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India’s Sugar Woes in an Imperfect Global Market

Sugar cane

Well, here we go again…

Those in Congress who believe in unicorns and a global free market in sugar need only take a look at this Reuters story, “Govt plans incentives for sugar mills to pay cane growers: sources,” published on Tuesday by the Business Standard in New Dehli…

“The (Indian) government is likely to give incentives to sugar mills to pay cane growers, government and trade sources said on Tuesday, as part of efforts to help sugar companies saddled with large stocks and lower prices. ‘We are working out some sort of subsidy for mills so that farmers can be paid on time,’ a government source said.”

Some…sort…of…subsidy. Doesn’t sound very “free market” to me.

While in an ideal world the U.S. wouldn’t have a sugar program at all, the one we do have includes some relatively minor quotas and tariffs on imported sugar.

But U.S. sugar farmers and sugar mills do NOT get direct government subsidies like those being mulled for Indian sugar farmers and mills – which will artificially lower the cost of Indian sugar and further exasperate the distorted global sugar market.

In somewhat related news, Bloomberg reported that “Shree Renuka Sugars Ltd., the biggest Indian refiner, filed for bankruptcy protection in Brazil” this week.

Seems the current global sugar glut – particularly bad in both India and Brazil – has driven down prices at the same time a drought in parts of both countries is threatening the current crops and future productions.

This, too, should prove instructive to the Rose-Colored Glasses caucus on Capitol Hill.

Sure, the cost of global sugar outside the U.S. is cheap today.

But if unfettered access of cheap sugar to the U.S. market today resulted in a crippling or death of our domestic sugar industry tomorrow (see, “Shree Renuka Sugars, Ltd.”), what would happen to those sugar prices when unforeseen circumstances – like drought – wipe out artificially cheap sugar imports and replace them with sky-high sugar imports?

Can you imagine the cost of Oreos and Hershey bars when U.S. consumers are left at the mercy of manipulative foreign governments once they get unrestricted access to our domestic market and destroy the U.S. sugar industry?

The U.S. sugar program isn’t ideal for a perfect world.

But it’s the best we’ve got in the imperfect world we actually live in.