Country-by-Country Sugar Subsidy Developments
Compiled by ASA staff using USDA’s Global Agricultural Information Network reports.
New Report Finds No Evidence that U.S. Sugar Program Harms Profitability of Sugar-Using Companies
A collaborative analysis conducted by four agricultural economics professors at the University of Tennessee and Oklahoma State University has found that U.S. sugar prices do not impede the financial performance of sugar-using firms.
The analysis thoroughly examined, and rejected, the claim from sugar-using firms “that as the U.S. price of sugar increases relative to the world sugar price, this negatively impacts their profits.” As the authors note, their findings “suggest that U.S. sugar-using firms pass on higher costs to consumers when relative prices increase or do not pass on discounts to consumers when relative sugar prices decrease.”
This was on full display in the aftermath of the dumping of subsidized Mexican sugar on the U.S. market in 2013. Sugar prices plummeted, costing U.S. producers $4 billion and many sugar workers their jobs. Meanwhile, Americans paid higher prices at the grocery store for sweetened products and manufacturers pocketed the profits.
This report expands upon a well-known 2016 report published by Dr. Alexander Triantis, during his tenure as dean of the University of Maryland business school, and analyzes the financial performance of 26 publicly traded companies that use sugar primarily purchased in the United States. In his 2016 report, Dr. Triantis found that under current U.S. sugar policy, the nine largest publicly traded firms producing sugar-containing products had added jobs, increased production, and far outpaced the rest of the food processing industry in profit returns.
The full report prepared by the University of Tennessee and Oklahoma State University agricultural economists can be found here. This is an independent and peer-reviewed report for which no industry funding was received and which was originally published by Agricultural and Food Economics.
Dr. Karen L. DeLong, one of the report’s authors and an Assistant Professor of Agricultural and Resource Economics at the University of Tennessee, said that the analysis yielded conclusive results.
“The U.S. sugar program buffers domestic sugar producers against heavily subsidized foreign sugar, but sugar-using firms claim that this program maintains artificially high domestic prices and therefore decreases profits. The data show that when all other conditions remain the same, there is no evidence to support these claims,” DeLong said.
In fact, the analysis found the unexpected result that “as U.S. prices increase relative to world prices, sugar-using firms are more profitable.”
“America’s sugar farmers and workers are proud to provide our customers with more than 60 different types of affordable and sustainably produced American sugar,” said Jack Pettus, chairman of the American Sugar Alliance. “This analysis confirms what our industry has long known: the price stability provided by America’s no-cost sugar policy has no negative effect on the bottom line of sugar-using companies.”
Pettus continued, “The pandemic has highlighted the importance of essential products like sugar to be produced in the U.S. and delivered through reliable supply chains. America’s sugar farmers and workers need a strong no-cost sugar policy to give us a fighting chance against excess foreign imports that threaten our ability to produce sugar domestically.”
Sour Subsidies Underscore Need for U.S. Sugar Policy
The widespread use of foreign government support and subsidies have contributed to a wildly unpredictable global sugar market. And foreign intervention only continues to rise as nations struggle to prop up their inefficient producers and deal with the overproduction spurred by these very same sugar subsidies. As a result, sugar exports are being dumped by dozens of countries on the world market at prices that are half the cost of producing it world-wide and well below their own countries’ internal consumer prices.
The American Sugar Alliance recently reviewed all of the U.S. Department of Agriculture’s (USDA) 2020 Semi-Annual Sugar GAIN reports and compiled all mentions of the various ways more than 20 foreign governments intervene in their sugar markets into one convenient report.
State run companies. Direct payments. Export subsidies. Government-set prices.
These are just some of the sour policies used for such a sweet crop, especially when compared to America’s successful no-cost policy, which doesn’t rely on subsidies. And all of it is documented in this report.
Let’s look at a snapshot of recent developments affecting sugar sectors in countries around the world, including some covered in the aforementioned 2020 USDA GAIN reports.:
- Thailand approved a 10 billion baht bailout package for its sugar farmers – that amounts to approximately $323 million.
- India is reportedly moving ahead with a support package for its sugar industry, estimated to be in the $1.3-$1.6 billion range.
