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The Sugar Beat

As most lawmakers were inside the Capitol last week negotiating a deal to help the government stay open amid crippling budget pressures, a couple of legislators ironically held a sparsely attended press conference outside the Capitol to take GroceryShoppersaim at one of the government’s only no-cost policies.
Their target was sugar policy, which hasn’t cost taxpayers a dime since 2002 and will remain no cost through, at least, 2021, according to government and private sector estimates.  Not surprisingly, no one at the press conference mentioned the $1.3 billion-a-year sugar policy alternative floated by food manufacturers during the 2008 Farm Bill.
Given these budget implications, you'd assume times must be tough for food manufacturers.  How else could they get a couple of legislators to take aim at a no-cost policy when almost everyone else is focused on trimming spending?
But food manufacturers are doing very well right now.
  • The confectionary industry has cited profit margins of 35%.
  • U.S. candy production has expanded by 7% from 2004-2009, according to the Department of Commerce.
  • An August 2009 paper about the confectionary industry by a former USDA official noted job growth and expansion of U.S. candy manufacturing facilities.
  • And the chairman of the Smithsonian Institution’s work and industry division crowned confectioners as nearly “recession proof.”
Joining the press conference was the manufacturer of marshmallow Peeps, which increased sales last year despite difficult financial times for most Americans.
And speaking of most Americans, what stake do they have in this debate? Not much when you look at the figures.
  • A pack of 10 Peeps costs $1.25. For perspective, a grocery shopper could pick up two whole pounds of sugar for about the same price.
  • In fact, there's less than 8 cents worth of sugar in that $1.25 pack of Peeps.
  • Given the affordability of sugar, the best shoppers could hope for would be a 3-cent savings on a $1.25 pack of Peeps if U.S. sugar policy were eliminated and subsidized foreign sugar flooded the U.S. market.
Of course, a lot of unlikely scenarios have to unfold before this 3-cent windfall can be realized.
  • The manufacturer of Peeps would have to pass every penny of lower sugar prices to consumers instead of pocketing it as profit. That defies basic business logic, which explains why food manufacturers have always pocketed past sugar price declines.
  • The subsidized foreign sugar companies that replace U.S. growers would also have to agree to ship the sugar across the globe for free, store the product in America for free, and deliver it to the Peeps’ assembly line exactly when needed for free. Again, that’ll never happen.
Sure seems like a lot of trouble for 3 pennies, especially considering 7 in 10 Americans say they prefer U.S. sugar to foreign sugar, even if imported sugar were cheaper.
The fact of the matter is lawmakers have bigger issues to deal with right now than helping a few candy companies further boost their bottom lines on the backs of farm families.
In times of ballooning budget deficits, America needs more policies that operate at no cost to taxpayers, not fewer.
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Symposium

Audio & Video

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