Misinforming Congress

Published in the August 2012 Issue Published online: Aug 08, 2012 Clay Crumbaugh
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Right now, Capitol Hill is being fed a steady diet of inaccuracies from a non-transparent lobbying coalition with an agenda. And if Congress falls for it, then the impact to our local economy could be seismic.   

 A new front group for large candy companies and food makers, the Coalition for Sugar Reform (CSR), is aggressively lobbying for elimination of sugar policy, which would displace more than 12,000 local workers and leave the nation dependent on foreign sugar. 

To make its point, CSR tells lawmakers almost daily that if no-cost sugar policy were repealed then U.S. sugar prices would fall and grocery shoppers would get a break at checkout lines.

There's just one problem with this statement. U.S. sugar prices have been falling-nearly 20 percent since the summer of 2010-but grocery shoppers are paying more for sweetened products as CSR's members pad their profits. 

This is nothing new. Until recently, wholesale sugar prices were remarkably low and unchanged for about three decades. Yet food prices steadily marched upwards, right along with food makers' revenues.

Of course, these companies don't misinform Wall Street or investors about their profits or economic outlook. That wouldn't be in their best financial interest.

In April, one of the country's best-known chocolatiers announced that it used an 11 percent product price hike to gain a 24 percent increase in first-quarter earnings.

The Wall Street Journal exclaimed, "Price Increases Sweeten Hershey Earnings," and investors sent the company's shares to a seven-year high. The company noted in an earnings call that, even with the price hike, its products are still very affordable. That's a much different story than Congress is getting.

The good news isn't isolated to a single company either. Since the current sugar policy took hold in 2008, U.S. production of chocolate and candy has increased by 2.5 percent, according to the U.S. Census Bureau. Sales have soared, too.

Stories of high profit margins, manufacturing facility expansions and employment growth by confectioners have become commonplace. The head of the industry's main trade group even publicly boasted: "A lot of people think that it's oil and energy that drives this economy, but it's candy, it's chocolate that's doing well in this economy."

Again, that's a far cry from the tale of economic woe being spun for Capitol Hill.

Some may argue that it would be impossible for food companies to pass along the savings they see when sugar prices fall since sugar is such an insignificant portion of a product's cost. That's true, but that's not what Congress is being told by big food and candy lobbyists.

And sugar isn't an insignificant part of at least one product's cost. When you buy a bag of sugar at the grocery store, you aren't buying any other ingredients, just sugar. But grocery store chains aren't letting shoppers see savings on that product either. 

When grocers purchase sugar from sugar companies-again, those prices fell almost 20 percent since the summer of 2010-the sugar producers package and ship the bagged sugar where needed. Grocers simply carry the sugar from the back of the store and put it on the shelf.

That's not a lot of work, which is why it is pretty difficult to swallow an 18 percent price hike in grocery store prices over the past two years. It is pure profit for the grocer, plain and simple.

Hopefully lawmakers will take the time to really examine the facts before making decisions about no-cost sugar policy in the upcoming Farm Bill. 

And hopefully Congress will vote for family farmers and Michigan workers by voting against a profit grab by some of the country's most profitable multinational conglomerates.