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U.S. Sugar Policy Consumer Costs

Issue: U.S. sugar policy is constantly under attack with claims that if forces consumers to pay inflated prices for sugar, $1.4 billion a year is often cited, by denying access to cheap sugar from the world market.

U.S. consumers get a good deal on sugar at the supermarket. What consumers want is a reliable supply of quality sugar at reasonable and stable price. Under U.S. sugar policy, that is exactly what the consumer gets.

Since U.S. consumers pay less for sugar at the supermarket than do consumers around the world, the savings to Americans from this price differential is tremendous. Americans, who pay 39 cents a pound average retail price, save $2.42 billion a year for sugar alone. This compares to the average of what they would have to pay in other developed countries, 54 cents a pound. When the U.S. price of high fructose corn syrup (HFCS) is factored into the equation, the savings for U.S. consumers is even more dramatic, $5.53 billion.

Despite this fact, editorial writers and others, but not consumers, frequently charge that because U.S. sugar policy import quotas restrict access to cheap world sugar, this costs consumers $1.4 billion more for sugar. This is an absolutely false statement based on false assumptions.

The first false assumption is that a reliable supply of foreign sugar is available to meet all of the needs of U.S. consumers at a lower price. This is not so. The truth is, U.S. consumers use about 9 million tons of sugar each year. The so-called world market of sugar, which is really a dump market, consists of only about 25 percent of the 114 million metric ton world production. This means that if the U.S. were to be dependent for its supply from the world market, the U.S. alone would consume about half of that which is trade don the world market.

The second false assumption is that we could go into that volatile world market and purchase half the supply without causing a significant impact on the price. The truth is, twice in the past two decades the U.S. eliminated quotas, with disastrous impact on consumers and the industry. Prices shot up as high as 60 cents a pound in 1974 and then to more than 40 cents a pound in 1980. U.S. sugar policy keeps prices reasonably stable.

A further false assumption is that if the big sugar users, and more than 60 percent of all U.S. sugar is used by the big sugar users, could get the sugar at cheap world market prices, they would pass the savings through to the consumer. Consumer analysis confirm this is not true. Not too long ago Coca Cola was sued successfully by some of its own franchised bottlers for not passing along savings even to them, members of the “family”, much less the poor consumer. A trade magazine for the soft drink industry also congratulated its readers on maintaining higher prices even as sugar prices declined.

Additional facts on Consumer Costs

Fact 1: A reliable supply of foreign sugar would not be available to meet all the needs of U.S. consumers at a reasonable price. U.S. consumers use about 9 million tons of sugar each year, or one third the total amount traded on the world market.

Fact 2: Large purchases from the world market have an immediate and significant impact on price. The world sugar market is by far the most volatile of any commodity market. The price is very sensitive to changes in supply and demand. The charge against the industry ignores this basic economic truth. Getting government out of sugar policy or eliminating quotas has happened twice in the past two decades, with disastrous impact on consumers and the domestic industry. Without a sugar policy, world prices rose to 60 cents a pound in 1974 and then to more than 40 cents a pound in 1980, only to drop sharply below production costs.

Fact 3: All savings from cheaper sugar are not passed on to the consumer. Of all U.S. purchases of sugar, about 60 percent are made by big food manufacturers. Analysts confirm that little if any savings in sugar prices are passed on to the consumers. Added costs are passed on to consumers. Savings are passed on to CEOs and company owners.

An analysis of the issues affecting the U.S. sweetener industry along with information addressing those issues, prepared by the American Sugar Alliance

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