by Marion Nestle
Sep 21 2009

How will the sugar policy crisis shake out?

My Sunday (September 20) column in the San Francisco Chronicle deals with the sugar “crisis” I discussed here a few weeks ago:

Q: I saw you on “The Colbert Report” (Aug. 19) talking about sugar policy. Explain, please. I don’t understand why sugar policy is a topic for Comedy Central.

A: Neither did I until I saw Stephen Colbert douse himself with 5 pounds of sugar over the impending “crisis.” We have a sugar crisis? According to processed food manufacturers, we are about to run out of sugar. Horrors!

Earlier in August, Kraft and other food processors asked the U.S. Department of Agriculture to raise the quota on sugar imports. Sugar availability, they complained, is the lowest in years and it’s the USDA’s fault.

The USDA firmly controls amounts of sugar (sucrose) produced by American cane and beet growers through quotas. It even more firmly controls sugar imported from other sugar-growing countries through quotas and tariffs. And as corn is increasingly diverted to biofuels, less high-fructose corn syrup (HFCS) is around to make up the shortfall.

Should we worry?

The shortage is no crisis. At worst, it is temporary and will end as soon as the 2009 harvest is in. But processed food makers are right about one thing: Sugar is the most absurdly protected agricultural commodity in America.

For decades, no matter what it cost on the world market, quotas and tariffs ensured that Americans paid two or three times as much for sugar. High sugar prices cost American consumers about $3 billion a year. But because this works out “only” to about $10 per year per capita, nobody much cared.

If you think of $10 as trivial, you won’t give sugar protectionism another thought. But if you look at this system as an unnecessary transfer of $3 billion a year from 350 million Americans to a few thousand sugar growers and processors, you can understand why sugar policy is ripe for satire.

Here’s how the system works:

Quotas allow U.S. producers to grow only specified amounts of sugar cane and sugar beets each year, for which the USDA guarantees a higher-than-market price. Beets get 55 percent of the quota; cane gets 45 percent. The quotas are fixed. If you want to grow sugar beets in your backyard and sell the sugar to USDA at the favorable support price, too bad for you. You only get a quota if you already have a quota.

As for tariffs, the 2008 Farm Bill requires 85 percent of total sugar in the United States to be produced domestically, and allows only 15 percent to be imported. That 15 percent is distributed through quotas awarded to about 20 countries.

Above and beyond the quotas, imported sugar is subject to high tariffs. Mexico is an exception. Under NAFTA, Mexico gets to sell us as much sugar as it wants at the favored price. However, few countries in Africa hold quotas. What if you are an African cane-growing country and want the high quota price for your sugar? Not a chance.

Imports are never supposed to top 15 percent, so the USDA can’t increase the percentage. But we participate in the World Trade Organization, which obligates us to take world market sugar. Oops. These policies don’t match. Processed food makers must think the contradictions will allow the USDA to let in more sugar. Maybe, but the legalities are not yet decided.

Mind you, sugar producers and processors love this system. They argue that it keeps jobs in rural America and eliminates dependence on foreign sugar imports. To make sure nobody scrutinizes the system too carefully, they formed cooperatives to avoid antitrust laws.

Sugar producers are among the most generous and equal-opportunity contributors to congressional election campaigns, giving to both Democrats and Republicans. For decades, administrations of both parties have tried to end sugar supports. No such luck.

A shift’s brewing

Policies may change, because the gap between the prices for domestic and world market sugar – and for high fructose corn syrup – has narrowed recently. Sugar is now at war with HFCS. As HFCS is increasingly known as a key junk food ingredient, manufacturers are rushing to replace it with sucrose, which they can tout as “natural and unprocessed.”

Other sugar issues are also ripe for comedy. Most sugar beets are now genetically modified, leading many companies to avoid using beet sugar. In the South, sugar cane production pollutes the Everglades, which is costing billions of dollars to clean up. Investigative reporters are riveted by the feudalistic labor practices of sugar plantations.

And then there’s Cuba. Until the Castro revolution, that’s where we got most of our imported sugar. When relations improve, will Cuba get a sugar quota?

If sugar is responsible for any true crisis, it is because of its role as an ingredient in processed foods. Cheap sugar reduces the cost of candy and soft drinks. Cheap junk foods are highly profitable. Otherwise, our sugar policies make no sense in today’s global marketplace.

But we would be healthier eating less sugar, anyway. So here’s my solution to the non-crisis: Eat less sugar!

  • Janet Camp

    The sugar debacle is just another example of how entrenched the lobbyist system has become. To top it off, they’ve had themselves (or their money, anyway) declared “free speech”. It really is wrecking the country.

  • http://www.thedallascookbook.blogspot.com Amy S

    I am concerned lowering the prices of sugar will result in people eating more sugar. Because that is how economics works when the supply rises, prices drop and consumption rises.

    Making sugar or HFCS more accessible (by increasing tariffs or production) only creates incentives for making it an additive in foods. Those who research these additives the least are the poor and uneducated, who are desperate for lower costing products. These are also the families with children who are most likely to become obese.

    What is objectionable is that any subsidies are paid to the industry, get rid of those. Limit the amount of sugar produced or imported (no different than the way alcohol is limited), recognizing that it is in every way addictive and deadly as other legal but restricted goods (cigarettes, alcohol). Then let the market determine the price, instead of subsidizing a guaranteed price. Take away the subsidy and it becomes the end consumer instead of the taxpayers who pay for consumption of sugar. Don’t eat alot = don’t pay alot.

    This in no way is to be misconstrued as a “quota per person” on sugar, but let it become more expensive and it will become a greater economic choice for people to make.

    Full disclosure – I love a PayDay bar every so often, but the prices have come down so far it’s a quick and easy choice to only pay $.25 cents for a days worth of sugar.

  • Michael Jo Mayer

    I agree as to the solution: eat less sugar. I have substantially reduced my intake of refined sugar and HRCS and have found that I have far more energy and much better bowel movements. I do get a fair amount of sugar, natural sugar, from fruits (as I eat grapefruit everyday and also enjoy an assortment of berries, bananas, and apples). Every now and then I also sweeten my green tea with a little honey or agave nectar. Overall, I have felt much better after slashing my refined sugar consumption (while also slashing my meat consumption).

    On thing that I would like to know is how much of the sugar money goes to smaller farmers? I know that it is said that only about two cents out of every $1.50 order of french fries goes to the potato farmer.

  • Bobby

    I Studied sugar in my commodity markets economics course in 1985, and came to the conclusion that this was quite the mess of stinky poo. There was not much of that American Free market enterprise thing in evidence, and a lot of protecting the big producers from competition. Doesn’t look too different today, even with the competition of HFCS. Taught me the important lesson of “money shapes politics”, and I still dream of government by the people, for the people, instead of the “money talks” system of corporate-controlled-government of today’s America.