US sugar policy was set with the 2008 Farm Bill and works on the principle that supply should not exceed demand. In order to achieve this, the government can restrict the amount of sugar that American sugar farmers can sell, restrict the amount that the US will buy to the level required by trade obligations, and divert excess sugar to ethanol production. The idea is that sugar prices should remain stable, but this has not been the case.
On the back of low supply, prices have skyrocketed – hitting a 28-year high on the New York futures market on Friday, up to 20.79 cents a pound for October deliveries of raw sugar. And according to the USDA, sugar inventories as a proportion of consumption are at their lowest levels since 1975.
The Sugar Policy Alliance, which involves sweetener users including Hershey’s, Kraft Foods, Krispy Kreme and General Mills, as well as public interest groups, has called for more imports to be allowed from Brazil, according to reports.
The Alliance claims that it has led to consumers paying more for sugar, and the loss of American jobs as food and beverage companies move their operations overseas, says Bloomberg News.
Meanwhile, the American Sugar Alliance, a trade organization which represents sugar cane and beet farmers, has accused The Sugar Policy Alliance of trying to “flood the sugar market with subsidized imports so they can increase corporate profits.”
Mexican sugar is the only sugar which is not subject to import restrictions in the US, as it is protected by the North American Free Trade Agreement.