Sugar Value Chain More Labels Sugar: It

sugar value chain MORE LABELS

Sugar: it gives us energy, in more ways than one. But this comes at a huge cost that is becoming more recognized, which will eventually have to be tallied up as population growth and resource depletion force humankind to re-evaluate consumption patterns all over the globe. The environmental consequences of sugar production have been apparent for centuries but are growing more urgent as production expands, releasing pesticides, crop pests and pathogens, high nitrogen and phosphorus concentration which poisons soils and water; carbon, dust and pollutant emissions from power generation and refining, coliform bacteria and radiation, to name a few examples (International Finance Corporation 1-8). While more carbon emissions from sugar production are becoming offset by converting sugar byproducts into biofuels, this has its own consequences. To the list of environmental externalities from processing sugar, increased production drives deforestation with the resulting loss of emissions depletion, loss of species and human habitat; soil erosion and compaction and the emissions from fossil fuels delivering the primary product refined sugar, often in the form of molasses, to market.

These toxic spillovers pollute the human environment in various, site-specific ways. Imperial Sugar for example is having difficulty complying with water discharge regulations, their annual 10K report to the U.S. Securities and Exchange Commission reveals (Imperial Sugar 15). Imperial also still faces the last of 43 lawsuits surrounding a single industrial accident, as well as product recalls among other social reasons (Imperial Sugar 16). Even more widespread negative social health effects are becoming epidemic, not only from growing sugar consumption, but from society's and institutions' increasing ability to demonstrate causality between refined sugar and liver damage, high blood pressure, and "metabolic changes that lead to diabetes, heart disease and cancer" (Bunim n.p.). These institutional health costs even where totally paid by private individuals, consume scarce social resources and thus raise prices for all other medical supplies and services including insurance, not to mention public indigent health costs for those who can't pay or higher insurance costs for those who never get sick at all paid for by the entire society. Likewise food prices increase as demand for real estate to produce sugar and biofeuls competes up prices farmers pay to grow crops in otherwise distant and less-obviously interconnected microclimates. These social spillovers derive from institutions perpetuated by sugar at every step of the value chain.

These effects are well-documented by some of the highest government and academic institutions. Nonetheless the demand for sugar can plausibly be expected to increase with social factors like population growth and rising incomes where those materialize, at the same time as increasing reliance on biofeuls as fossil fuel substitute drives environmental factors like forest depletion that offsets emissions reductions without altering the fundamental problem, fuel-burning infrastructure that is only beginning to see competition from non-extractive alternatives themselves limited by constraints of storage and transmission. The result is a check-mate scenario where limited environmental resources of geography, carbon storage, population and income growth, social public health and consumption habits intersect such that one of them must eventually give out absent some miraculous social or institutional intervention through technology or sociopolitical organization. This raises the following Research Questions: How did this deadlock arise, given existing institutions? Why doesn't society "just say no" to sugar and replace it with a different input? Why not then just find something else or get rid of it, if these irreconcilable consequences are bad enough now and only threaten to grow more urgent?

This inquiry will seek to describe the institutional, social and political consequences of sugar production from field to fork and beyond, and attempt to identify why and how our cultures keep tolerating damages from this product that become more recognized and documented even as demand increases. While many of the world's largest producers are privately held and thus do not have to report information to regulatory institutions like publicly traded corporations in the U.S. And developed nations, questions of where sugar comes from, how much and who is consuming it can, be imputed or described in the aggregate from international trade flows and government institutions. What lies below these statistics are more hidden questions about the institutions that perpetuate such systems of unsustainable consumption. Is unsustainability a valid assumption? Given social factors of increasing global population growth and real increasing demand (McConnell, Dolman and Haley n.p.) absent other change in existing conditions, what may give out is either western societeis' consumption levels or if not, perhaps human life itself. Why institutional and political systems that propel us toward an apparently inevitable collision with the downside of sugar consumption persist even as the dangers grow increasingly apparent will be the primary research question of this inquiry, with a secondary objective of identifying how these systems remain perpetuated, even if the an exhaustive "who" or "where" remains elusive due to the opacity of proprietary information hidden behind institutions of private intellectual property. These two research questions point to complex and dynamic, seemingly contradictory interests achieving persistent but suboptimal equilibria.

