Here's a Better Way to Get Coca Cola to Use Cane Sugar Instead of High Fructose Corn Syrup

Eliminate federal sugar price controls!

Source: The White House X account

Last week, President Trump announced that he had called the Coca Cola company to ask them to use cane sugar instead of high fructose corn syrup (HFCS) in their flagship beverage. He claimed they had agreed to do so, and Coca Cola later announced that it would add a cane-sugar version this fall. However, this reads like a pretty weak promise, given that you can already buy Coke made with sugar in the US; we call it “Mexican Coke” and it comes in a glass bottle.

The president is right that Coke made with sugar is better. I know this because my daughter and I did a blind taste test, the results of which I posted in Ag Data News in 2021. Here’s an excerpt:

My daughter and I tasted four cola products from Coke and Pepsi. From each brand, we tasted one cola sweetened with sugar, one sweetened with HCFS, and two sweetened with aspartame. Both Coke and Pepsi have "diet" product and a "zero" product. It seems each developed their zero product in an attempt to improve their diet recipe. We also tasted a cola made by Empire and sweetened with sugar.

Our favorite was Coke sweetened with sugar, also known as Mexican Coke as it is typically imported from Mexico. I have always thought I liked it better. Apparently, I really do. My wife, whose palate is more refined than mine, observed that sugar seemed to mask some tangy flavors that HCFS did not. I also liked sugar better than HCFS in Pepsi, but my daughter disagreed.

We both liked Coke better than Pepsi.

By the way, we have done a few other taste tests, including (i) Which Chicken Sandwich is the Best? (ii) Which Milk Substitute is the Best?, and (iii) Which Fries are the Best?

The president may be right about the taste, but he is taking the wrong approach to engineering a sugar switch.

If sugar tastes better, why is American coke made with HFCS?

Answer: Because government policies make sugar prices twice as high as the rest of the world. If I were to describe these policies without context, you would think I was describing the Soviet Union in the 1960s; it is very much not free market capitalism.

Here’s how US sugar policy works.

1. To keep the price high, USDA guarantees a minimum price to sugar processors, which in turn pay high prices to farmers.

2. To prevent over-supply at these high guaranteed prices, USDA assigns to each sugar processor the maximum amount they are allowed to produce. It chooses these amounts to total 85% of predicted demand.

3. To prevent cheap imports from flooding the market, the US imposes a tariff rate quota, which permits a small quantity to be imported duty free and then imposes a large tariff on imports above the quota. Each country gets its own quota.

The sugar program has taken this form essentially since 1981. Coke and Pepsi switched from sugar to HCFS around the same time. HFCS consumption grew rapidly until 1999, after which it slowly declined on a per capita basis.

In 2024, the world price of sugar was 21c per pound, and the US price was 38c per pound. The world price is the price of raw cane sugar for delivery to a port within the country of origin of the sugar, sometimes known as No.11 Futures. This US price is the price of raw cane sugar at one of five US refinery ports, known as No.16 Futures. (I have no idea why there are no contracts numbered 1-10 or 12-15.)

For the last 20 years, US sugar producers have been unable to reach their allotted volume of 85% of consumption. The government is forcing consumers to pay double the price that consumers in the rest of the world pay, yet farmers still cannot produce their quota. Each year since 2007, the USDA has told each sugar processor how much domestic sugar it is allowed to process, and then later in the year it had to allow more imports to make up for the domestic shortfall.

This pattern suggests that sugar producers are not making exorbitant profits. If they were, then more farmers would enter the market. Instead, they are wasting resources by producing high-cost sugar.

Where is sugar produced?

Most sugar is made from sugar cane grown in the tropics, with Brazil and India the world’s largest producers. Sugar beets provide 10% of the world’s sugar and are grown mostly in Europe and North America. The US produces less than 3% of world sugar, according to UN FAO data.

US production is split evenly between beets and cane. Specifically, USDA requires that 54.35% of the domestic production allotment be distributed among beet processors and 45.65% be distributed among the sugarcane processors. Specific allotments are distributed to each processor according to formulas prescribed by the Agricultural Adjustment Act of 1938. I am not kidding — here are the official 2024 and 2025 allocations.

In 1960, Hawaii produced half of US domestic cane sugar. Its production declined steadily to zero until 2016 when the Maui Sugar Mill closed. It is much cheaper to produce sugar in places other than beautiful islands in the middle of the Pacific.

What about corn farmers?

Corn is America’s biggest crop, and it gets plenty of government support. About a third of US corn is used to make ethanol thanks to a federal policy that requires corn ethanol to be blended into our gasoline. Most of the rest of US corn is used to feed animals.

HFCS uses 3% of the corn crop. In my 2017 paper with Colin Carter and Gordon Rausser, we estimate that a 13% increase in corn demand from the ethanol sector caused a 30% price increase. This estimate implies that losing the HCFS market would reduce corn prices by 3*30/13 = 7%.

What about health?

There is little evidence that HFCS is worse for health than sugar. The HFCS used in soft drinks is 55% fructose and 45% sucrose; sugar is 50% fructose and 50% sucrose. So, despite what the MAHA movement claims, switching from HCFS to sugar is not a boon for health.

However, excess consumption caloric sweeteners is a leading contributor to diabetes, cardiovascular diseases, certain types of cancers, and overweight and obesity. These diseases impose costs on society that could justify a tax on sugar - perhaps even the 100% tax the US government imposes through its communist sugar policy. (Unlike a typical tax, the proceeds of the “sugar tax” go to sugar producers rather than to the government.)

Or maybe GLP-1 drugs will make the health issues moot.

If GLP-1 Drugs Are Good For Everything, Should We All Be on Them?

Would the price of a Coke go down if they used imported sugar?

Domestic sugar and HFCS are 20c per pound more expensive than imported sugar (assuming no tariffs). A can of coke contains 39g of sugar, so the cost of producing a can of Coke would go down by 1.7c if the sugar program went away. It’s not nothing.

Don’t hold your breath

In 1982, the New York Times wrote an article titled “A Shameful Sugar Policy”. Since that time, myriad agricultural economists have pilloried the program, all to no avail. It was expanded in the OBBBA.

I’m pessimistic that we’ll see the sugar program disappear any time soon, but eliminating it would be a surefire way to make sugar cheaper, which would cause soft drink companies to use it instead of HFCS.

I made the graphs in this article using this R code.