Sugar Shortage
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-a.- The United States, Canada and England were importing before the war, while France and Italy were very nearly self-supporting.
b.- That the main sources of supplies to importing countries were -
1. Germany and neighboring powers,
2. The West Indies,
3. The East Indies.
-c.- The German sources have been cut off entirely and Germany also largely absorbs the sugar or surrounding countries at the present time. Before the War England drew approximately 1,400,000 long tons per annum from German and neighboring sourcres. France produced about 750,000 long tons of beet sugar and exported 50,000 tons. The French production in 1917 fell to 210,000 long tons. Italy produced about 210,000 long tons and imported almost none. Thus these three countries were thrown onto West and East Indian sources for 1,925,000 tons to maintain normal consumption -- or to reduce this by home economies. The East Indian sugar requires about three times the length of voyage and therefore three times the amount of tonnage to bring from that source compared to the West Indies. The actual draft of sugar from the Western Hemisphere by the Allies was 1,420,000 tons against 300,000 tons pre-war normal. They also drew some 400,000 tons from Java, and the East Indies.
d.- The steady shortening of shipping throughout the year thrust an increasing drain on the West Indies. Aside from this constant element of uncertainty in the position from month to month another uncertain factor arose oin that we oculd not judge the effect of their conservation measures in Europe. While drastic on the civil population, the consumption of soldiers is far above normal.
The Food Administration was created August 10th, 1917. The statistical evidence had indicated for some time that the heavy but uncertain draft of Western Hemisphere sugar to Europe might narrow our margin of supplies, pending the new crop. In order to prevent supplies from going elsewhere than to the Allies an embargo upon exports from the United States was put into force on August 27th, 1917, and the Cuban Government co-operated by placing an embargo on all its sugar except to ourselves and the Allies on October 1st, 1917. In the meantime, every effort was made by the Food Administration to secure voluntary reduction of consumption by widespread propaganda, in order that we might afford as much supplies to the Allies as possible.
Efforts were made to secure Java imports but no shipping could be allowed by the Shipping Board, nor did our efforts succeed in securing foreign shipping.
In August the English Government reduced the household sugar ration to a basis of 24 lbs. per annum per and in December the French Government reduced their household ration to 8 kilos or about 13.2 lbs., and at the same time, further restrictions upon use in manufacture. In August the French Government found itself unable to maintain even this ration their supplies and appealed to the American Government for exports. These were granted, and it was agreed should be continued up to 100,000 tons. The American household consumption being at least lbs. per annum per person it was considered that the duty of maintaining French morale made our course plain. A plea for further reduction in consumption to assist the French was laid before the public by the Food Administration, as it was felt that this concession to the French and the other causes already noted would indicate at least sporadic shortages in the period prior to the harvest of Louisiana and beet sugars in November, although at no time would supplies wholly fail or even amount to privation if the public supported the Administration in reducing unnecessary consumption. Requests were made to distributors to supply the confectionary and sweet drinks trade with 50 per cent of normal and this has been generally followed by patriotic persons. Such regulations were voluntary as the Food Administration had no authority to impose them.
The Department of Commerce returns show the exports to the Allies were as follows:
United Kingdom France
August ..............17,990 21,051
September......... 146 10,896
October.............. 9,868 32,670
November........... 33 17,702
Total .................28,037 82,319
The Allied Traffic Executive gives the following shipments to France, (the dates probably do not exactly coincide) and some sugar was diverted enroute to France.
August.......13,879
September..35,731
October......22,783
November...13,033
Total..........85,426
-During this period 236,777 tons of raws were shipped direct from Cuba to the Allies - a total of 327,133 tons to them since August 1.
Subsequent to granting the French permit up to 100,000 tons, the car shortage in this country rendered it impossible to secure an even distribution over the country, and it was arranged to shift some sugar among Allies to France and allow the distribution of some 30,000 tons of sugar intended for France in the Northeast, we proposing to help the Allies from Gulf ports or Cuba, as the case might develop. We have not yet been able to do so, although the Allied situation is today more critical than ever.
The Food Administration has conducted a systematic campaign for the reduction of individual sugar consumption. The reduction has shown in the decrease in candy sales, et cetera, but on the other hand a similar campaign for the preservation of fruit has increase consumption in that direction - but will reduce consumption later on.
In the face of the crucial situation in England and France and the obvious shortage in this country any discouragement to this campaign is a postive disaster.
Taking into consideration the stocks of raw sugar on January 1st, 1917, the total net supplies from all sources -- after deducting exports -- from January 1st to September 1st, 1917, were in the calculations of our statistical division about 3,287,000 long tons against 2,989,000 long tons in the same period of 1916, or an apparent net increase in supplies by about 300,000 tons. On the other hand the carefully compiled statistics of the Department of Agriculture show the net sugar retained in the United States for the past three years is as follows to the 30th of June each year -
1914....3,925,801 Long tons
1915....3,81,327
1916....3,553,733
1917....3,777,640
Average for the three years 1914 - 1916 - 3,776,952.