The briefest historical overview sets the stage for modern context. The story of sugar boils down to slavery, colonialism, depletion and expropriation of foreign raw materials by first European, then U.S. And finally global international entrepreneurs seeking to fill a seemingly endless Western craving for a product not found in Europe until after the Age of Exploration, and easy profit derived therefrom. From such auspicious beginnings the modern sugar cube evolved through the Industrial Revolution, Fordism and automation in the U.S. circa World War II, and the resulting mechanized global food industry that is expected to consume 169 million tonnes (metric) of refined sugar over a year spanning 2012-13 out of a 173 megatonne crop which is only expected to increase for the foreseeable future, produced from 1.8 trillion tonnes of raw sugarcane and beets (Organisation for Economic Cooperation and Development 132) over the 2012-13 business year. Brazil is the largest sugar-producing country, producing over 4.5 million tonnes in 2011 compared to U.S. output of 28 million according to the United Nations Food and Agriculture Organization (in American Sugar Alliance, n. p.).

Many of the biggest sugar companies are scattered across the globe, for example Wilmar International, "[o]ne of the top 10 global raw sugar producers as well as the largest raw sugar producer and refiner," with "over 300 manufacturing plants and an extensive distribution network covering China, India, Indonesia and some 50 other countries" (Wilmar n.p.). The largest U.S. producer, fittingly called U.S. Sugar, is privately-owned and does not publish financial information like publicly-traded corporations even though it represents 8% of U.S. sugar production (U.S. Sugar, n.p.). The largest individual confectioner in the world does happen to be in the U.S., Hershey's (Yahoo!Finance 'Top Confectioners"), followed by Imperial Sugar in fifth, again in the U.S. Hershey's has a market value to owners of $13.5 billion and owns subsidiaries in Mexico, Canada, and the rest of the world (Hershey's 119), just for example.

In fact U.S. Sugar was recently purchased in its entirety by the State of Florida in 2008 in order to help clean up the Florida Everglades (Hodges, Mulkey, Spreen and Clouser, n.p.). This previously and subsequently privately-owned corporation employed 1700 at that time refining over 8% of the U.S. beet and cane output into a capacity 700,000 tons of raw sugar. This constituted "one of the largest ever public buyouts of a private company for conservation purposes, and would have significant economic and environmental impacts to the South Florida region and the State," Hodges et al. explain. Where these socio-economic effects play out is through interlinkage to the other suppliers U.S. Sugar bought inputs from, including fuel and utilities; consultations like tax preparation and legal advisement; insurance, training services and a specific list we could not even view until the company became public rather than private. While U.S. Sugar employed 1700, the horizontal linkage to other suppliers meant an approximate job loss of nearly 10,000 full or part-time jobs and sales revenue losses to some $1.5 billion, only about half of which came from U.S. Sugar itself (Hodges, Mulkey, Spreen & Clouser). The rest of the lost revenue not from sugar sales came from indirect and induced impacts of $900 million in sales by input suppliers but also including $480 million in spending by the original 1700 U.S. Sugar employees. The loss in value-added business income, rents, other non-U.S. Sugar employment, dividends and interest income, and all the social effects this missing revenue implies, was projected at about $588 million and $46 million of indirect tax revenue to governments exclusive of federal income taxes, to a sum of about $633 million in value per year that would not be created without U.S. Sugar.

This type of econometric modeling is common. The theory is that the employees and owners (shareholders, in publicly traded firms) make money from U.S. Sugar, and spend it, either capital gains income for owners or paychecks for workers, on other goods and services when they are not at work. These jobs allow quality of life for individuals and their families, and thus employment is one of the most fundametnal social consequences our institutions and political systems can generate for their constituents. Of course firms consume many inputs that are as diverse as the number of processes and companies in production.

