Sweet deal: High-fructose corn syrup price vs. consumption
Hansen's Natural Soda is replacing high fructose corn syrup (HFCS) with cane sugar in all its soft drinks. Given that most soda advertisements these days seem to involve a daredevil doing something dramatic like riding a bike out of an airplane, a slogan that contains "to the max" or "extreme" (preferably in all caps), and some hype about an energy boosting nutrient, it's hard to see how Hansen's will be able to publicize this seemingly mundane change in the current style. (How about a skier going down an impossibly steep slope using sugar cane stalks as poles?) And it's likely that the vast majority of consumers won't even notice.
But many Hansen's customers will: Hansen's says that 30% of consumer calls it received were asking for a change from HFCS to a more natural sugar. "Consumers asked and we listened," is how one executive put it. This response is a refreshing change from the typical corporate doublespeak along the lines of "public pressure had nothing to do with our decision, it was planned long ago."
Of course, cane sugar production is not without its flaws — workers are mistreated, fertilizer overapplied, ecosystems damaged, and so on, as an episode of the Deconstructing Dinner radio program explains in detail.
However, Hansen's switch, along with record high corn prices, has me wondering if consumption rates of HFCS are changing, and if so, how fast. I found some of the answers in the USDA's Sugar and Sweeteners Data Tables, a massive collection of historical data on production, prices, trade, and consumption of all kinds of sweeteners.
The rise of HFCS
Until 1970, all sweetener calories were from white sugar and "other" sweeteners (honey, maple syrup, etc.) and U.S consumption was about 400 calories per day. HFCS boomed in the '70s and early '80s, paralleling the "cornification" of America through corn subsidy programs and government programs that raised the price of cane and beet sugar. As the figure below indicates, HFCS rose from a non-entity to something that eventually accounted for about 35% of sweetener calories in the U.S. In the early years, HFCS was a substitute for sugar: the decline of white sugar is almost mirrored by the rise of HFCS. But even after the HFCS for sugar switch was complete, consumption of HFCS kept rising, peaking in 1999 at 215 calories per day, then dropping slightly to about 200 calories per day. (Data sources are detailed at the bottom of the post.)
The biggest driver of HFCS's rise was the beverage industry, which nearly eliminated the use of sugar in its products in the early 1980s. I consulted several books about the history of Coca-Cola (including "For God, Country and Coca-Cola" and "Secret Formula") and it appears that the change from sugar to HFCS was not a big deal within the company. There was a little bit of resistance from someone who had been with Coke for almost 60 years, but in the end the management could not resist the enormous financial benefits of the switch. "Secret Formula" claims that the savings from replacing 50% of Coke's sugar with HFCS were $100 million per year in the early 1980s. In 2002, the soft-drink industry used 8 billion pounds of HFCS, but only about 200 million pounds of sugar (according to data from the USDA Sugar Backgrounder, a great reference on sugar production, use and policy).
Recent HFCS trends
I also extracted data showing recent trends of HFCS price and consumption, shown below in a chart. The blue line shows the relative price trend for HFCS-55 (,the formulation used in soft drinks; 55 refers to a 55% fructose concentration in the syrup), corrected to 2007 dollars (via the Bureau of Labor Statistics inflation calculator). The price rose steadily between 2000 and 2006, after which there was a 20% increase in price in two years.
The red line shows the trend in Americans' consumption. There is a slight decrease of a few percentage points per year. Between 2006 and 2007 — when there was a 12% price increase — consumption dropped only 3.4%. Unfortunately, data for 2008 are not available, so we can't tell whether the latest price rise is having similar effects on consumption.
The most likely reason for the relatively small decrease in consumption is that HFCS makes up only a tiny portion of the retail cost of even the most HFCS-intensive product like soft drinks. The February 2008 issue of Amber Waves estimates that a 2-liter bottle of soda contains 15 ounces of corn in the form of HFCS. At the 2007 average price of $3.40 per bushel (about 56 pounds of shelled corn), the value of corn in the soda is only 5.7 cents. So a 20% rise in the price of corn results in a raw material cost increase of only about a penny, an increase that the giant soft drink companies or fast-food chains can certainly absorb for a little while.
Despite the price increases in the last few years, HFCS is still far cheaper than sugar in the U.S. Much of that price difference is caused by government programs (loans, import quotas, tariffs) that artificially inflate the price of sugar here. Indeed, USDA data indicate that the U.S. price is almost double the world price (tables 2, 3, 4 and 6 in the USDA Sugar and Sweeteners data tables). Some that that differential will decrease as Mexican sugar starts entering the market under the NAFTA provision reducing restrictions on Mexican sugar imports.
Many sources, including the documentary "King Corn," have pointed to HFCS consumption as a potential cause of America's rising obesity rates and accompanying diabetes epidemic. There is some evidence that HFCS is processed by the body differently than sweeteners that occur naturally (see, for example, some research from Saint Louis University). Anyone who is hoping that rising corn prices alone will drive down the consumption of HFCS is likely to be disappointed. Until there are many more changes in the food system, high-fructose corn syrup is not going away.
All data are from the USDA Sugar and Sweeteners data tables.
- First figure: total calories are from Table 51, white sugar calories are from Table 51, HFCS calories are from Table 52, and "Other" calories are from Table 53.
- Second figure: HFCS prices are the spot prices for HFCS-55 from Table 9 (2008 prices are for January-April), HFCS consumption is from Table 52.
Photo credit: Sugar cane from iStockphoto
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