A HISTORY OF SUGAR MF.RKETING THROUGH 1974 14d :: ' t.,\; "''',.':- · ' ''t,: " '"' ,,.,· .........~.~, ~'"~ ,'~-''~~''', ' ' .. ~,~. ,..'... I;."', · , .;~.~'~, .'k'"" :O ,... ' :,'~.~..: I <' '". - . L~b~ I .. ' ', '.;., U..DEATEN FAGIUTUEECNMCS TTITC, N COEATVSSEVC AGR~~~~~ICUTRLEOOICRPR O 8 U. S. DEPARTMENT OF AGRICULTURE ECONOMICS. STATISTICS, AND COOPERATIVES SERVICE AGRICULTURAL ECONOMIC REPORT NO. 382 ABSTRACT The quota system of regulating the production, importation, and marketing of sugar in the United States through 1974 was an outgrowth of Government regulation of the sugar trade dating from colonial times. Similar systems have developed in most other countries, particu- larly those which import sugar. The U.S. Sugar Quota System benefited domestic sugar pro- ducers by providing stable prices at favorable levels. These prices also encouraged the produc- tion and use of substitute sweeteners, particularly high fructose and glucose sirup and crystalline dextrose in various industries. But sugar is still the most widely used sweetener in the United States, although its dominant position is being increasingly threatened. KEYWORDS: Sugar, quota, preference, tariff, refined, raw, sweeteners, corn sweeteners, world trade. PREFACE This report was written in 1975 by Roy A. Ballinger, formerly an agricultural economist in the Economic Research Service. It supersedes A History of Sugar Marketing, AER-197, also by Ballinger, issued in February 1971 and now out of print. On January 1, 1978, three USDA agencies-the Economic Research Service, the Statistical Reporting Service, and the Farmer Cooperative Service-merged into a new organization, the Economics, Statistics, and Cooperatives Service. Washington, D.C. 20250 March 1978 CONTENTS Page Summary ........................................ ii Introduction ........................................................... 1 Sugar Before the Discovery of America ....................................... 1 The Colonial Period in the Americas ........................................ 2 Sugar from 1783 to 1864 ......... ........................................ 5 Developments in the Latter 19th Century ............................... .......... 8 Changes in U.S. Sugar Trade Following the Spanish-American War and During 1900-15 ......... ..................................... 15 Sugar During World War I ................................................ 20 Price Fluctuations and Higher Tariffs ....................................... 23 Sugar Quotas Prior to World War II .................................................... 32 Sugar During World War II ......... ...................................... 39 U.S. Sugar Quotas after 1947 ......... ................................... 52 Government Regulation of the Sugar Industry by Countries Other than the United States ........................................... 59 International Sugar Agreements After World War II ............................ 63 World Sugar Production and Trade ............................ ........................ 66 Postwar Trends in the U.S. Sugar Industry ................................... 74 Nonsugar Sweeteners: Recent Developments ................................. 82 Retrospect and Prospect ......................... ........................ 89 Bibliography .......................................................... 92 Appendix A .......................................................... 95 Appendix B . ...................... .................. ............... 97 SUMMARY It took about about 2,000 years for the production beet sugar in Europe, largely as a result of sugar of sugar, which originated in India, to move westward shortages during the Napoleonic wars. The new across much of Asia and North Africa and become source of sugar greatly reduced the market for cane established in islands controlled by Spain and Por- sugar and led to economic depression in many sugar- tugal in the Atlantic Ocean off the coast of Africa. But cane-producing areas throughout the world. establishing sugar production in these islands shortly The structure of the U.S. sugar industry was altered before the discovery of America facilitated the speedy greatly by events following the Spanish-American introduction of sugarcane to the New World. The War. Sugar from the Philippines and Puerto Rico was development of sugar production in the Western allowed duty-free entry into the United States, and Hemisphere, more than any other event, marked the beginning of present-day methods of sugar production tion from the rate applicable on sugar from other tion from the rate applicable on sugar from other and trade. Except for precious metals, sugar was the first commodity shipped in commercial quantities to Euro- Sugar shortages during World War I led to a large pean countries from colonies in the New World, thus, increase in output in countries exporting cane sugar, sugar colonies became valuable possessions of Euro- particularly Cuba. England shifted from a free trade pean countries controlling them. Since each country position in sugar to one of protection for its domestic attempted to control trade with its colonies to the industry and preference for its colonies. The United benefit of its European nationals and not the col- States doubled its import duty on sugar and, in 1934, onists, disputes became fairly common and much followed this with a quota system. An international smuggling developed. This was particularly notable sugar agreement was adopted in 1937, following a with respect to English colonies. Those on the main- series of earlier efforts to establish some international land of North America-where little or no sugar was control over the sugar trade. The U.S. quota system produced-were anxious to trade surplus products for ended in December 1974. sugar and molasses produced in the Caribbean in In most years until the end of 1974, this protection Spanish and French as well as English colonies. Tar- led to somewhat higher sugar prices in the United iffs and other trade restrictions established by States and most other sugar-importing nations. It had England were greatly resented in the mainland col- also encouraged the production of nonsugar sweet- onies and were a factor leading to the Revolutionary eners and of attempts to produce sugar from sources War. other than sugarcane and sugarbeets. The most Ironically, one of the first acts of the U.S. Con- important of these competitors until about 1974 were gress, after the adoption of the Constitution, was to the starch sweeteners, commonly known in this coun- place an import duty on sugar as a means of raising try as corn glucose sirup and dextrose. The noncaloric revenue for the Government. Following the Louisiana sweeteners-saccharin and, for a few years, Purchase, the tariff also had the effect of protecting cyclamate-also increased in importance, however, the newly established sugar industry in southern Lou- current and proposed restrictions are expected to isiana. During the 40 years or so before the Civil War, restrict their use. And recently methods have been Louisiana supplied a substantial part of the relatively developed for producing fructose from starch in the small quantity of sugar consumed in the United form of a sirup containing enough fructose to make a States. product considerably sweeter than ordinary corn sirup. The most important new feature of the sugar These methods appear to be of great potential eco- industry in the 19th century was the development of nomic importance. ii A HISTORY OF SUGAR MARKETING THROUGH 1974 by Roy A. Ballinger INTRODUCTION Cane sugar has been an important article of food in sweeteners interest producers, importers, and con- the world for several thousand years. It has been an sumers of sugar. Sugar and other sweeteners have important commodity in international trade since come to be regarded as necessary by consumers in shortly after the discovery of America. And since the nearly all countries, increasing the need for abundant early 19th century, both cane and beet sugar have and reliable supplies. contributed importantly to the economic development of most nations of the world, including the United This report traces developments in the marketing States. of sugar and other sweeteners in the United States Since colonial times, a large share of U.S. sugar and, to some degree, in other countries. It is particu- needs has been supplied by imports from various larly concerned with countries from which the United countries. In addition, this country has produced a States has obtained large supplies. The influence of large amount of cane and beet sugar for domestic Government policies toward sugar in the United consumption. Production of nonsugar sweeteners has States and other countries is described. Also, trade in also achieved considerable economic importance. As sugar among nations is examined, since this trade a consequence, domestic and international problems has had a considerable indirect effect on sugar trade connected with the marketing of sugar and other patterns and production in the United States. SUGAR BEFORE THE DISCOVERY OF AMERICA Early Sweeteners Hemisphere when Europeans first arrived and explored the area. Although the natives in America The oldest sweet substance known to be used, obtained their honey from species of bees not present except fruits and other plant materials containing sug- in Europe and Asia, early European settlers brought ar, is honey. The principal ingredient of honey is a honey bees from Europe which have since become