Contact: Susan Whiteside
September 3, 2009
In support of a recent editorial in the Wall Street Journal supporting reform for U.S. sugar policy and in response to a negative advertisement placed by the American Sugar Alliance in the same newspaper, the National Confectioners Association wrote the following letter to the New York-based publication with international distribution. The letter was published in the Wall Street Journal on Thursday, September 3.
Your editorial "Sugar Land" (Aug. 22) calls for an increase in U.S. sugar import quotas-something that is also supported by consumer advocates and the companies that buy and use sugar and employ 650,000 Americans. TheU.S. sugar lobby disagrees vehemently. There is plenty of sugar, the lobby says.
In fact, an objective look at current markets leaves no doubt about the need for the U.S. Department of Agriculture to allow more sugar imports. The best indicator of supply adequacy in commodity markets is the ratio of end-of-year stocks to total demand; in other words, how much is left once all consumption demand has been satisfied? A high ratio of so-called stocks-to-use indicates surplus; a very low ratio means shortage.
The U.S. government officially predicts that this stocks-to-use ratio for sugar in September 2010 will be the lowest since at least 1959. At 6.7%, the ratio means that only about three weeks worth of sugar will remain at next fiscal year's end. A normal level for sugar is about 15%, nearly two months use.
That U.S. sugar policies raise consumer prices is not simply an assertion by the food industry; it is a finding of the Government Accountability Office, Congress's watchdog agency, which cited a consumer impact of $1.9 billion a year even when U.S. sugar prices were much lower than they are now. Similarly, it is the government, not just the food industry, which says that U.S. sugar policies contribute to job loss. That finding was in a Commerce Department study.
When companies face decisions about where to locate facilities, one factor is their ingredient costs. For a confectioner whose largest commodity cost is sugar, the fact that U.S. sugar is deliberately priced well above world levels is not a factor that can be ignored.
For most agricultural products, U.S. import quotas are not an issue because they do not exist. Pay a modest tariff, and you can import what you need. For farm goods like corn and soybeans, tariffs are low or nonexistent, and yet imports do not overwhelm domestic producers.
In the case of sugar, import quotas place an absolute limit on food and beverage makers' access to supplies, and U.S.production alone is insufficient to meet demand. In today's market conditions, the import quotas are too low and need to be raised. That will not harm U.S. sugar producers, but it will keep markets adequately supplied and guard against higher inflation.
Lawrence T. Graham
National Confectioners Association
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