NCPA - National Center for Policy Analysis

SUGAR DEAL NOT SO SWEET FOR CONSUMERS

September 29, 2005

Sugar supplies are plentiful around the world, yet, the United States faces a shortage this year thanks to protectionist measures that favor the American sugar industry, says the Wall Street Journal.

How can this occur? If market prices for sugar fall, the government buys sugar at a guaranteed minimum price. Therefore, the U.S. Department of Agriculture (USDA) strives to keep prices high through import quotas and domestic production quotas.

The problem is that the supply of sugar is based on department estimates that do not always match consumer demand. The result this year has been disastrous, says the Journal:

  • In August, a major sugar supplier has announced that it will have less sugar than anticipated.
  • So the Department of Agriculture has announced that it will allow domestic producers to sell more to lessen the shortage.
  • But U.S. law requires that 54 percent of the new marketing allotment must go to beet sugar producers and 46 percent go to cane sugar producers, so the USDA has to fill the supply shortage from cane sugar producers with government stocks and imports.

The USDA predicts that demand will outstrip supply by several hundred thousand tons, so sugar prices are expected to soar. The Central American Free Trade Agreement (CAFTA) allows an increase in sugar imports from the Caribbean, but not enough to mitigate the damage done to consumers and the $225-billion sugar-using industries, says the Journal.

Source: Editorial, "Sweet and Lowdown," Wall Street Journal, September 26, 2005.

For text (subscription required):

http://online.wsj.com/article/0,,SB112768548800351484,00.html

 

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