Coke with sugar manufactured in Mexico can also be found in some Latin American grocery stores.
If At First You Don’t Succeed
Mexican sugar growers want “in” on the cozy little arrangement that domestic sugar growers have here in the United States. They have formed an alliance with the U.S sugar lobby to recommend that the U.S. and Mexican governments work to “avoid importing sugar from other countries to help boost the market between the neighbours” (full article here [$]).
This proposal is not new, of course, having previously been suggested to lawmakers’ during the 2008 farm bill debate (see here). The “recommendation” was rebuffed at that time, but these people are nothing if not tenacious.
In what surely must be a contender for the “Understatement of the Year” award, the article ends with this: ” Sweetener users and free trade advocates are likely to find the recommendations controversial”. Someone at CongressDaily has a sense of humor.
More on Sugar’s Sweet Deal
Following my and Dan’s blog posts last week on the continuing lining of Big Sugar’s pockets at consumers’ expense, the Washington Post and Wall Street Journal have written editorials on the scam. I commend both of them to you, although I could have done without the WaPo‘s moralizing on the “social benefits” of high sugar prices.
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