Therefore while the consumption for the fiscal year 1917 was 223,907 tons in excess of 1916 it was only 688 tons in excess of the average of the three previous years. Consequently I am in doubt as to whether there was any real increase in consumption and as to whether the apparent increase cannot be accounted for as to differences in invisible stocks from year to year. A rough stock-taking by the Food Administration of supplies indicated on September 1st that there was in the hands of refiners, and principal storage houses about 300,000 tons. This has since been found by the Department of Agriculture to have been 325,000 tons. The stocks in these hands at the same date in 1916 are undeterminable.
Several explanations have been made of the supposed increased consumption and many explanations given -
a. A higher wage level and consequent higher standard of living and the increase due to increased dry area.
b. The largely increased amount of home fruit preservation.
c. Some household hoarding during the months of February, March and April upon the general alarm created by the declaration of war. The trade journals of this period will confirm the time of this run upon the sugar bank. In my opinion there has been a reduction in household consumption since July last.
d. No statistics on sugar consumption from year to year can be looked upon as precise because of the variation which may occur in trade supplies, of which there has no collected data, and there is some evidence of increased holdings by the trade because of unsettled condition.
e. Taking into consideration all factors it is not certain that there has been any increase in actual consumption and considering the increased canning use ther may be a decrease.
As to the situation between September 1st and December 6th, the following indicates the supplies as nearly as we can estimate in round numbers.
--SUGAR RECEIVED AND DISBURSED (Long Tons)-----
Supplies September October November
On hand 300,000 154,700 82,231
Cuban 140,380 72,981 9,882
All others 55,026 54,563 46,404
Louisiana 80,000
Beet 31,500 100,000 150,000
Total 526,906 373,244 368,517
Exports 22,206 41,013 43,000
Balance 504,700 332,231 325,517
Consumption say... 350,000 250,000 259,000
Balance forward..... 154,700 82,231 75,517
The average monthly consumption is about 350,000 tons, and there has been in October and November at least 70 percent of normal supply.
During the month of December, if cars are available, the beet manufacturers can distribute 150,000 tons and Louisiana could ship 50,000 tons. Overseas arrivals should amount to 40,000 to 50,000 tons. This, together with stocks, should maintain 70 percent of normal consumption - if cars were available. After January 1st arrivals from overseas should rapidly increase. The movement into the Northeastern states has been the most difficult point, owing to the railway blockage and embargoes on the Eastern lines. One result is to give sufficient supuplies in the area of free movement, and to cumulate the shortage in the Northeast. At the present moment about 140 cars of beet sugar alone destined for the Northeast are held up enroute. By December 1st practically all Cuban old crop had been exhausted and under the Cuban embargo shipped either to the United States or the Allies.
My own conclusion is that the conflicting operation of the war declaration run on the sugar bank and the conservation measures have more or less neutralized each other; that the drain of the Allies on Cuban and American supplies denuded us of a margin of about 300,000 tons that we needed to maintain normal consumption instead of about 70 to 80 per cent during the last three months of the year; that this shortage has been accentuated by the lack of cars to move Louisiana and beet sugar promptly to areas of greatest pressure; that there is not today, nor has there been, any supplies available which have not been brought into distribution.
There has been a constant administrative difficulty from month to month is being unable to forecast the Allied shipping position and the results from their reduced consumption and consequently of their needs.
Such statements that there have been or will be ample supplies of sugar available are not only wrong and opposed to every fact in the situation but if they are believed and acted upon by the American public will have done this country’s war efforts incalculable harm. It is our stern duty to feed the Allies. to maintain their health and strength at any cost to ourselves. There has not been, nor will be as we see it, enough sugar for even their present meagre and depressing ration unless they send ships to remote markets for it. If we in our greed and gluttony force them either to further reduce their ration or to send these ships we will have done damage to our abilities to win this war. Today the number of soldiers we can send to France is limited by the ships we have available. If we send the ships to Java for 250,000 tons of sugar next year to piece out theoir ration we will have necessitated employment of the equivalent of eleven extra ships for one year. This in our present situation is the measure of transport and maintenance of 150,000 to 200,000 men in France.
The Food Bill contains no price-fixing powers and no price-fixing in the legal sense has been attempted, and there has been no restraint on competition below profiteering level.