- A special Sugar Inquiry Commission in Pakistan recently released a report detailing the approximately $177 million in sugar subsidies that have flowed into the coffers of a handful of sugar mills since 1985.
- So many buyers rushed to get their hands on Brazil’s subsidized sugar, made sweeter by its devalued currency, that the country is currently dealing with a giant container ship traffic jam.
- Egypt – where most of the sugar processors are state-run companies – have flat out banned sugar imports for the next three months to protect their industry from the volatile prices on the world market.
- Russia has turned from a major world importer of sugar to a growing exporter, with the government having recently allowed for the establishment of sugar export associations to help facilitate further exports abroad.
Meanwhile, America’s strong no-cost sugar policy protects efficient American sugar farmers and workers and ensures that we maintain an affordable supply of this essential ingredient.
But if we were to unilaterally weaken or cripple this successful policy in the face of rampant subsidization, without passing the Zero-for-Zero Sugar Policy, the more than 142,000 sugar farmers and workers the American sugar industry supports would likely face bankruptcy.
After all, the multigenerational family farmers that grow sugarcane in three states or sugarbeets in 11 states, and all of the factory workers that process sugar, can’t compete against the billions that foreign treasuries dump into the market.
That’s why the American sugar industry is advocating that Congress pass Congressman Ted Yoho’s Zero-for-Zero Sugar Policy (H. Con. Res. 7) to put a stop to the wave of sugar subsides causing market turmoil. It’s a common-sense proposal that would only drop America’s no-cost sugar policy in exchange for the verified elimination of all foreign sugar subsidies.
It’s time for the Zero-for-Zero Sugar Policy.
Sugar Industry Lends Helping Hand to Support Nation’s Recovery
Over the past several months, the COVID-19 pandemic has altered our daily routines, but it has not dimmed the hope and giving spirit that shines through America’s sugar industry.
The majority of America’s sugar operations are located in small towns and rural areas, fostering a tightknit relationship between sugar farmers and workers and the communities where they live and work. From day one of the COVID-19 pandemic, the sugar industry has led efforts to feed and protect its neighbors in need.
When Amalgamated Sugar Company found itself with a surplus of masks above and beyond what was required to protect its workers, it donated 2,000 surplus cloth masks to the Boise Rescue Mission Ministries to help protect vulnerable men, woman and children from the spread of COVID-19.
“Amalgamated Sugar’s generous gift of 2,000 face masks provides a timely resource that is so appreciated,” said Reverend Bill Roscoe, president of Boise Rescue Mission Ministries. “I am amazed at their kindness and generosity to the Rescue Mission as we continue to serve people through very difficult circumstances.”
We are so proud of the sweet ways America’s sugar industry has lent a helping hand in support of our nation’s recovery. We’ve profiled many of them already, but are thankful to be able to keep sharing more examples of the humble generosity of our sugar producers.
American Crystal Sugar Company prides itself on the local ties its employees have fostered within the local communities. So, it wanted to find a way to share its appreciation for its hardworking employees as well as support local restaurants that have been affected by COVID-19.
American Crystal awarded each of its nearly 2,000 employees with $75 in gift cards for restaurants throughout the Red River Valley as well as near Sidney, Montana.
Sugar farmers have always been quick to share their blessings by supporting food donation efforts. However, the pandemic has created even greater food insecurity in many of our rural communities. In response, farmers and sugar companies have stepped up efforts to help, including Florida Crystals.
Florida Crystals and its farmers also donated sugar, rice and fresh produce to local hospitals during National Nurses Week and National Hospital Week in gratitude for the dedicated medical professionals on the front lines of this pandemic.
But sugar is more than just a key ingredient for many of the foods we know and love. As distilleries make hand sanitizer to support relief and recovery efforts, sugar companies have donated tens of thousands of pounds of a critical component: sugar.
Florida Crystals joined these ranks with its donation of 42,500 pounds of cane sugar to a local Florida rum distillery to produce and donate hand and surface sanitizer to first responders, hospitals, nursing homes and community members.
This season might look vastly different for our farmers, our factories and our families. The challenges created by the pandemic may be new, but our dedication to preserving vibrant rural communities, farm families and small businesses has long been a tenet of the industry’s commitment to sustainability and will continue to drive our efforts to aid recovery.
We’re all in this together and hope will persevere.