A critical observer would not find much exaggeration in the claim that there is no culture, or in the developed world perhaps no individual household, that is not affected by the political economy of some 170 million metric tons of global refined sugar production, as the 1.8 trillion tonnes (thousand billions) of raw cane and beet crop makes its way through the global value chain to the final product on the grocery store shelf. Considering all the revenues derived from the various steps in this production chain, from marketing and advertising, to product development and research, to packaging and shipping, down to harvesting, processing and reconfiguring the refined product into sweet snacks, and the consumption, and resulting quality of life those revenues imply as the workers spend those paychecks buying other products and services, including health, education, and leisure, there is probably no developed-nation consumer or wage earner more than two or three steps away from some kind of spending derived from sugar production or delivery of the products it appears in.

Add to this the vast capital gains of the publicly traded corporations that either produce or resell refined sugar in consumer products, and all the consumption those capital gains generate, and it may be more efficient to list the production that does not derive from sugar refinement somehow rather than those that do, if such could be discovered. Who are these capital gains earners who own these exchange-listed multinational corporations? Sixty percent of Imperial Sugar is held by 71 institutions and mutual funds (Yahoo! Finance "Imperial"). Several mutual funds hold large lots in Imperial including DFA and "College Retirement Equities Fund-Stock Account," for example (Yahoo! Finance "Imperial"). Many of these same institutions own Hershey with the addition of major stakeholder Hershey Trust Company (Yahoo! Finance "Major Holders Hersheys ") What this means is that the owners of these institutions, often the retired public sector workers now living on fixed incomes, also profit from any pollution externalities or unfair labor practices produced fulfilling demand for sugar. While the total value to owners (market capitalization) of publicly traded sugar producers on the U.S. stock exchanges was around $550 million, the 'market cap' of sugar consumer, refiner and distributor (technically 'food manufacturer') Nestle was $193 billion (Yahoo!Finance 'Top Confectioners"), much of that earned through adding sugar to familiar drink mixes, candies, breakfast sweets and drinks. That is just one holding company among dozens in this one industry, of which there are dozens in food production and services alone. Many of the very labor unions and pension funds who protest free trade agreements and deregulation own the actual companies profiting from what the protestors consider exploitationary policies.

Then, after summing all those incomes either from sugar and the products and services required to carry it to the cash register, and the spending those incomes generate, add the wealth derived from treating the medical consequences of global sugar addiction: While some health educators find obesity and the ancillary conditions it aggravates an epidemic demanding regulation like alcohol, to which sugar metabolism has very similar effects (Bunim, n.p.), other observers point out this implies every bit as much revenue to the health care sector, including for example dental care which some claim amounts to over $50 billion attributable to sugar-bearing foods per year (Macrobiotic Guide, n.p.). Such unattributed claims deserve more investigation than this report has space for and the exact figure is not the point here and probably impossible to identify accurately but what these sources suggest is that the very real health spending that has become enough of a social crisis in the U.S. To warrant nationwide discussion on mandatory insurance, drives up competition for medical resources that ends up costing all other nondiscretionary disease patients as a result of others' preventable behaviors. If there was no sugar-derived obesity, those institutional resources would be available for other treatments at lower prices, but that would also mean that much less income for doctors,. pharmaceutical corporations and the medical services industries.