In order to protect the public from profiteering and speculation, to protect it from twenty-five cent sugar in the face of short supply, every element of the sugar production in the country was called into conference and asked to voluntarily enter into undertaking with the Administration to prevent these things. The national necessity was pointed out to these men. They were appealed to on the ground of patriotism to give their skill and co-operation to the undivided public interest in this time of national stress to bury thoughts of personal gain and serve the nation. They were appealed to to bury their trade fights and trade jealousies and work in the common interest. There were many interests to consider. The cane producers of Louisiana, the beet producers, the beet manufacturers, the Hawaiian can producers, the cane refiners, the Cuban producers, the Allied necessities, the American consumer. These conflicting interests have much accumulation of hatred and bitterness.
It has been necessary to organize these groups upon a voluntary basis and to drive this team to the common good; the ultimate ends being:-
1st. To protect our producer and consumer.
2nd. To prevent speculation and extortion.
3rd. To supply the Allies.
You gentlemen will, before you are finished, have before you evidence of the gigantic difficulties in the Sugar Trade, and the animosities that make this problem almost insuperable. I would like to point out that a task of similar dimensions has needed to be carried on in many other trades. Food control is a new field in the world and we have taken on even newer ground in the United States - organization on a voluntary basis.
The prices of refined sugar to the consumer rose suddenly in August from 81/2 to 101/2 and 11 cents per pound. As a result of measures taken it has been reduced in the territory north and west of the Ohio and Mississippi to 8 and 81/2 or a reduction of from 11/2 to 2 cents per pound, and in the South and Atlantic seaboard states to 91/2 or a reduction of about 1 cent per pound.
The price of sugar rose from 10 cents to 30 cents during the civil war when there was no restraint.
Sales of sugar from 16 to 20 cents per pound have been followed up vigorously and stopped and is evidence itself of the prices at which consumers would have been mulct had we not intervened. We have forfeited wholesalers licenses in aggravated cases and we have issued warnings to first offenders in a great many instances through our local administrators.
The Food Administration took the following steps:
a. Suspension of speculation has in futures in the sugar market. This step has necessarily discommoded the business of many persons who lived upon exchange operations, but stopped high prices being made for advance position and the tendency of distributers to follow with their shelf stocks.
b. A voluntary agreement with the beet sugar producers by which the price of beet sugar was made 7.25 of about 1 to 11/1 cents below the price of then ruling and its universal distribution provided for. A voluntary agreement of the California Hawaiian refinery to adhere to the beet basis, despite the higher basis for can sugar in the East.
c. An agreement with the Louisiana producers by which the price was limited to 7.80 granulatedt.
d. A request to American refineries not to pay more than a 6.90, duty paid at New York, for import raws. Sales had been made as high as 7.77. The balance of Cuban old crop sugar available has been bought at this price and distributed either in the United States or by the Allies at three prices, and that this sugar has already come into the market is sufficient answer to the charges that this action prevented the sugar from reaching the American consumer.
e. A regulation limiting the profits of refiners.
f. A regulation limiting the profits of refiners.
g. A widespread propaganda informing the public of the maximum price they should pay retailers and that wholesale prices were not to be raised and a ruling that retailers charging exorbitant prices would have their supplies cut off.
The Food Administration of course has no ability to control retail prices except by public opinion but all these measures have resulted in maintaining a price of from 81/2 to 91/2 cents, granulated, retail, depending upon the locality and therefore the necessary freight differences.
Every once cent raise in sugar from September 1st to January 1st means that 18,000,000 dollars to the American consumer. Numbers of gentlemen would tell you that 20 cent sugar would have prevailed and the public robbed of $180,000,000 this year if we had not taken these actions. I do not contend that they could not have been more efficient. They are as efficient as they could be with the feeble weapon of voluntary agreement that we have been able to wield. Had the right not been stricken out of the Food Bill for us to purchase sugar directly for the Government both the price and the distribution could have been handled more efficiently.
The statement has been made that the action of the Food Administration in September in limiting the price to be paid for Cuban raw caused some 50,000 to 100,000 tons of these sugars to be diverted esewhere and contributed to this shortage, aside from the operation of the embargo of the Cuban Government in our favour. A comple answer to this statement lies in the fact that all of the Cuban sugar since that date has come either to this country or the Allies and has been consumed. Some existing small contracts were permitted to Spain and Mexico amounting to less than 2,000 tons. I submit the following telegram from our Consul General in Cuba, as follows :-
"Exports from Cuba to neutral countries for September, October, and November according to statistics here as follows: Spain three hundred sixteen long tons, Mexico one thousand six hundred fify No other Practically no sugar on island of old crops unsold".
(Signed) HH Morgan
American Consul General.
CONTROL OF CAN REFINERS PROFITS.
