Introduction to SugarSugar is a crystalline ofcarbohydrates that has been a natural ingredient in the human diet forthousands of years. Today, white sugar is considered as a basic food item ineveryday use. However, this was not the case in past times, as it was soexpensive and rare to the point that it was called “white gold.
” Today, sugaris the most popular ingredient added to foods in the United States, on average,an American consumes over 68 kilograms of sugar per year.Where Sugar comes fromSugar can be grown in two main ways. Most of the sugar supply, which is around80%, comes from sugarcane. Sugarcane requires a tropical climate to grow, likeBrazil. The rest of sugar comes from sugar beet, which are mainly grownin the United States and other countries which do not have a tropical climate. Worldwide,70 countries produce sugar from sugarcane, 40 from sugar beets and 10 fromboth. The top producers are Brazil, India, China, Thailand and Pakistan. Supply and DemandThe sugar market dependsheavily on the weather, like most agricultural commodities.
Bad weatherconditions may damage the crops and reduce the supply, hence affecting theprice as well. In this kind of situation, the price will rise to high levels asdemand will remain high. The demand for sugar is continually rising,because now, sugar is not only used in food production, but it is alsoan important input in biofuel production.Today the international communityhas become much more aware of the state of the environment. A result of this isthe rise of alternative energy resources other than fossil fuels. One of thesealternatives is biofuels, where sugar is an important inputmaterial. Sugar is replacing corn as the leading input in biofuelproduction, because of it is much more efficient than corn.
These two factorscombined are raising the demand for sugar and should be monitored inorder to be able to make a realistic and calculated price forecast. As the demand for sugar is always rising, thesupply is trying to keep up with the demand. The prices of sugar are decreasingas the demand is increasing, following the law of demand.
The supply of sugarincreases, so the price also increases, according to the law of supply. Infestive seasons, the demand for sugar tends to increase as there are moreconsumers. Since there is no alternative for sugar, the supply of sugar is moreinelastic.