Bittersweet

by Russ Roberts on April 14, 2010

in Trade

From the WSJ:

The U.S. Department of Agriculture indicated it will allow a small increase in U.S. sugar imports this year, a decision that is likely to do little to quell complaints from confectioners and processors about tight supplies.

Agriculture Secretary Tom Vilsack said Tuesday that the department would make “some adjustment” to the sugar quota, which has been in place for decades. Mr. Vilsack said it could be raised by about 24%, or as much 300,000 short tons, from the 1.23 million short-ton level, an increase he described as not significant.

An increase of 300,000 short tons is less than the one-million ton boost that some sugar users had sought. The USDA uses the import-quota system to balance sugar supply and demand, but many users said the quotas unfairly prevent them from importing cheaper sugar. They argue the restrictions have left the country in danger of running out of sugar.

The reporters are ┬áCarolyn Cui, Bill Tomson, and Ilan Brat. The second sentence of that last paragraph is a strange one. The USDA does not “use the import-quota system to balance sugar supply and demand.” They use it to restrict the amount of sugar that comes into the United States. At least say that the USDA claims that it uses the quota to blah blah blah. What it actually does is enrich a handful of families at the expense of the rest of us. It is a very ugly piece of public policy.

The reporters do recognize the impact of quotas on the price of sugar. The article continues:

Meantime, U.S. sugar farmers have successfully blocked efforts to significantly increase imports, assuring them of little price competition.

Restrictions on imports have caused American users to pay much more than the rest of the world for sugar. That gap recently blew out to its widest in a decade.

Mr. Vilsack’s comments raised the prospect of increased demand for global sugar and drove prices up 2.7%, or 0.44 cent, to 16.98 cents a pound on ICE Futures U.S. Prices for U.S. domestic sugar dropped 2.1%, to 30.8 cents a pound. That narrowed the gap between the two to 13.82 cents a pound.

So the world price of sugar is about 17 cents a pound. Here in the US, we pay almost 31 cents, almost double. I’d love to hear the story of how that “balances supply and demand” here in the US.

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