Finally, after adding all the income derived from medical treatment for such preventable diseases to direct consumption of sugar itself, the social, institutional, environmental and economic consequences of the historical reliance on fossil fuels has resulted in the need for a more sustainable alternative which drives the demand for ethanol as a replacement. Ethanol is a byproduct of sugar production and so far represents a relatively minor crop compared to both refined sugar and fossil fuels, but this "promising" substitute is growing in importance (Martinelli and Filoso 885). Just as obesity costs 'crowd out' other involuntary medical needs and raise prices for non-obese consumers (social effects), so too will a growing demand for biofuels increase demand for agricultural real estate, crowd out other food crops, and raise prices for all consumers even those who do not own or operate a car. It would be hard to imagine a more widespread social effect than the cost of food. While the evidence for environmental deforestation and air, soil and water pollution is becoming increasingly recognized, the implied effects are only beginning to become estimated, and claiming to be able to precisely define the exact specific extent of such environmental consequences would have to include exactly how many miles of road sugar producers put in; different environmental laws and costs across the hundreds of sugar-producing countries, and institutional differences between regulations in every single one of the many countries where sugar is produced, thus exceeding the space for this paper.

Why then do these conditions persist? What social and political forces and insitutions allow such danger signs to increase? How can such environmental spillovers as the many listed above, including to humans in that (social) environment, continue to be perpetuated when plausible information from best institutional experts suggests very real catastrophe may be the approaching result? Behind the financial interest vested in the diverse stakeholders described above, the industry and popular news reveals some of the leverage that continues to prop up global quasi-addiction to sugar and its byproducts. Hodges, Mulkey, Spreen & Clouser explain how even though complete shutdown of U.S. Sugar would have such significant results on the Florida social environment (the company is in fact now being run by a cooperative), "even the complete cessation of its production activities would not likely cause any significant shift in the domestic sugar market in the short run, due to the controlling effect of the federal sugar program," which apparently "indirectly regulates supplies and prices" by making loans and restricting imports (n.p.). While they explain later that Mexican imports are unrestricted under free trade agreements, this brief reference to institutional price control bears investigation to see how institutional factors affect the global market effects and the social consequences introduced above.

"Although dramatic fluctuations in world prices have affected U.S. sugar prices," announce McConnell, Dohlman & Haley on the cover of the Sept. 2010 issue of the U.S. Department of Agriculture's economic newsletter Amber Waves, "domestic sugar policy continues to drive U.S. sugar price movements." In the land of the free trade and home of frequent cries for deregulation, institutional policy seems to protect the sugar industry from global competition. While supply shortfalls drove price change abroad, another significant contributing factor was "policy factors in other countries" (McConnell, Dohlman & Haley). Luckily the U.S. is "largely insulated from global sugar price movements," McConnell et al. explain, except when prices are high, when global supply and demand effects are "felt" in domestic markets (n.p.). Stronger U.S. exchange rates result in relatively lower costs for international producers especially Brazil, the world's largest exporter (McConnell, et al.). The second-largest producer, India, intervenes in markets at home by setting prices for sugar exports and imports, which distorts global markets, particularly in Asia, but "any country that imports sugar is in some way influenced by global price swings" (McConnell, et al.), which would include the U.S. Such exposure justifies intervention with "domestic marketing allotment quotas and through tariff-rate import quotas" except of course for imports from countries with preferential trade agreements like Mexico (McConnell, et al.). The U.S. federal government uses tax revenues to support sugar prices just like India and Brazil, with all the social consequences higher taxes imply- less ability to consume health, education and leisure.

Imposing artificially high prices for sugar imports, however, has caused some conflict among policy stakeholders, most notably the "Sweetener Users' Association." The sugar importers who refine or include imported sugar into consumer products pay the price, or rather pass on the price of tariffs and quotas to the U.S. consumer, allegedly causing reduction in corporate growth rates and thus flight to countries without such support programs (Miraski, n.p.). Sweetened food producers take their jobs to Canada, the industry association claims, where prices are not so artificially inflated by quotas and taxpayer subsidies (Miraski). Miraski cites an economics professor who explains this is generally regarded as a transfer from the consumer and taxpayer to the sugar producer, via higher shelf prices for sweet foods and also direct tax transfers. A new-then Bush policy would potentially increase required demand for domestic product and restrict "the disposal of excess sugar supply by the U.S. Department of Agriculture" (Miraski). Not only does the U.S. impose artificially high prices, it also apparently destroys surplus sugar in order, presumably, to maintain artificially higher prices.