Sugar Producer

22 Sugar Producer MAY 2017 Everyday Americans don't worry much about the price of sugar. After all, they spend about as much on one gallon of gas as they do a 4-pound bag of sugar, which would last many households a year or more. Yet the price of sugar is at the heart of a decades-old debate over U.S. sugar policy and will come under certain attack by food makers as Congress begins drafting the next farm bill. Understanding the price is necessary for making smart policy. Unfortunately, sugar pricing is complex and is often misrepresented by sugar policy opponents in an effort to influence lawmakers. For example, critics frequently complain: "American consumers pay triple the world price for sugar." Is it true? Is it an exaggeration? The record of actual retail sugar prices strongly suggests the latter. In a survey by SIS International, New York-based researchers tracked grocery store prices for nearly 70 percent of global sugar consumption. It revealed that American consumers actually pay a good deal less than most other consumers around the world. The global average consumer price— that includes developing countries—was found to be 20 percent higher than the U.S. price. The developed-country average was 29 percent higher. How, then, can critics complain that U.S consumers pay more for sugar than consumers abroad? That complaint is usually supported by unfairly comparing raw sugar prices on the world futures market with U.S. retail prices for refined sugar. Such a comparison is an exaggeration, and it would be like comparing the price of rubber with the price of a tire. Consumers don't buy raw sugar. Whether they are grocers buying bags to put on their store shelves or candy manufacturers buying railcar FROM THE ASA By Phillip Hayes | Director of Media Relations The Great Price Debate loads for a batch of gumdrops, they are buying refined sugar. And most sugar is consumed in the country where it is produced. So, although there is a world futures market for raw sugar, it only represents only about a quarter of the world's supply. One would expect prices on a futures market to reflect production costs. But, in sugar's case, they do not. In fact, most years, prices are barely half the average cost of producing the product. How could the market price for this product be so much less than the cost of producing it? That's simple. Major exporters can afford to unload their surplus sugar at low prices because they have covered their costs with subsidies and by selling most of their sugar in domestic markets, where higher prices are supported by governments. How high are those domestic prices? The International Sugar Organization (ISO) in London did a survey of wholesale refined prices that covered nearly 80 percent of global consumption from 2005 to 2014. It found average wholesale prices around the world that were 15 percent above average production costs. In the case of developed countries, prices were 53 percent higher than the cost of producing the sugar. Comparing U.S. to global averages, you also see that current U.S. prices— just under 29 cents per pound—are below the averages found by ISO. American wholesale sugar prices— the price that sugar producers receive from food manufacturers and grocers—are not only low, but have been remarkably stable over time. Going all the way back to the 1980s, U.S. wholesale refined sugar prices have averaged in the narrow range of just 27 to 29 cents. Long story short: The allegation that American consumers pay far more for sugar than others around the world does not stand up to a factual examination. Comparisons of U.S. retail refined sugar prices with world raw dump-market prices are highly misleading. In fact, both wholesale and retail sugars prices in this country—for food manufacturers, grocery chains and end consumers— are well below world averages. It will be up to us to make sure lawmakers hear that message loud and clear. n Editor's note: Contact Phillip at phillip@sugaralliance.org. U.S. wholesale refined sugar prices have averaged 27 to 29 cents since the 1980s SUGAR PRICES PAID BY FOOD MANUFACTURERS GLOBALLY 2005-2014 Global Avg. ............................................ 31.1 cents/lb. Africa .................................................... 32.6 cents/lb. Asia ....................................................... 35 cents/lb. Central America .................................... 30.2 cents/lb. Europe ................................................... 35.9 cents/lb. Oceania ................................................. 21.5 cents/lb. North America ....................................... 36.1 cents/lb. South America ....................................... 30.5 cents/lb. Current U.S.* ......................................... 28.63 cents/lb. Sources: International Sugar Organization *USDA Sugar and Sweetener Yearbook

• Cover