Wednesday, April 29, 2015

US Sugar Price Floor

The US has a binding price floor on sugar, resulting in sugar prices being higher than in world markets.  From the supply and demand market for sugar we know that a binding price floor will result in a surplus of sugar at the binding price floor.  Now let's think about the impact this has on US candy manufacturers.

As reported in the Wall Street Journal, US candy manufacturers are moving out of the US to avoid having to pay the higher US sugar prices and purchase sugar at the lower world prices.  This has resulted in a loss of jobs as the manufacturers are moving to where production costs are lower.

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