Immediately upon the establishment of the Food Administration, an examination was made of the costs and profits of refining and it was finally determined that the spread between the cost of raw and sale of refined cane sugar should be limited to $1.30 per hundred pounds - The pre-war differential had averaged about 85 cents and increased costs were found to have been imposed by the war, in increased cost of refining losses cost of the bags, labour, insurance, interest and other things, rather more than cover the difference. After prolonged negotiations, the refiners were placed under agreement establishing these limits on October 1st, and anything over this amount to be agreed extortionate under the law. In the course of these investigations, it was found by canvas of the Cuban producers that their sugar had during the first nine months of the past year sold for an average of about $4.24 per hundred, f.o.b. Cuba, to which duty and freight added to the refiners' cost amounted to about $5.66 per hundred. The average sale price of granulated by various refineries accoding to our investication was about $7.50 per hundred or a differential of $1.84. In reducing the differential to $1.30 there was a saving to the public of 54 cents per hundred. Had such a differential been on use from the 1st of January 1917 the public would have saved in the first nine months of the year about $24,800,000.
Next Year
With a view to more efficient organization of the trade in imported sugars next year, two committees have been formed:
1. A committee comprising representatives of all of the elements of American can refining groups. The principal duty of this committee is to divide the sugar imports pro rata to their various capacities and see that absolute justice is done to every refiner.
2. A committee comprising three representatives of the English, French, and Italian Governments; two representatives of the American refiners with a member of the Food Administration. Only two of the committee have arrived from Europe buty they represent the Allied governments. The duties of this committee are to determine the most economical sources from a transport point of view of all the Allies, to arrange transport at uniform rates, to distribute the foreign sugar between the United States and the Allies, subject to the approval of the American, English, French and Italian Governments.
This committee, while holding strong views as to the price to be paid for Cuban sugar, has not had the final voice, this voice has rested in the Governments concerned, together with the Cuban Government and I wish to state emphatically that all of the gentlement concerned as good commercial men, have endeavored with the utmost patience and skill to secure a lower price and their persistence has reduced Cuban demands by fifteen cents per hundred. The price agreed upon is about $4.63 per 100 pounds, f.o.b. Cuba, or equal to about $6.00 duty paid New York.
This compares with -
The average realization of raws to Sept. 1st, 1917 5.66 + .34
The high price of raws in August 7.77- 1.77
The price of raws was limited in September 6.90 - .90
This price should eventuate to about $7.30 per hundred for refined sugar from the refiners, at seaboard points, or should place sugar in the hands of the consumer at from 81/2 to 9 cents per pound depending upon locality and conditions of trade, or at from one to two cents below the prices of August last and from one-half to one cent per pound cheaper than today.
There is now an elimination of speculation, extortionate profits and in the refining alone the American people will save over $25,000,000 of the refining charges last year. A part of these savings goes to the Cuban, Hawaiian, Porto Rican and Louisianan producer and part to the consumer.
Appeals to the prejudice against the Food Administration have been made before this committee because the Cuban price is 34 cents above that of 1917. It is said in effect that the Cubans are at our mercy, that we could get sugar one cent lower. We made exhaustive study of the cost of producing sugar in Cuba last year, through our own agents in Cuba, and we find it averages $3.39 while many producers are at a higher level. We found that an average profit of at least one cent per pound was necessary in order to maintain and stimulate production or that a minimum price of $4.37 was necessary and even this would stifle some producers. The price ultimately agreed was 23 cents above these figures, or about one-fifth of a cent per pound to the American consumer and more than this amount has been saved by our reduction in refiners profits. If we wish to stifle production in Cuba, we could take that course just at the time of all times in our history when we want production for ourselves and the Allies. Further than that, the State Department will assure you that such a course would produce disturbances in Cuba and destroy even our present supplies - but beyond all these material reasons is one of human justice. This great country has no right by the might of its position to strangle Cuba. Therefore, there is no imposition upon the American public. Charges have been made before this committee that Mr. Rolph endeavored to benefit the California refinery of which he was Manager by this 34-cent increase in Cuban prices. Mr. Rolhp did not fix the price. It does not raise the price to the Hawaiian farmer about that amount. It does not raise the profit of the California refinery becaus their charge for refining is, like all other refiners, limited to $1.30 per hundred pounds, plus the freight differential on the established custom of the trade. Mr. Rolph has not one penny of interest in that refinery. In any event, by the voluntary limitation of the California Refinery sugar price to the $7.25 level three months before it came into force on the Atlantic Seaboard in order that we might have a universal price west of the Ohio, Mr. Rolph has penalized the company of which he was Manager over seven hundred thousand dollars under what it might justly have stood out for. That is equal treatment with the Atlantic refineries. He has done distinquished service for the Americn people.
I submit herewith a statement of our views as to the sugar supplies for ourselves and the Allies next year. You will observe that it entails the transport of 250,000 tons of sugar for the Allis from Jave, if the American public is to have its normal supply. Such transport will diminish our ability to send soldiers to France by 200,000 men. If, however, the American public will diminish their consumption per 10% to 15%, or if the Cuban crops are larger than we anticipate, this disaster of transport necessity can be averted.
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