A sour sugar lobby

Marketplace Staff Mar 8, 2007

A sour sugar lobby

Marketplace Staff Mar 8, 2007

KAI RYSSDAL: Brazil uses sugar to make its ethanol. We make ours from corn. As we just heard that crop gets substantial protection in Washington.

American sugar producers have their own political backers as well. But groups at the other end of the production chain want to change that. And end those federal subsidies. Stuart Cohen explains one part of the fight over this year’s farm bill.

STUART COHEN: At the Goetze Candy Company’s factory in Baltimore, the air is so thick with sugar you can taste it in every breath.

MITCHELL GOETZE: Well this is where we twist-wrap all the Caramel Cream product. This takes the caramel with the white center and twist-wraps it with the two fins, which some people call the kiss, which is the . . . basically the icon of our company.

Owner Mitchell Goetze says any change in the price of sugar affects his ability to make the company’s signature Caramel Creams and keep the family business going. Even a small drop in price would help.

GOETZE: You could even go down to a tenth of a cent, a half a cent. I mean really, at this point, you know with a U.S. manufacturer, the insurance costs are not gonna go down. Our workmen’s comp is not gonna go down. Our energy costs are through the roof. Every single savings in cost, even with pennies, is significant.

But here’s the sticky part: unlike other ingredients, the price Goetze pays for sugar isn’t set by the law of supply and demand. It’s set by the laws of Congress.

A decades-long government policy sets minimum sugar prices and limits imports of cheaper sugar. That keeps prices high compared to the world market.

Larry Graham is president of the National Confectioners Association. He says that program also helps sugar cane and beet farmers at the expense of sugar users, like candy makers. So, for this year’s farm bill, he’s pushing a different deal for farmers.

LARRY GRAHAM: Open up the program, so that it’s a free market program. So that my companies and other companies who use sugar can buy sugar on a free market. And in the meantime, certain subsidy payments would be made to the farmers as they transition into other crops.

In other words, farmers give up fixed sugar prices in return for government cash. Supporters of that approach say similar programs in the past have worked for peanut and tobacco farmers.

But the sugar industry likes the sweet deal they’ve got going now. They argue subsidies would shift the cost to the federal budget, and there’s no telling how long it would be before Congress sours on the idea of keeping sugar farmers on the government dole.

Besides, as Jack Roney of the American Sugar Alliances says, the free market isn’t really free at all.

JACK RONEY: A hundred and twenty countries around the world produce sugar. They all have government programs of some sort, and many of them overproduce and dump the surplus on the world market for whatever price it would bring. And that price has averaged less than half the world average cost of producing sugar for the last 20 years.

And, he says, that could put family farms in 17 states that produce sugar out of business. So the industry is fighting hard to keep the current program, contributing nearly $3 million to candidates in last year’s congressional election.

But Dan Griswold, director of trade policy studies at Washington’s Cato Institute, says there’s no easy solution to the sugar industry’s reliance on government support.

DAN GRISWOLD: The sugar program almost killed the Central American Free Trade Agreement. It can’t be the focus of U.S. policy to protect everybody’s job from any kind of competition. Far more American’s lose their job every day because of internal competition, new technologies. So we can’t be out there trying to save every job, every farm.

For Mitchell Goetze and the bulk of small family businesses that dominate both the candy industry and sugar farming, it’s now left to the big players to fight it out on Capitol Hill over the future of sugar prices.

GOETZE: I look at my two small daughters and I think of what’s going on with costs, whether it be manufacturing cost or ingredient costs. And I really do wonder, will we be here in a hundred years? But I’m fifth generation, and I feel as if it’s my duty to be a good steward and hand it on to the sixth generation.

In Washington, I’m Stuart Cohen for Marketplace.

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