Economic Analysis Of Sugar Industry Brazil And Australia Economics Essay

Australia as the 2nd largest exporter of sugar in the universe is non truly one of the biggest manufacturers. Brazil is a 1000 lb guerillas. Compared with the sugar industry of Brazil, from overall consideration, Australia sugar industry has an obvious competitory disadvantage that can non hold the scale consequence.Scale consequence is besides called economic systems of graduated table, that is, enlarging the graduated table could convey the economic benefits increasing ( John & A ; Scott, 2010 ) .

Any production embraces costs, by and large including fixed costs and variable costs. To accomplish profitableness, the gross revenues gross must be higher than production costs. As the fixed costs are unchanged, more production will convey the mean fixed costs diminishing and the mean net income increasing. Harmonizing the economic sciences, economic system of graduated table is derived from the decreasing fringy costs.

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Therefore, Scale consequence demands that the production graduated table should run into or transcend the breakeven point. The undermentioned Figure-1 shows the theory of Scale consequenceScale consequence Inverted-U curveProduction ScaleNet income Growth RateCritical pointFigure 1The comparative size of Australia as a manufacturer of sugar is non every bit big as the size of Brazil so that it can reason that Australia sugar industry is non every bit easy as Brazil sugar industry to accomplish the scale consequence. Then from the consideration of economic system of graduated table, Australia sugar industry may portions a higher fixed cost degree than Brazil for bring forthing the same measure of sugar with the premise that other variables maintain to be a same degree. Therefore here it can be said Brazil sugar industry has a scale competitory advantage compared with Australia sugar industry.2 The sugar equilibrium monetary value analysisEquilibrium monetary valueDemand curveSupply curveMeasureMonetary valueFigure 2The equilibrium monetary value of sugar depends on many factors, the chief two of which are the sugar demand measure and the sugar supply measure in the universe market. Before researching the sugar equilibrium monetary value analysis, the debut of equilibrium monetary value will be stated as follows.

Equilibrium monetary value refers to a trade good monetary value as the supply curve intersects with the demand curve, that is, the monetary value for trade good demand measure equals the trade good supply measure ( Donald, 2010 ) . In a market that is competitory in rigorous economic footings, the demand force of a trade good interacts to its supply force, and so the trade good market monetary value tends to be the equilibrium monetary value. If the market monetary value is higher than the equilibrium monetary value, extra supplies will be achieved and the market monetary value tends to fall ; on other manus, if the market monetary value is lower than the equilibrium monetary value, extra demands will be presented and the market monetary value tend to lift to the equilibrium monetary value degree. Therefore, it can be said that the market competition drives the equilibrium monetary value to be formed. The equilibrium monetary value formation rule is shown as the undermentioned Figure-2.As to the equilibrium monetary value formation, the sugar industry has to see the sugar demand and the sugar supply. So the measure of demand and demand for sugar should be analyzed for researching the equilibrium monetary value formation. Sugar, as a type of life necessity, its demand snap is relatively little, that is, no affair the alterations of sugar provision, people have a certain degree of demanding for sugar.

Thus it can be said that the sugar demand is fixed and stiff. For analysing the sugar supply, since the cane fabrication topographic points are located in different states and sugar fabrication has a close connexion with the fabrication engineering, the natural clime, the husbandmans ‘ cultivation, and national constabularies, etc, it therefore can be said the sugar supply snap is large, that is, cane providing depends on several human factors and natural factors.If the cane providing factors, like the fabrication engineering, the natural clime, the husbandmans ‘ cultivation, and national constabularies, play a positive function on sugar fabrication, so the sugar supply measure is big. Compared with sugar demand measure, if the sugar supply measure is larger the demand measure, so the dominant right of organizing sugar monetary value prevarications in the demand side ; if the sugar supply measure is smaller than the demand measure, no affair how big the supply measure of sugar is, the dominant right of organizing sugar monetary value prevarications in the supplying side. Then the above in this paragraph is how the sugar equilibrium monetary value to be formed.Through deeper analysing the sugar equilibrium monetary value formation procedure, the premise of sugar supply being smaller than its demand can be subdivided specifically. First, when sugar supply is smaller than its demand and the sugar and cane market a perfect competitory market, by and large stating, single sugar house is a price-taker, because the sugar industry is a planetary industry and the single sugar house has to accept the monetary value established by the forces of the whole market.

Second, if the sugar and cane market is non a perfect competitory market but a monopolistic market or policy-orientation market, so the position of single house may be changed, that is, single sugar house may non be a price-taker anymore, but a price-maker. If the single house has the monopolistic ability to command the sugar monetary value and it adopt monopolistic competition method to stamp down its challengers, so it will be the price-maker for sugar ; if the host state issued some Torahs or ordinances to restrict the lowest monetary value of sugar for protecting the cane husbandman ‘s benefits, the monopolistic house may be non the price-maker any longer, but the price-taker.3 Sugar demand snap Analysis3.1 Price snap of demandBefore discoursing the sugar demand snap, the definition of Price snap of demand will be briefly introduced here.

Price snap of demand ( PED ) is used to mensurate the per centum alteration in measure demanded ( Q ) which is caused by a one per centum matching alteration in the monetary value variable ( P ) ( Dorothea & A ; Philipp, 2005 ) . Through mathematical description, PED = ( a?‚Q/a?‚P ) ( P/Q ) . If the absolutely elastic demand curve is horizontal to X axis, so it represents boundlessly elastic ; if the absolutely inelastic demand curve is perpendicular to the X-axis, so it represents zero snap ; if PED equals one, so demand is unit-elastic ; if the PED value is between nothing and one, so the demand is inelastic ; and if the PED value is larger than 1, so demand is said to be elastic. Curves D1 to D4 in the undermentioned Figure-3 show the different state of affairss of snap of demand.D1Monetary valueD3D2D4MeasureFigure 33.

2 The sugar demand snap analysisSince sugar is a type of life necessity, it can non be substituted by many other trade goods, and people ‘ common outgo on sugar does non account for a big proportion of their entire outgos, we can state that the sugar demand snap is infinite little, about zero, which is manifested by a similar signifier of D1 curve in the Figure 3. However, there besides exit exceeding conditions that can alter the monetary value snap of sugar demand, if a new replacement is created and used to replace the sugar, so the sugar demand snap may be turned to be higher ; under that premise, the sugar will non be life necessity any more.4 Competitive advantage analyses of Brazilian sugar manufacturers.Brazil is a state with 1000 lb guerillas on agribusiness.

Its sugar production occupies the figure one position all round the universe. And if compare the Australia sugar production to Brazilian sugar production, it will be clear that the Brazil set the tone for the worldwide sugar market because the sugar end product in Brazil is much larger than other states, even the 2nd largest state Australia. Brazil sugar industry has its ain particular competitory advantage than Australia sugar industry.First, Brazil sugar industry has integrated production systems so that there is complete ownership from the field, through conveyance, right through the mill and down to the ports, while Australia does non hold such integrated production systems.

The incorporate production systems can assist Brazilian sugar manufacturers efficaciously diminish the transformational cost of sugar fabrication procedure ; the critical information can be shared and different parties of sugar industry can be cooperated better within the systems, therefore the direction cost can be diminished. The lessened costs will decidedly convey Brazilian sugar makers a competitory monetary value advantage.Second, Brazil sugar manufacturers have cheap labour, which is rather of import for a agriculture industry development. Labor cost, as a chief constituent of Variable Cost, has a immense influencing function on the overall cost. Under the premise that fixed cost is stable, lower labour cost decidedly conveying lower overall cost.

Compared with Brazil, Australian agribusiness labours are relatively scarce, so the Australia sugar production can non trust on diminishing labour cost to decrease the overall cost. Then this is another advantage that Brazilian sugar industry has over Australian sugar industry.Third, Brazil has the advantage of puting the tone for the worldwide sugar market, which is similar with a type of monopoly advantage. The export end product of Brazilian sugar is big plenty to straight interfere with the sugar monetary value formation ; through the intervention, the worldwide sugar monetary value may be formed for the benefits of Brazilian sugar manufacturers.

This is a atrocious competitory advantage of Brazil sugar manufacturers over the Australian sugar manufacturers, which could be called monopolistic competition, and is harmful to the universe economic system development and should be restricted and punished.5 Competitive advantage analyses of Australian sugar manufacturersEven though Brazil has its competitory advantage of inexpensive labour and incorporate systems, Australia has other competitory advantages over Brazil. Through sum uping Australia competitory advantages, I think at least two types of advantages exist, which will be stated as follows.5.1 Educated work forceAustralia has advanced engineerings of agriculture, processing, and cropping canes. To use these advanced engineerings, educated work forces are needed. Though modern advanced engineerings adopted and operated by educated work forces, the production end product of cane and sugar can be achieved to be a higher degree. Then the gross can acquire enlarged.

Under the premise that the worldwide sugar cost is stable, no uncertainty this is a competitory advantage over Brazil, because the Brazilian sugar manufacturers hire the inexpensive labours that can non follow and use the modern advanced engineerings.5.2 Integrating the harvest home of conveyanceThe other advantage Australia has over Brazil on the sugar competition is that that Australia is good at incorporating the harvest home of conveyance. Australia gets the sugar Millss and ain railroad lines that conveying cane to the Millss. The railroad lines carry more during the suppression season than Queensland Railway and that conveyance system gets cane to the factory in dual speedy clip. Therefore, it can be said that Australia gets efficient mechanical harvest home, efficient conveyance, efficient turning, efficient Millss and a good incorporate selling system.

All those efficiencies help Australia better the sugar production direction. And along with the direction efficiency betterment is the diminishment of entire cost. Obviously this is another competitory advantage of Australian sugar manufacturers.5.3 The authorities supportSince Australian cane turning country has kept been reduced over the several past old ages ( Ben, 2009 ) , which means the graduated table of cane production is reduced and this is non helpful for the market competition, Australian authoritiess intend to publish some policies that are engaged in enlarging the cane turning size.

This will advance the Australian sugar industry development ( hypertext transfer protocol: // ) . So acquiring the authorities support is another competitory advantage of Australian sugar manufacturers.6 DecisionsThough comparing the sugar industry differences between Brazil and Australia, analysing the sugar equilibrium monetary value formation procedure and the features of sugar demand snap, this essay illustrate the competitory advantages of both Brazil sugar industry and Australian sugar industry. Brazil sugar industry has competitory advantages of scale consequence, inexpensive labour costs, and incorporate production systems, while Australian sugar industry has advantages of modern engineering, educated work force, and the incorporate harvest home of conveyance.


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