Wide Range of Opinions on Sugar 'Crisis'

(MoneyWatch)  Who should we believe on sugar? On one side, we have sugar buyers like General Mills, Mars and Hershey warning that we could "virtually run out of sugar" if we don't change our sugar policy aimed to restrict imports. On the other side, we have sugar growers assuring us everything is fine and talking as if we have more sugar than we know what to do with.

Of course, these parties are just fighting for their own interests -- growers benefit from our protectionist policies that keep sugar prices artificially high, while buyers would benefit from a larger supply.

So what is the reality? Well, we're not going to run out of sugar. Sugar's stocks-to-use ratio is forecast to be its lowest since 1949, but that doesn't mean we'd actually run out of sugar. We'd just have to dip into our stockpiles.

The real issue, of course, is price. Sugar prices are higher than they've been in decades, and they may go even higher. But there's no consensus on how high they will go -- above a certain level, some analysts think, buyers will simply switch to corn syrup or other alternatives. And though India's weather has been unfavorable for sugar production, there is still a wide range of predictions on what its final output will be.

Under current U.S. policy, after a certain quota is filled, high tariffs kick in on sugar imports (except for sugar from Mexico, which is exempt through NAFTA). The government can increase the quota amount, but it has to do so by Sept. 30 or wait until next year. This no doubt influenced the timing of a letter written by a bunch of major companies to Secretary of Agriculture Tom Vilsack saying the government must import more sugar or face a crisis.

The American Heart Association has just weighed in with a different opinion -- it says we should significantly reduce our sugar intake. Their new guidelines are so severe that a woman would surpass the recommended daily allowance just by drinking a single can of soda. If everyone stuck to those recommendations, our sugar stockpiles would probably expand pretty quickly. But I don't predict that happening any time soon.