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
I’m not aware of the ins and outs, but I think the simple answer would be someone is being exploited
Water falls from the sky and much of the weight in the sugar cane is water plus the carbon content which came from the air fixed by the sun.
Those are both virtually free.
Water is not that expensive when it is used for agricultural irrigation. In Spain, in 2010, in a region with intensive agriculture –which received water from another basin–, it costed less than 0,3 eur/m3. That is, less than 1 euro for those 2000 L.
I guess that is similar in other countries.
(Spain also produces sugar, but it comes from the beetroot).
Edit: In 2022, the water price in this region is circa 0,2 eur/m3. Source: https://www.boe.es/boe/dias/2021/08/07/pdfs/BOE-A-2021-13594.pdf
It’s really difficult for a lot of people to really conceptualize just how cheap bulk agricultural goods are.
That’s because a lot of the cost that we consumers end up dealing with is largely transportation, storage, and a retail mark-up.
For example, a *tonne* of corn is worth about $30. A tonne of raw sugar cane is worth about $50. A big part of the reason agricultural products are so cheap is two fold. In richer countries it’s a combination of high levels of automation and low paid migrant workers depending on the product, not all of them rely on that but a lot do and in poorer countries it’s just low wages (so…exploration)
Also your numbers are way off. It takes about 10 kg of sugar cane to make 1 kg of table sugar. That means the raw sugar cane cost for a kg of processed sugar is about 50 cents.
As for water well that’s a whole other…thing. Right now that’s virtually free, but only because most places are using water at an unsustainable rate.
The water comes mostly from tropical rains, of which there are plenty. And the labor is done largely by poor laborers in similarly poor countries who do not make very much money (the wealthiest country with significant sugarcane production is Brazil, a middle income country, and many others are poorer).
Apart from sugar, you also get bagasse ( used as fuel and to make particle board, card boards), molasses ( used to make alcohol among other things) and pressmud ( wax and carbon paper)
So sugar factories make money from multiple streams.
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.
Haven’t seen anyone else mention yet that sugar cane grows in a similar way as bamboo, which is to say that even without human intervention, provided it gets enough sun and enough water from rain or by being near a source of fresh water, it spreads like crazy.
When it comes down to it, what costs money is *people*. Sugar is produced on a vast, industrial scale, with huge machines doing all the work, and only a handful of machine operators and technicians supervising the processing of thousands of tons of sugar a day.
Take a look at this video of sugar production from sugar beets (which are more efficient in colder climate than sugar cane), and look at how few people are involved.
[https://www.youtube.com/watch?v=hizXcJCqmoQ](https://www.youtube.com/watch?v=hizXcJCqmoQ)
Why is sugar so cheap? Robots.
Sugarcane is a grass and self-perpetuates in the right climate where it’s naturally getting enough water. All you have to do is pay incredibly underpaid laborers to go cut it down. It’s also easy to cultivate using cuttings. Furthermore there’s byproducts by the way of cellulosic ethanol, thatch and as livestock fodder. A single mature planting can be cut and regrown every year indefinitely, although sugarcane produces the most and best sugar content during its first five to seven mature years
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