In this document we will study the market equilibrium and the demand and supply analysis of Sugar as a commodity. For this study we have selected three scenarios:
1. How demand and supply of sugar affects its market price.
2. The changes in demand for sugar during festivals and its effect on the price.
3. The changes in the supply of sugarcane and its corresponding effect on the supply and price of sugar.
Scenario 1: Setting the Equilibrium price for Sugar.
India had been the largest producer of sugar in the world for 7 out of 10 years but now Brazil has taken a lead from India. Indian production from both the sectors sums up to 22 million tons. Indian share in the world’s total production has shown an increasing trend in the past few years and currently India is contributing to around 16%. The country has been indulged in the production of cane sugar rather than beet sugar as India’s tropical weather conditions support sugarcane production. Maharashtra holds the lead in the production of cane and sugar in the country. The consumption level of sugar in India reaches up to 18.5 million tons annually making India the largest consumer of sugar in the world. This demand and consumption level is still showing a rising trend. The government largely controls the demand and supply of sugar in India and the prices fluctuate according to the government releases of sugar. Apart from the government, the other market factors that affect the demand and the supply of sugar in India include:
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1. Demand for Sugar:
• Festivals.
• Sales of sweets including candies and confectioneries.
• Technological changes resulting in development of new uses of sugar.
• Other Political factors.
• Income of the consumer.
2. Supply of Sugar:
• Factors pertaining to the climatic conditions and rainfall.
• Production of sugarcane in the country.
• Other Political factors.
• Other factors that may affect the production of Sugar eg: factory strikes, problems in supply of raw materials, etc.
Scenario 2: The changes in demand for sugar during festivals and its effect on the price.
Scenario 3: The changes in the supply of sugarcane and its corresponding effect on the supply and price of sugar.
The Price of Sugar is closely connected to the supply of Sugarcane that is the most crucial raw material in the production of sugar. The supply of sugarcane may disrupted due to poor rain fall in the sugarcane producing areas in the country or due to protest by the farmers for increasing the minimum fair price for sugarcane. This disruption in supply may of sugarcane adversely affect the production of sugar and in turn reduces the supply of sugar in the market.
