Could America run out of sugar?

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Aug. 14 2009 6:22 PM

Sweet Is Low

Could America run out of sugar?

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Prominent American food companies, including Kraft, General Mills, and Hershey, have warned the Department of Agriculture that there's a deficit in the sugar supply and that we could " virtually run out" in the near future. After the Wall Street Journal and a number of other news sources picked up the story, the American Sugar Alliance countered that we're far from a shortage; in fact, we have a surplus. Could we ever really run out of sugar?

No way. American sugar producers churn out approximately 8.5 million metric tons per year. The USDA also allows about 1.3 million metric tons to cross our borders from 40 different sugar-producing countries, and, under NAFTA rules, an unlimited amount from Mexico. (Mexican imports will be about 1.45 million tons for the current fiscal year.) Since American consumers use only about 10 million tons in a year, producers frequently end up with excess sugar, which is then stockpiled in warehouses. If producers couldn't keep up with demand—due to poor growing conditions or a change of policy in Mexico, say—they would first dip into these stockpiles. If there were still a shortage, the USDA would simply increase its import quotas. In 2006, after back-to-back-to-back hurricanes (Katrina, Rita, Wilma) during the 2005 growing season, the USDA became worried about the domestic sugar supply and promptly pushed up the yearly limit. Most Americans never noticed.

Candy companies in the United States are flipping out because there is a sugar deficit outside the country—a result of Brazil using more cane for ethanol and drought in India. Consequently, prices on the global market for surplus sugar have skyrocketed to a 28-year high. But the United States does not import from this market—we buy directly through preset trade agreements—so those prices do not directly affect domestic rates.

Even if global supply problems persist and we start experiencing domestic sugar shortages, it's still unlikely that the U.S. consumer will need to downgrade from Snickers to Snickers Fun Size. Since Americans have such high purchasing power, it's in the interest of foreign producers to cut off their own people and ship everything they have over here. Sugar prices could, theoretically, go up in such a scenario, but in real life they've actually gone down over time. During Jimmy Carter's presidency, refined wholesale sugar—the kind manufacturers like Kraft use—cost 38.3 cents a pound. As of July 2009, it cost 35.4 cents. Factoring in inflation, sugar is 59 percent cheaper than it was 30 years ago.

Some countries keep physical reserves of certain key commodities in case of shortage. China, for example, established a sugar-reserve system in 1991 and has a stockpile of 2.8 million metric tons. In this country, since the Agricultural Trade Act of 1980, we have a trust that provides cash for storage or to purchase commodities during an emergency. At this time, we have $310 million set aside for purchasing, but no actual physical reserves.

Since the rise of industrial agriculture, true food shortages are virtually nonexistent in technologically advanced countries. When you read about food "shortages" in the news, it usually means there's a problem of distribution that can be solved through politics, rather than a problem with the actual supply. Before World War II, the United States did experience food deficits from time to time. In the 1860s and 1870s, for example, a locust outbreak led to a wheat shortage. At that time, the USDA was in its infancy (it dates to 1862), and the federal government wasn't in the habit of stepping in during a crisis, but local agricultural colleges pushed farmers to start using chemical insecticides, and affected communities changed their diets—they ate more turnips and carrots.

Got a question about today's news? Ask the Explainer.

Explainer thanks Jonathan Groveman of the USDA, Phillip Hayes of the American Sugar Alliance, and Slate contributor James E. McWilliams of Texas State University—San Marcos.

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