Sugar Price War Revived as U.S. Senators Seek Cheap Candy

A group of lawmakers is using a day set aside for the exchange of Valentines to propose cuts in U.S. price supports for sugar, a commodity that has triggered policy disputes since the British ruled the Colonies.

Senator Jeanne Shaheen of New Hampshire, a Democrat whose effort to lower sugar aid failed in last year’s farm-bill debate, joined Illinois Republican Senator Mark Kirk and other lawmakers to back a bill that would mostly return to the sweetener policy in place before current agricultural law passed in 2008. The growers’ American Sugar Alliance says the proposal may cause some producers to fail.

“Sugar is the most tightly controlled commodity in our country,” Shaheen said today at a Washington news conference. The proposal “will make U.S. manufacturers more competitive and make prices lower for consumers,” she said.

Sugar, grown in about 120 nations, is used in everything from H.J. Heinz Co. ketchup to Sweethearts, the candy with romantic messages made by New England Confectionery Co. of Revere, Massachusetts. Debate on sugar predates the American Revolution, when the British Sugar Act of 1764 -- imposing a tax on sugar -- fanned the flames of the colonial rebellion.

Imports, Prices

The U.S. limits sugar imports and sets prices for about 5,000 growers, raising consumer costs by $3.5 billion a year, according to an Iowa State University study. Because it helps farmers by setting artificially higher prices rather than with direct payments, government spending is minimal.

Because import restrictions limit competition, U.S. prices tend to be higher than the world market. Trade groups for food and beverage companies including PepsiCo Inc., Mars Inc. and J.M. Smucker Co. say quotas hurt profits and cost jobs --leaving them with little enthusiasm for sugar programs.

Trading in the commodity has been volatile. From a peak of 36.08 cents a pound in February 2011, prices fell to 17.76 cents today on ICE Futures U.S. in New York, a 30-month low, as rainfall helps production in Brazil, the world’s biggest grower. Record U.S. sugar output is creating the biggest domestic glut in a decade, making it more likely the government will need to stockpile supply to support farmers this year.

‘Won’t Survive’

A companion bill also was introduced by Representative Joe Pitts, a Pennsylvania Republican, in the House.

Low prices and excess supply make it less likely subsidies will be rolled back in Congress, said Phillip Hayes, spokesman for the Washington-based sugar alliance, which represents growers and processors including American Sugar Refining Inc., maker of Domino Sugar.

“If sugar policy is gutted, you’ll have producers who simply won’t survive,” he said.

About three-quarters of U.S. sugar consumption is from domestic crops, and the nation isn’t a major exporter. Cane- growing Brazil accounts for about two-fifths of global shipments, and the beet-growing European Union along with Australia and Thailand are major growers. U.S. imports are controlled by a quota system in which purchases exceeding trading patterns from 1975 to 1981 are heavily taxed.

Government control of sugar markets encourages volatility, with guaranteed pricing contributing to gluts where supply and demand are never fairly aligned, said Jennifer Cummings, spokeswoman for the Sweetener Users Association, an industry group based in Washington.

“We’re not calling for the elimination of the program, we need more flexibility in it,” she said. “The current policy is unsustainable. This is the year to change it.”

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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