US: Ohio candy makers want better deal on sugar program

Published: 10/12/2017, 12:13:04 PM

Ohio candy makers want an extra-special treat from Washington next year: the end of a federal sugar price support system that they say raises prices and drives jobs from the country, according to Ohio's Cleveland.com.

While farmers say the U.S. Department of Agriculture's sugar price supports ensure the United States doesn't depend on foreign countries for a key commodity, sweet-making companies are sour on it.

At McJak Candy in Medina, company president Larry Johns says the program puts his lollipops and fudge at a disadvantage to products made in countries where sugar costs roughly half the U.S. price.

It's the same story at Spangler Candy in Bryan, which recently opened a candy cane plant in Mexico because of its lower sugar prices. CEO Kirk Vashaw says 70% of a candy cane's ingredient cost is sugar.

"If we could just buy sugar at the price the rest of the world pays for sugar, we could move the 250 jobs we have in Mexico to Ohio," says Vashaw, who still makes half his candy canes in Bryan. "This is basically government price fixing of the sugar market."

Spangler - best known for its Dum Dums lollipops - is the only company that still makes candy canes in the United States, according to Vashaw, who says his U.S. competitors all quit because they couldn't compete with candy canes made in countries with cheaper sugar.

For more than 30 years, the federal government has guaranteed U.S. sugar beet and sugar cane  producers a minimum price for their product through a system of price support loans, quotas and buy-backs. The USDA system allots market shares to limit the amount of sugar each processor can sell and establishes import quotas to control the amount of sugar entering the United States.

Phillip Hayes of the American Sugar Alliance argues the sugar program ensures that a key commodity is still produced in the United States. He says it operates at no cost to taxpayers because it gives farmers loans that are repaid with interest. Because sugar prices have remained relatively low while production costs increased, he said U.S. sugar production has decreased in recent decades. The price manufacturers pay for sugar is less now - 29.65 cents a pound at the end of 2016 - than the 38.29 cents a pound it cost in 1980, says Hayes.

He says 50% of the world's sugar comes from Brazil, which has "a stranglehold" on the international market.

"We tell lawmakers all the time it makes absolutely no sense for our country to outsource our domestic sugar industry to Brazil because we will be at the mercy of Brazil for pricing, if that happens," says Hayes.

Even though Ohio stopped growing sugar beets years ago because other crops are more lucrative, most of the state's farmers back the sugar supports, says Ohio Farmer's Union treasurer Roger Wise of Fremont. Wise said the program is budget neutral, ensures a steady supply of sugar for consumers and exporters, and stabilizes prices.

"The program assures that we don't have unfair competition from foreign countries that are heavily subsidized and dump sugar on the world market at below production prices," says Wise. "The fact of the matter is that we need to have stable sugar prices and supply and that is what the program does."

Trade groups that represent sugar users like confectioners, soft drink manufacturers and bakers disagree. They are lobbying to change the system when Congress writes next year's farm bill.

The Independent Bakers Association, whose members include Cleveland's Orlando Baking Company, accuses longtime sugar program supporters like Toledo Democratic Rep. Marcy Kaptur of being "in the pocket of the nation's beet and cane sugar cartels."

The group's president, Nicholas A. Pyle, says Kaptur got more than US$150,000 in campaign donations from the sugar industry since she was elected in 1983. He calls the supports "a Soviet style command and control scheme that restricts planting and imports."

"This inflates the price of sugar in the United States to almost double the world price," said a statement from Pyle. "So, when you go to the store to buy a snack cake or anything sweetened, you pay more."   

Pyle says the program makes Americans pay US$3.5 billion each year in increased grocery costs, which breaks down to US$58 per household. He says that when a proposal to reform the sugar program came to the House floor during the 2013 farm bill, it was backed by all the state's Congress members except Kaptur, Holmes County GOP Rep. Bob Gibbs and Niles-area Democratic Rep. Tim Ryan. He attributes their votes to campaign donations from sugar interests.

Ohio's sugar program supporters say that's not the case.

Kaptur said she backs the supports because she wants to ensure a steady supply of domestic sugar. Its foes are "big candy makers," she says, who want to "buy dumped sugar on the international market from plantations in Latin America where the workers live like slaves, there's overproduction of sugar, and they dump it in the U.S. and put our farmers out of business."

The House Agriculture Committee has already begun conducting hearings on the next farm bill. Spokesmen for that committee's two Ohio members - Gibbs and Warrensville Heights Democratic Rep. Marcia Fudge - declined to comment on how they plan to vote on sugar supports when the committee considers the bill.

Vashaw, whose Spangler Candy has 540 Ohio employees, says he's hoping for "modest" sugar program reform. He says his concern about foreign companies that can undercut his prices because they use cheaper sugar might be alleviated by tariffs.

"All we're asking for as candy makers is a level playing field," says Vashaw. "If we were a public company, we'd be closed, or we would have moved to Canada or Mexico. Life Savers used to be made in Chicago. Now they're made in Mexico. Jolly Ranchers were made in Michigan. Now they're made in Canada. And they moved production of Oreos from Illinois to Mexico. They didn't move down there for labor. They moved down there for the sugar."

Johns, whose Medina company employs 49 to 100 workers depending on the season, isn't optimistic that he and his fellow candy makers will get what they want.

"I don't have high hopes," he says. "The sugar growers and refiners have a really strong lobby. Whatever they're doing, it works."