American Candy Makers, Pinched by Inflated Sugar Prices, Look Abroad

“We are committed to offering locally made affordable products, but the cost of sugar is driving manufacturers out of the country,” Ms. Calvo-Bacci said, echoing other American candy producers, like the maker of Dum Dum lollipops, that are moving jobs to Mexico to take advantage of the lower sugar prices there.

Candy makers say the culprit is the federal sugar program, a combination of import restrictions, production quotas and loan programs dating to the 1930s, all designed to keep the price of American sugar well above that of the world market. Now the program is at the center of an intensifying battle as the House and Senate open formal negotiations this week on a long-delayed farm bill.

The price for one type of sugar, wholesale refined beet sugar, averaged 43.4 cents per pound at Midwest markets last year, the Agriculture Department reported, compared with 26.5 cents per pound for the world refined sugar price.

American sugar producers say the federal program is necessary to keep sugar-producing countries like Brazil, India and Thailand from flooding the American market and driving them out of business. Nick Sinner, the executive director of the Red River Valley Sugarbeet Growers Association in Minnesota and North Dakota, says that the cost of sugar makes up a small percentage of the retail price of candy, and argues that it has little impact on domestic jobs.

Opponents of the program say they hope that the $300 million the federal government will spend this year to buy excess sugar will prompt lawmakers to re-examine it. (A larger-than-expected harvest and the importation of millions of pounds of sugar from Mexico led to a surplus, contributing to a drop in prices, sugar industry officials said.) By law, the government has to buy excess sugar when prices drop below a certain level.

“I’m hoping that members who are meeting to work on a final farm bill will consider that we are paying millions to bail out sugar producers, while doing nothing for small business, which make little sense,” said Senator Jeanne Shaheen, Democrat of New Hampshire, who with Senator Mark Kirk, Republican of Illinois, has sponsored legislation to overhaul the sugar program. “Sugar price supports are an unnecessary market intervention that have no place in our 21st-century economy.”

But sugar producers, bolstered by lawmakers from sugar-beet-producing states like Minnesota and sugarcane states like Florida, have spent an estimated $20 million since 2011 to block efforts to change the program. (Sugar beets account for about 55 percent of American sugar production, and sugar cane for about 45 percent.) Small candy makers, bakers and others who have lobbied Congress for lower prices say that taking on the sugar lobby is like taking on Goliath.

“We were no match for the sugar people,” said Judy Hilliard McCarthy, an owner of Hilliard’s House of Candy, a candy maker just outside Boston. Ms. McCarthy said she had made several trips to Washington to lobby on behalf of the industry.

Government and academic studies support claims by candy makers that the sugar program has had an impact on the industry. A widely cited 2006 study by the Commerce Department and a 2011 Iowa State University study found that the price supports had led to job losses among candy makers.

In particular, the Commerce Department study found that three candy-making jobs were lost for each job growing or processing sugar that was saved by higher prices. The Iowa State study found that eliminating price supports and quotas for sugar would create about 20,000 jobs for American food processors, bakeries and candy makers.

Article source: http://www.nytimes.com/2013/10/31/us/american-candy-makers-pinched-by-inflated-sugar-prices-look-abroad.html?partner=rss&emc=rss