U.S. Department of Commerce calls for an end to subsidized Mexican sugar flooding U.S. market

Sugar producers across the country have been fighting an unfair fight for the last few years, competing against heavily subsidized Mexican sugar imports that sell for well below fair market values with an economic impact to the tune of about $1 billion each year.

On Thursday, the U.S. Department of Commerce announced its final determination in the antidumping duty and countervailing duty investigation of Mexican sugar imports.

That struggle could soon come to an end, pending a final decision from the International Trade Commission on Oct. 20.

“It’s always been a concern for Wyoming sugar producers that other countries have been flooding the market,” Sen. John Barrasso said in an email to the Tribune on Friday. “That’s why we need to enforce the rules against countries who attempt to violate them.”

If the International Trade Commission rules in favor of the Department of Commerce’s findings, then the Mexican sugar’s unhindered access to the American market will be put to an end.

“To be honest, we are very very confident they are going to rule for it because they already have all the facts and everything, that is, it is subsidized,” said Klodette Stroh, national sugar chairwoman for Women Involved in Farm Economics and Sen. Mike Enzi’s Ag adviser for Park County.

“We have been competing against governments for years and years and this is the first time we have gotten help,” said Ric Rodriguez, a Powell farmer and vice-chairman of the Western Sugar Cooperative Board of Directors. “Most countries have a subsidized sugar industry. We are the most efficient producers in the world, but you can’t compete against governments.”

Both of these laws protect American businesses and workers from the market-distorting effects caused by dumping and unfair subsidization of imports brought into the country. Basically, they create a level playing field for American producers as they compete in a global market.

The Department of Commerce had two findings on Mexican sugar imports:

• First, they were being sold in the U.S. at dumping margins of 40.48 to 42.14 percent.

• Second, they received counteravailable subsidies ranging from 5.78 to 43.93 percent.

This is problematic for local and national sugar beet growers because the American sugar industry is not subsidized by the federal government.

Although the U.S. government does not subsidize sugar growers, it does regulate the supply and demand to help keep production going.

“Our (sugar) farmers in the U.S. don’t get a subsidy — not one (sugar) farmer gets a cent from the government,” Stroh said. “They all operate on their own income, and the factories borrow money and pay it back with interest.”

The Department of Commerce agreed to suspend the investigations with Mexican sugar producers and exporters and the Mexican government on Dec. 19, 2014. That agreement will remain in place even if the International Trade Commission goes along with the Department of Commerce’s determinations.

Mexican sugar can still enter the U.S. market without regard to antidumping or countervailing duties, but their export amounts will be limited and minimum prices will be established so that the U.S. market does not become oversupplied. At the same time, it will allow Mexico to supply all of America’s unmet sugar needs.

Sugar that was being brought to the U.S. from Mexico is not supposed to be subsidized by any government, but the majority of the Mexican sugar industry is owned by their government, Stroh said.

“When they bring it to the country, it floods the market,” Stroh said.

Damages to the U.S. sugar market came in to the tune of $821 million in 2012, then $1.08 billion in 2013 and $725 million in 2014.

“In 2013 and 2014, it was very hard on them because there was a billion dollar income loss because they dumped so much sugar on the market,” Stroh said. “It falls on the producers; the cut back will come from the bottom of the totem pole, the ones who produce. The farmers can’t regain those losses from anywhere else, and from year to year, pretty soon it pushes people out of business.”

The agreement requires refined Mexican sugar in the U.S. market to be sold at or above 26 cents per pound. Other Mexican sugar imports will have to be sold at or above 22.5 cents per pound.

These prices are the bare minimum that U.S.-grown sugar can be sold while still allowing producers to continue operation, Stroh said.

“It is just above what we feel our cost of production is — we aren’t making a whole lot on it,” Rodriguez said. “Hopefully if that stays in place, the market will move up higher.”

The 2014 crop is done being sold, so if the changes go into place, the market should move in favor of American sugar beet farmers, Rodriguez said.

“It should be more than that because the cost of fertilizer has gone up,” Stroh said.

“The U.S. producers, they are the ones that take all the risk and have the cost on their back,” Stroh said, noting they pay for their own parts, fuel and other necessities to raise crops. “In the U.S., producers are among the most efficient producers in the world.”

As far as the consumer impact is concerned, Rodriguez said, “ask yourself, when was the last time you saw a candy bar get cheaper? They have not gotten cheaper; sugar products don’t go down when the price goes down, it is just profits for those guys.”

“It is going to be good for sugar farmers in the Basin,” Stroh said, noting that Western Sugar is a cooperative, meaning the farmers all own the facility. “It is going to be good because sugar prices will stay stable for them.”

Stabilizing sugar prices is exactly what Big Horn Basin sugar producers need right now, Rodriguez said.

“The market is so soft because the users are waiting,” Rodriguez said. “I think it is a good deal, they can’t just dump a bunch of it.”

Both of the investigations resumed on May 4 at the request of two U.S. sugar refiners.

“Senator Enzi believes the Department of Commerce’s finding is an important step to ensure that Mexico is competing on a fair playing field with Wyoming and U.S. producers,” wrote Enzi’s press secretary Max D’Onofrio in an email to the Tribune on Friday. “Enzi understands the danger that sugar dumping poses to Wyoming and the industry and applauds domestic sugar producers for bringing this issue to the attention of the international community. Enzi will continue to keep an eye on the issue as the proceedings move forward.”

Stroh urged Wyoming residents to contact Enzi, Barrasso and Rep. Cynthia Lummis so that their voices can be heard in Washington, D.C. before the Oct. 20 hearing.

If the commission makes positive determinations, the agreements will remain in effect.