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Introduction to Sugar

Sugar is a crystalline of
carbohydrates that has been a natural ingredient in the human diet for
thousands of years. Today, white sugar is considered as a basic food item in
everyday use. However, this was not the case in past times, as it was so
expensive and rare to the point that it was called “white gold.” Today, sugar
is the most popular ingredient added to foods in the United States, on average,
an American consumes over 68 kilograms of sugar per year.

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Where Sugar comes from

Sugar can be grown in two main ways. Most of the sugar supply, which is around
80%, comes from sugarcane. Sugarcane requires a tropical climate to grow, like
Brazil. The rest of sugar comes from sugar beet, which are mainly grown
in 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 from
both. The top producers are Brazil, India, China, Thailand and Pakistan.

Supply and Demand

The sugar market depends
heavily on the weather, like most agricultural commodities. Bad weather
conditions may damage the crops and reduce the supply, hence affecting the
price as well. In this kind of situation, the price will rise to high levels as
demand will remain high. The demand for sugar is continually rising,
because now, sugar is not only used in food production, but it is also
an important input in biofuel production.

Today the international community
has become much more aware of the state of the environment. A result of this is
the rise of alternative energy resources other than fossil fuels. One of these
alternatives is biofuels, where sugar is an important input
material. Sugar is replacing corn as the leading input in biofuel
production, because of it is much more efficient than corn. These two factors
combined are raising the demand for sugar and should be monitored in
order to be able to make a realistic and calculated price forecast.  In festive seasons, the demand for sugar tends
to increase as there are more consumers, although this is a short-term effect
on demand.

 As the demand for sugar is always rising, the
supply is trying to keep up with the demand. The prices of sugar are decreasing
as the demand is increasing, following the law of demand. The supply of sugar
increases, so the price also increases, according to the law of supply. Since
there is no alternative for sugar, the supply of sugar is relatively inelastic.

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