U.S. Sugar Policy Sends Candy Makers Abroad

November 8, 2013

Despite a prolonged slide in domestic sugar prices, U.S. candy makers are expanding production in other countries as federal price supports and a global glut of the sweet stuff give an ever-greater advantage to foreign rivals, says the Wall Street Journal.

  • A 50 percent drop in U.S. sugar prices in the last two years hasn't been enough to eliminate problems from a longtime price gap between domestic and foreign sugar.
  • From 2000 to 2012, the average price of U.S. sugar was more than double the worldwide average, according to pricing data from the ICE Futures U.S. exchange, where both the U.S. and global contracts are traded, and the Agriculture Department.
  • Total U.S. confectionary-manufacturing employment sank 22 percent to about 55,000 jobs in 2011 from 1998, according to an analysis of U.S. Census Bureau data by the Wall Street Journal.
  • The number of industry manufacturing locations fell 7.7 percent to about 1,600 in the same period.

U.S. prices can't fall much lower because of a federal government program that guarantees sugar processors a minimum price. The rest of the world also has a surfeit of sugar, but fewer price restrictions, and big growers like Brazil are expecting a record crop for the current season.

Financial pressures have grown because rising costs for labor, utilities, packaging, freight and health care in the United States make it impossible to lower candy prices when the cost of sugar drops, some candy makers say.

  • The squeeze explains why Atkinson Candy Co. has moved 80 percent of its peppermint-candy production to a factory in Guatemala that opened in 2010.
  • That means it can sell bite-size Mint Twists to retailers for 10 percent to 20 percent less.
  • Less than one-fourth of Atkinson's total production has been moved outside of the United States, but the percentage being produced abroad is growing.
  • The foreign expansion, including a second shift just added at the factory in Guatemala, helps the company sell its products at lower prices that appeal to larger retailers.

Source: Alexandra Wexler, "Cheaper Sugar Sends Candy Makers Abroad," Wall Street Journal, October 20, 2013.

 

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