The U.S. Department of Agriculture’s September 2010 issue of its magazine, “Amber Waves,” has an excellent article on the U.S. domestic sugar program – its domestic market allotments, price supports, and import restrictions — and how even this program, which attempts to protect U.S. sugar producers from competition and price fluctuations, is affected by volatility in the world sugar market.
And that’s a timely topic, as this Wall Street Journal August 21 article makes clear. What has happened would have been easy to predict. Sugar users in the U.S. – mainly food and confectionery producers – have been asking the Secretary of Agriculture to increase the amount of sugar allowed to be imported into the country under tariff rate quotas that carry low tariff rates. Otherwise, sweetener users said, they would be facing supply shortages. Under the 2008 Farm Bill, at the beginning of the quota year, the Secretary is required to set the initial quota at the minimum the World Trade Organization requires, and can’t increase that before April 1 unless there is an emergency.
As the WSJ article notes, once the Secretary raised the quota, world sugar prices rose to 20 cents per pound, the highest level in five months. That compares with U.S. domestic sugar prices of about 34.13 cents a pound, kept artificially high due to government-mandated supply restrictions on both the domestic supply and the imports allowed.
CEI has long advocated the termination of the U.S. sugar program, which benefits a relatively small group of sugar producers, while raising food costs for consumers. It’s a prime example of why central planning doesn’t work.