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

Economy of scale.

Production of a product gets generally cheaper per unit the more units you are making.

There are a lot of fixed costs in production and by working in an extremely large scale you make these fixed cost basically irrelevant for individual units.

And they also exploit the the heck out of their workers and suppliers.