Sugar Producer

From the ASA By Phillip Hayes Mexico Sets Dubious Records Rock bottom sugar prices in the U.S., which are lower than prices seen elsewhere in North America, apparently aren't much of a deterrent to Mexican sugar producers who, according to the U.S. Department of Agriculture, broke a record for exports to America this year. All told, Mexico has sent 2.1 million tons of sugar to the United States. That's up from 1.1 million tons just a year ago and only 60,000 tons prior to 2008 when NAFTA granted Mexico complete duty-free access to the U.S. market. Unfortunately for U.S. sugar growers, America didn't need all that sugar. In fact, the flood of subsidized sugar from south of the border has pushed surplus levels in America to record highs. The USDA estimates that surplus stocks at the end of September will reach a record 2.2 million tons. For perspective, that's enough leftover sugar to give every man, woman, and child in the country an additional 14 pounds of sugar on top of what they are already consuming. Sugar surpluses also mean falling prices. U.S. sugar prices are down 50 percent over the past two years, plummeting an astounding 30 percent this year alone. This unprecedented price plunge is almost entirely due to the flood of unneeded Mexican imports. So when will things get better? It's hard to tell, but the price outlook isn't promising. Especially since Mexico's sugar production has hit a record level, increasing by nearly 2.3 million tons since last year. Jack Roney, an economist with the American Sugar Alliance, is crying foul about Mexico's record-setting ways. "If U.S. growers were being outperformed by more efficient businesses, that would be one thing," he said, "but this appears to be a case of efficient U.S. businesses being punished by a foreign government." Instead of letting its least efficient sugar producers go out of business as we did in America, Roney explained, the Mexican govern38  Sugar Producer  NOVEMBER/DECEMBER 2013 A freshly cut sugarbeet is shown in front of a stack of beets. ment stepped in and took ownership of those businesses with the full weight of the country's treasury behind it. "When global prices were extremely low, the U.S. industry contracted and adopted new efficiencies and technologies to cope with new market realities," he said. "Mexico's government took a different approach and purchased 50 percent of the country's sugar production." The Mexican government still owns and operates one-fifth of the industry, making it the biggest producer, seller and exporter of sugar in Mexico. "We are more efficient sugar producers than our Mexican counterparts, but we cannot go head-to-head with a major government," Roney concluded. U.S. sugar policy is the safeguard U.S. sugar producers have to weather the Mexicaninduced storm, but even that has come under attack from large candy companies eager to reap the modest financial benefits of heavily subsidized foreign sugar. Confectioners unsuccessfully lobbied to gut U.S. sugar policy in farm bill votes taken by the House and Senate this year but continue to push for an unwinding of the U.S. sugar safety net. "Right now, the global and North American sugar markets are broken because of foreign subsidies," said Roney. "Unilaterally disarming America by gutting our sugar policy doesn't fix that problem; it just outsources U.S. jobs to less efficient countries. We need a multilateral solution." That is precisely the thinking behind a recently introduced resolution by Rep. Ted Yoho (R-Fla). Yoho, and 14 of his colleagues, think the U.S. government should apply pressure to Mexico and other subsidized exporters to cease subsidies and let a free market form. When it does, the lawmakers have agreed to eliminate U.S. sugar policy as well. The American Sugar Alliance and numerous free-market advocates support the Yoho approach, known as a zero-for-zero sugar policy. Large candy companies hoping to outsource America's sugar industry are opposed. n Editor's note: Phillip Hayes is the communications director for the American Sugar Alliance.

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