Sugar Industry Blames Mexico for Falling Sugar Prices
September 2, 2014
The U.S. sugar industry is seeking to limit Mexican sugar imports, claiming that Mexico is the culprit behind falling sugar prices in the United States. But Vincent Smith, visiting scholar at the American Enterprise Institute, writes that the sugar lobby is off-base.
The sugar industry is already the recipient of taxpayer aid, with an expensive subsidy program that sends funds to sugar farmers with incomes above the national average. Still, producers are blaming Mexican imports for a recent fall in sugar prices, insisting that Mexican sugar producers are causing harm to American farmers. But while sugar prices have fallen, Smith explains that the drop is due to global factors:
- American sugar prices peaked from 2010 to 2012, reaching 59.5 cents per pound. Today, the global price has dropped to 13 to 18 cents per pound, much more in line with historical prices.
- The high sugar prices from 2010 to 2012 were not typical, rather they were due to two major global events: poor weather in Central America and the Caribbean, which destroyed sugar crops, and Brazil's heavy use of sugar to produce ethanol. When those two factors returned to normal, sugar prices did too.
Mexico has in fact increased its sugar production, as sugar export constraints were lifted in 2008, allowing Mexico to increase its sugar shipments to the United States. Though Mexican sugar imports have risen, total sugar imports into the United States have fallen from 2012 to 2013, making it unlikely that the Mexican imports are responsible for the fall in prices. In fact, Smith writes that the world began to produce more sugar, driving prices downward.
Additionally, Smith notes that Mexico's own sugar consumption has fallen, because the high sugar prices from 2010-2012 pushed food processors to use high fructose corn syrup instead of real sugar to sweeten foods and drinks. Significantly, Mexico gets that high fructose corn syrup from the United States.
Smith calls farm lobby arguments the "Alice in Wonderland world of economic logic."
Source: Vincent H. Smith, "A subsidy for the rich that will have you clutching your head," American Enterprise Institute, August 27, 2014.
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