Fluctuations in the price of sugar
We watch oil prices fluctuate all the time. Of course, oil gets a lot of attention because it has visible and sometimes significant consequences for the rest of the economy. Other commodities may not enjoy the same status, but they often suffer the same fate of volatile prices. The FRED graph above tells the recent story of sugar. It’s remarkable that the price of a commodity produced and used across the globe can almost double for a while and then return to its original level. In fact, as the graph below shows for an earlier period, this volatility can be even more extreme.
What does it take to generate price spikes like these?
- Supply issues, such as a world war
- Poor harvests in the major producing regions
- Political issues (For example, Cuba is a major producer of sugar cane.)
- New uses, such as ethanol produced from sugar
- Attempts at manipulating markets
In a way, all these factors combined to create the extraordinary sugar spike in 1920: World War I essentially shut down the sugar beat harvests in France, the U.S. Congress considered buying the entire Cuban harvest of sugar, and a speculative frenzy ensued.
Read this article for more about the history of sugar.
Suggested by Christian Zimmermann.
View on FRED, series used in this post: