U.S. Sugar Price Nearly Twice the World Market Price

This sugar crisis may not be one of the worst crises in the world right now, but we should never lose sight of the many, myriad ways that the federal government fails the American People with its pursuit of power way beyond its constitutional grants of power.  The U.S. Constitution gives the federal government no power to set food prices or agricultural production limits, yet it does so under the completely spurious claim that it can do anything it wants to our commerce under the Interstate Commerce Clause.  That clause was intended to keep the various states from interfering with trade between the states, but it was reinvented as a power allowing the federal government to dictate the terms of all commerce crossing state lines in the late 1800s and even most intrastate commerce in the 1900s.

One result is that politicians and bureaucrats largely fix the price of sugar in the U.S. by imposing import restrictions on sugar.  These restrictions are controlled to cause the U.S. price of sugar to be much higher than that in the world market.  According to today's Wall Street Journal, the U.S. price of sugar relative to the world market price is the highest it has been in the last decade.  This is a gift to sugar producers, some of whom are abroad, from sugar processors, confectioners, and consumers.  It is as direct a transfer of their income as would be a tax levied on them with the government then handing the tax over to the sugar growers.  No.... actually it is better for the sugar growers than a tax, since they do not lose a part of the money to bureaucrats as they handle it.

The global sugar price is 19.67 cents a pound, but the U.S. price is 35.02 cents a pound.  Until 1 April, the import quota on sugar is 1.3 million metric tons, which it has been set at since 1990, despite a growing population.  To be precise, there were two momentary exceptions:  after Hurricane Katrina in 2005 and a large sugar refinery explosion in 2008.  The historic price differential has been about 8 cents per pound, but last week it was 17.32 cents per pound, which is the highest it has been since 1999.  The import quotas are given by country and were set in the 1970s.  Jamaica and Haiti and others no longer export sugar to the U.S. at all, so only about 1.2 million metric tons is actually imported even though the overall quota is higher than that.  The USDA may reallocate the quotas by country to allow some countries actively exporting sugar to the U.S. to export more sugar to us.

It turns out that one peculiarity of these import restrictions is that the exporter, as long as he is within his country's export limit, is paid the higher American market price, not the world market price.  So, American consumers are offering such exporters a bonanza profit.  Once a country meets its quota, a stiff tariff of 15.36 cents a metric ton kicks in.  India and Brazil are the worlds two largest producers of sugar, but bad weather in both countries caused the world sugar price to hit a 29-year high on 1 February.  Supplies have improved since then.

Not only are Americans paying ridiculously high sugar prices, but we may run out of sugar before September when new supplies will be available.  Last year, U.S. supplies of sugar fell to 49 days worth by the end of September and they are projected by the USDA to go as low as 38 days inventory this year.

Of course, social engineering or Nanny State supporters are not likely to become too upset by high sugar prices.  If the import quotas did not keep the price of sugar high, they would be advocating a sugar sin tax.  Come to think of it, some of them are doing that anyway.