30 th Annual International Sweetener Symposium Napa, California August 5, 2013

1. 30th Annual International Sweetener SymposiumNapa, CaliforniaAugust 5, 2013 U.S. Sugar Policy: Successes and Dangers Jack Roney Director of Economics and Policy Analysis, American Sugar Alliance Washington, D.C.

2. U.S. Sugar Policy Successes • High-quality, safe, responsibly produced U.S. sugar supplies, from efficient, geographically dispersed U.S. sugar-producing industry • 20th lowest cost of 95 producing countries • 142,000 American jobs in 22 states • U.S. sugar-using industry able to thrive, expand • Sweetener Users have achieved goals of unlimited access to Mexican sugar and parity of U.S. sugar price with world price • Sweetener Users opposed to further sugar-producing industry contraction • Consumer prices for sugar among lowest in world: • World average is 14% higher than U.S.; • Developed-country average is 24% higher • Zero taxpayer cost, 2002-2012 • $51 million cost in 2013 = ½% of 2013 farm program spending • Total farm program spending = ¼% of 2013 federal spending

3. U.S. Sugar Policy Dangers • Mexico: Exports to U.S. far exceed U.S. needs • Oversupplies from subsidized foreign sugar • Mexican government owns 1/5 of industry • Brazil sugar-ethanol subsidies at $2.5-3.0 billion/yrand growing • World market remains distorted by subsidies • Historically low producer prices • Severe risk of loan forfeitures, sugar company closures • Attacks on sugar policy: Proposed “modest” reform • Revert to 1985 support price • Eliminate USDA ability to cope with unlimited subsidized imports from Mexico • Mandate chronic oversupply • Risk of severe industry contraction: Precipitous drop in real prices; huge rise in input costs

4. U.S. Sugar Policy Successes • For consumers: U.S. retail sugar prices lower even than “free trade” Canada and Australia • For food manufacturers: U.S. wholesale sugar prices lowest in North America • Wages, other non-sugar costs, a different story • Exports of sugar-containing products rising; net imports declining • Sweetened-product manufacturing in the U.S.: Profitable and expanding • Sugar costs a tiny share of retail product price

13. U.S. Sugar Policy Dangers • Severe oversupply; Historically low producer prices • Severe risk of loan forfeitures, sugar company closures • Cause of oversupply: Flood of imports from Mexico • Far in excess of U.S. needs

18. U.S. Sugar Policy Consequences of oversupply, low prices: • Boon to consumers, or to Sweetener Users? • Boom in consumer demand for cheaper sweetened products? • Users’ report: Access to world priced sugar = 20,000 new SCP manufacturing jobs • Threat to U.S. producers' ability to cope with: • Sharply higher inputs costs • Much higher prices for competing crops • Effect on food manufacturers' access to safe, high-quality, reliable just-in-time delivery if U.S. sugar-producing sector shrinks further? • “Modest reform” proposal would reduce price further, make oversupplies permanent

25. U.S. Sugar Policy Cooperation between sugar producers and customers • Defending consumption • U.S. caloric sweetener consumption declining • Sugar and other sweeteners wrongly in crosshairs as culprit in rise of U.S. obesity rates • Important long-term cooperation between food manufacturers and Sugar Association

29. U.S. Sugar Policy Cooperation between sugar producers and customers • Achieving global free trade in sugar • Multilateral elimination of barriers to sugar trade: All countries, all subsidies • When achieved, U.S. will eliminate U.S. sugar policy • U.S. producers highly competitive by world standards, well able to compete on level playing field • Unilateral disarmament makes no sense: U.S. further overrun by subsidized foreign sugar • Zero-for-Zero Approach: Resolution introduced in U.S. House of Representatives • Will Coalition for Sugar Reform endorse?

30. U.S. Sugar Policy Summary • U.S. sugar policy has been a success for consumers, food manufacturers, consumers • Policy and market under serious stress: • Mexico unloading huge surpluses • Producer prices at 1980’s price levels • Cooperation with food manufacturers desirable: • To defend sugar consumption • To achieve global free trade in sugar, and avoid unilateral disarmament and market chaos in meantime