Brach’s Confections, Inc. recently announced that they are shutting down their manufacturing plant on the West Side of Chicago.

You will still be able to get your Starlite Mints, though — production is moving to Mexico.

Of course, Brach’s factory in Chicago is old and inefficient. But what makes it not worth renovating is the federal sugar subsidy, which guarantees that any candy plant in the United States will be a money-loser.

Let me back up a moment and explain the sugar subsidy.

Since 1981, the U.S. Government has effectively set the price of sugar in the United States through a program of tariffs on imported sugar and non-recourse loans to growers of sugar cane and sugar beets.

The intended result, as illustrated by the graph below, is to keep the price of sugar in the United States at roughly double the price everywhere else in the world. From 1991 through 1995, the average world price of raw cane sugar ranged between about 9 and 13 cents per pound. In the U.S. during the same period, the price ranged from 21.39 to 22.76 cents per pound. Since 1995, the world price of sugar has dropped, while it’s gone up in the United States:

All of this would be well and good, under other circumstances: sugar is twice as expensive in the U.S. as it is everywhere else in the world, but it’s not so expensive that even Americans of the most modest means can’t bake cookies, have sugar in their coffee, etc.

The problem is that the industrial users of sugar — Coca-Cola, Brach’s, Smuckers, etc. — just can’t compete at those prices. When the main ingredient in your product is sugar, and you’re forced to pay twice as much for that sugar, you stop using sugar.

As a result, the rate of increase of consumption of sugar in the United States has slowed since the sugar-protection program was put in place.

Coke, jam, jelly, and most low-end candy produced in the United States now contain not sugar, but a product called "high fructose corn syrup". As a result, sales of imported jam and candy have shot up, and we in the U.S. have to put up with Coca-Cola — one of our main contributions to world culture — that’s inferior to the Coke they drink in Moscow! How’s that for irony?

And there’s where it all comes together, I think. The sugar price scheme is not a particularly costly one, as such programs go. It’s also not a particularly effective one, from the point of view of helping sugar farmers. The sugar industry has been harmed more than it’s been helped by this program.

The real beneficiary of the sugar price control program is the Archer-Daniels Midland Company, who produce, among other things, corn syrup.

Before the sugar program was in place, consumption rates of corn sweeteners roughly paralleled sugar. It was marginally cheaper, but not to an extent that made switching profitable.

With artificially-high sugar prices, though, corn sweeteners are cheaper, even though they’re still more expensive than the world price for sugar. The average American now consumes more corn sweeteners than cane & beet sugar.

The sugar growers say that ending the sugar support program would put them out of business. I say, fine! If it’s impossible to grow sugar profitably in the USA, then we should import it from other countries. The loss of jobs in the sugar-growing industry would be offset by the retention of higher-value jobs making candy and the like. Or the sugar workers could go apply for jobs at the restaurants and stores that are always apologizing for their appalling service by telling me that they’re understaffed.

The current policy is absurd, though. It encourages growing sugar on marginal land, it costs all of us more money, and it keeps us from buying quality products. All, ultimately, to benefit one company, ADM.

LINKS:

Coalition for Sugar Reform

a consortium of soft drink producers and the like. Quite a bit of good information on their website.

American Sugar Alliance

The ASA is a consortium of sugar producers, and the CSR’s arch-foe. This link is to their press release page. Note that their press releases mainly complain about other countries’ sugar subsidies, and call for more U.S. subsidies.