US headquartered firm Spangler Candy says it will not move large volumes of its production back to the US from Mexico until the US government creates a domestic sugar regime that matches world prices.
The Farm bill was written into US law as the Agricultural Act of 2014 last month. It included a five-year continuation of the existing sugar policy.
The move was applauded by US sugar growers, but left a bitter taste for US sweet manufacturers.
28% higher than world price
Kirk Vashaw, president and CEO of Spangler Candy, told us: “Right now US companies such as ours are at a disadvantage because we have to pay a much higher price for sugar and sugar is the main cost in our product. “
Sugar futures contracts in the US for May are currently trading at US¢ 21.9 cents, 28% higher than the international price.
As a candy cane manufacturer, 70% of Spangler’s ingredients cost comes from sugar.
“It puts us at a competitive disadvantage relative to if we manufactured in other countries including Canada and Brazil,” said the company’s CEO.
“What we’re hoping to do is grow our US manufacturing base, but because there are no changes, we’re happy to just be able to hold on to our manufacturing base.”
Spangler Candy still operates a factory in Ohio, but it moved around half of its production to Mexico in 2003 to remain competitive and said it had no plans to return volumes to the US until sugar prices matched world prices.
Spangler Candy: Jobs staying in Mexico
According to the Coalition for Sugar Reform around 112,000 jobs were lost in US sugar using industries between 1997 and 2009. The American Sugar Alliance, a producer’s organization that supports the existing regime, previously argued that more American jobs would be lost if the regime changed.
“You won’t find many hard candy manufacturers in the US because of this program. A lot of people have moved out of the US including us,” said Vashaw. “We’ll have to continue to make the commodity products outside the US.”
“We won’t be able to bring those jobs back to the US, they’ll have to stay in Mexico and all the other brands we compete with, they won’t be bringing back any jobs here either.”
Is it really that bad?
The American Sugar Alliance has argued that confectioners are enjoying sugar surpluses, while “padding their profits” and campaigning for deregulation.
The confectionery category in the US has registered growth every year for the past 10 years to reach $33bn in 2013, according to the National Confectioners Association (NCA). Can things really be that bad for candy makers?
“Yes,” said Vashaw. “We’re selling a lot here, but definitely making less than we used to make here in the US ten years ago. If you take the top ten hard sugar candies in the US, there’s very few of them that are made here, it’s imported.”
US sugar regime
The US government mandates that the price of domestic sugar is higher than the world price to protect the domestic sugar industry. It operates a minimum price for farmers and sets a limit for taxed imports among a host of other measures.
“The program is very complicated. We would be happy if they reformed just any one of the five or six pieces to it. But really in order for us to compete in a commodity business we have to have a level playing field,” said the Spangler Candy chief.