If sugar costs $1.70/kg, but takes 100kgs of sugarcane and over 2000L of water to produce that 1 kg, how is the end product profitable?

Question

If sugar costs $1.70/kg, but takes 100kgs of sugarcane and over 2000L of water to produce that 1 kg, how is the end product profitable?

In: 300

Answer 1

Sugar is one of the most heavily regulated commodities in the United States.

The US has strict controls on how much sugar is imported each year as well as price controls including price floors for domestically grown sugar. Sugar quotas are set by region and state at the Cane/Beet source.

For example, as part of the Agriculture and Food Act of 1981, the USDA gives loans to Sugar Producers, at a fixed price guaranteed for the crops. If the price per pound drops below the this USDA target price, then the farmer can relinquish the crop to the USDA at that price – effectively introducing a floor for Sugar prices. As of 2018 the average national rate of 18.75 cents for every pound of raw sugarcane provided as collateral (rates vary slightly by region of the country) and 24.09 cents per pound of refined beet sugar.

This all results in much higher sugar prices in the US, which is a primary reason that the US relies heavily on corn syrup instead of Sugar in many commercial uses.