Business: Sugar Quotas

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Last spring amid the magnificence of the Locarno Room of the British Foreign Office in London, U. S. Ambassador-at-Large Norman Hezekiah Davis achieved a signal triumph in international relations. He got 21 other nations to join with the U. S. in signing a pact controlling world sugar production for five years (TIME, May 10). Last week the U.S. Senate ratified the pact and simultaneously the Agricultural Adjustment Administration announced 1938 quotas for U. S. sugar imports and production. U. S. sugarmen found the former event more pleasing than the latter.

Sugar has been overwhelmed by more than a decade of overproduction. In 1926 Cuba tried a single-handed experiment in limitation, but as she cut her production, rival nations expanded theirs. Cuba then sponsored the plan of Manhattan Lawyer Thomas L. Chadbourne whereby all sugar-producing nations adopted export quotas. Put into effect in 1931, the Chadbourne plan failed to raise prices because its quotas were too high in the face of declining world sugar demand. In 1932 the average world price of sugar fell to .9¢ a lb., well below the cost of production. Since then it has never recovered far.

There are two broad divisions of sugar consumption—the free world market and various domestic markets, such as that in the U. S., which are protected by import limitations. The International Sugar Pact limits only production for export, i.e. for sale in the world market. It sets this figure at 3,600,000 tons per year. But further voluntary limitation by certain exporting nations may cut it to about 3,400,000 in 1937-38 and 1938-39. This is slightly more than the present consumption of sugar in international trade, is therefore not very restrictionary. But it pleases sugar dealers because it definitely prevents threats to the market of huge surpluses.

Open market sugar is, however, only one bonbon in the box of world consumption, which totals 30,000,000 tons per year. This is because most sugar-producing nations consume their own output. The U. S., for example, exports no domestic sugar, but grows some 6% of the world total and eats 22%, hence has no quota under the International Sugar Pact. It does have production quotas of its own, however, to control its beet sugar producers in the West, its cane sugar production in Louisiana, Florida and island possessions.

In 1936 the U. S. consumed 6,706,000 tons of sugar. The AAA quota for 1937 was first set at 6,682,000 tons, then raised to a whopping 7,042,000. But consumption in the U. S. has plummeted during the past three months of depression and sugar-men now fear that this year's consumption will not equal even the original 1937 quota. They were distinctly irked, therefore, when Secretary of Agriculture Henry Wallace last week set a new 1938 quota of 6,861,000 tons. Said the Wall Street Journal: "In the opinion of the trade a quota of 6,861,000 tons is too large to permit any sustained recovery in prices from their present low levels." Prices demonstrated that the opinion of the trade was right. Raw sugar quotations in Manhattan (including .9¢ duty) sagged to 3.2¢ a lb.