Mother Nature Intervening in Global Sugar Market

(Chuck Muth)  Thanks in part to government subsidies which allow foreign sugar producers to sell at prices lower than actual production costs, Indian farmers – the world’s #2 sugar producers behind Brazil – have been growing far more sugar than the market can bear.

This has created a “market glut” for sugar worldwide and artificially lowers to global price, putting American farmers – who receive no taxpayer subsidies of their own – at a decidedly unfair competitive disadvantage.

But Mother Nature may be stepping in to provide a little field-leveling, as reported this week by Virendra Singh Rawat of the Business-Standard…

“According to Indian Sugar Mills Association (ISMA), water in Maharashtra reservoirs was below normal levels due to lower rainfall in the last monsoon season. This indicates that cane acreage in the state will be ‘significantly’ lower in the coming season.

“Even at the pan-India level, there is expectation that sugarcane availability will be much lower compared to the current season, which is still ongoing, thereby reducing sugar production.”

A smaller sugar supply combined with “seasonal higher sugar demand in the summer, especially for soft drinks, ice creams etc.,” should boost prices closer to true market levels.

Supply and demand.  The way a free market is supposed to work.

As long as the government stays out of it.

This example also provides a cautionary tale for Congress.

Without a stable and reliable sugar industry in the U.S., American consumers would be without a dependable supply of this vital crop, leaving the nation at risk of wild up-and-down swings in sugar costs due to factors, including Mother Nature and foreign government instability, outside of our control.

The lure of artificially cheap foreign sugar is a strong temptation – at least in the short term while the current global glut is distorting the market.

But protecting our stable domestic market is the wise and prudent national policy for the long term.  The U.S. sugar program of minor tariffs and targeted import quotas provides American manufacturers with a solid level of business certainty.

Congress ought not fix what clearly isn’t broken.

Mr. Muth is president of Citizen Outreach and publisher of Nevada News & Views.  His views are his own.