Tag Archives: Archer Daniels Midland

Tariffs and Subsidies – The Literal Cost of High Fructose Corn Syrup

Out of all the e-mails I get in regard to High Fructose Corn Syrup, the second most popular question asked is “why do these companies use HFCS?” The most popular question, for the record, is “Wouldn’t it be easier to create a list of products that don’t have HFCS?”, to which the answer would be no, but only because I am lazy.

But back to the question of why is HFCS used: As many have guessed, cost is the only reason that HFCS is used in place of cane sugar. As I clumsily pointed out in another post, a 1/10th of a cent increase in sweetener, per serving, would cost Coca-Cola roughly $122,423,790. And here you were thinking your car insurance costs were high.

The answer to the question of why HFCS is used is fairly clear and easy to figure out. The more interesting question is one that’s almost never asked -

Why is HFCS so much cheaper than cane sugar? The answer to that question may surprise you.

Because the government wants it that way.

The Federal Government accomplishes this in two major ways:

  • Sugar Tariffs
  • Corn and Sugar Subsidies

Add these two variables together, and the result is sweetener made from corn.

The difficulty in explaining how the above work is in understanding that none of the above would exist without at least tacit complicity between the Sugar Industry, the Corn Industry and the United States Department of Agriculture. Remove any one of those three players from the equation, and the tariffs and subsidies most likely go away.

Let’s start with subsidies. A subsidy was developed to help a farmer make up money lost between the cost to produce a product, and the higher market cost. For example, if it cost me 1 dollar to grow a bushel of corn, and the market demanded only 80 cents, the government would make up the difference and pay me 20 cents, plus a little more so that I can make a profit and give me a reason to keep growing corn. A nice idea in theory, but in practice it essentially ends up paying a farmer both when they produce too much and when their crop prices are too low. As anyone with a passing grade in Econ 101 can tell you, making too much of a product is one cause of lower prices, the government ends up giving out a lot of money. To the cost of $22.7 billion in 2005.

A free market economy is exactly what we don’t have in our agricultural industries.

Now let me introduce you to the Big Player in the Corn Industry – Archer Daniels Midland (ADM).

The libertarian Cato Institute writes of ADM:

The Archer Daniels Midland Corporation (ADM) has been the most prominent recipient of corporate welfare in recent U.S. history. ADM and its chairman Dwayne Andreas have lavishly fertilized both political parties with millions of dollars in handouts and in return have reaped billion-dollar windfalls from taxpayers and consumers. Thanks to federal protection of the domestic sugar industry, ethanol subsidies, subsidized grain exports, and various other programs, ADM has cost the American economy billions of dollars since 1980 and has indirectly cost Americans tens of billions of dollars in higher prices and higher taxes over that same period. At least 43 percent of ADM’s annual profits are from products heavily subsidized or protected by the American government. Moreover, every $1 of profits earned by ADM’s corn sweetener operation costs consumers $10, and every $1 of profits earned by its ethanol operation costs taxpayers $30

Do you want to know who makes HFCS? It’s Archer Daniels Midland. Do you want to know who pays for HFCS? That’d be you and I, in the form of the taxes we pay to the U.S. Government. The government spent $41.9 billion on corn subsidies from 1995 to 2004, a trough of money at which ADM gladly ate. ADM buys 12 percent of the nation’s corn at a heavily subsidized price from farmers, and turns it into high-fructose corn syrup and ethanol.

But there’s another side to this coin — The sugar tariffs. The sugar tariffs, put in place by law and enforced by the USDA, are so complicated that many people give up worrying about it. After all, paying $2.25 for a five pound bag of sugar is no big deal. Unless you consider that we could be paying as low as a dollar for that five pound bag, and wholesale purchases of sugar by companies like Coca-Cola, Heinz, and Kraft would pay even less.

So here’s the Sugar Tariff in action:

  1. First, USDA’s Commodity Credit Corporation lends money each year to sugar cane processors at a specific rate per pound of sugar. The loans must be repaid, with interest, after nine months.
  2. The processors use the money to operate their factories and to pay sugar growers for the cane or beets that they deliver to the mills. Should the price of raw sugar fall below the amount set by the government at the time of the loan, the sugar processing companies are allowed to forfeit their sugar in lieu of repaying the loan.
  3. The law requires that this program operate at no net cost to the federal government. The government must then manipulate the market to keep sugar prices higher than the price at which the sugar companies would forfeit their product. Otherwise the government would be out of the money lent and still have the sugar to distribute, further adding to the governments net cost.
  4. To manipulate the market, each year the USDA estimates how much sugar Americans will consume in the following year and how much sugar U.S. growers will send to market to meet consumers demand.
  5. The USDA then establishes a quota for imports of sugar from foreign producers, such as the Dominican Republic, Brazil, the Philippines, and Australia. This quota allows just enough sugar in to meet demand, but not so much as to affect the already high prices.

And that, in the nutshell, is why we use HFCS in place of Cane Sugar. We inflate the cost of sugar, lower the cost of corn, and Archer Daniels Midlands buys an excessive amount of corn at excessively low costs in order to make HFCS.

If you want to get HFCS out of our foods, have the government take care of the Tariffs, the subsidies, or both.

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