As the global economy entered a period of price inflation in 2022, the input cost structure of many goods and services was pushed higher. For the sugar industry, these inputs include the cost of agriculture, from seed to harvest, as well as the cost of processing, distribution, and sales. While each sugar industry has an individual structure, with varying exposure to inflationary pressures, the study aims to review general operational aspects and their associated input costs, to distil possible changes in the sugar industry’s competitive position.
Sugarcane and sugarbeet are high yielding crops, but both require extensive husbandry, continuous investment and maintenance of their capital assets to maximise yields. The cost of achieving these yields changes as input prices change. While it is broadly recognized that good agronomic practice will return a higher, and more remunerative, yield, the business case for growing sugar crops, relative to other crops, changes with rising costs.
Beyond the farming element of the cost structure, there have also been significant increases in the input costs for processing, transport, and other aspects. A review of these supply chain elements and their changing costs sets out the case for the sugar industry during these inflationary times and provides a basis for a comparison against other crops.
Introduction
1 Agricultural input costs
Sugarbeet
Sugarcane
Fertilizer use
Harvesting costs
2 Processing
Boiler fuel
Process inputs
Sale and Marketing costs
3 Input Costs and Price Dynamics
Futures markets
Historic results
Reacting to a changing landscape
4 Competition with other crops
Planting and land preparation
Cost and use of fertilizer
Harvesting and return realisation
The cost of land & the quality of return
Crop selection
Macroeconomic considerations
5 Balance and Trade
Impact on consumption and trade
6 Conclusion