Market Equilibration Process - Essay Example

MARKET EQUILIBRATION PROCESS Introduction Brazil has been the leading sugar producer in the world for a long time and this falls into the category of being number five in the list of the world’s biggest states and prevalent in its continent. On aspects of business, no country surpasses Brazil’s development pace as it dominates markets with products such as sugar and the high production of ethanol that the country exports to most states around the globe (Troy 2007). In 2000, Brazil faced a crisis with the weather when there was no rain from the beginning of the year with only a few countries in South America getting drizzles.

This caused a lot of havoc in the country as merchants, market analysts and the nation’s authority focused on the yields of coffee, sugar and other vegetation products. The sugar produced had reduced leading to hike in the prices of sugar both locally and internationally; the hike was up to twenty percent increasing the costs for consumers. This was among the major market freezes that markets in South America experienced annually because of the obstinate climate; however, nobody expected that the effects would hit that hard.

Discussion Decisively, the variations in the weather also saw a sixty percent rise in the prices of coffee and ten percent for Soybeans; unfortunately, this is just the tip of the iceberg, the products manufactured from these components had a bigger increase in the prices. The spiraling costs raised concerns in countries that had Brazil as their sugar supplier; some were worried about the price while others focused on scarcity probabilities (Troy 2007). One thing was for sure, this was a warning for what followed, an era where the price of many of the products was not stable affecting both the corporations and their customers.

In any situation, the integration of regional and international markets determines the pace at which the changes in prices will apply in the market; additionally, other aspects like remoteness of docks, highway substructure and communication factors are also essential. However, in Brazil such features are different when compared to places such as the United States and the United Kingdom, which is the reason behind the fact that the increase in prices had a greater impact on the state causing variations in earnings in the dissimilar regions.

Considerably, the economic status of Brazil heavily relies on the core states where the sugar is imported i.e. the United States is one of the heavy importers of sugar from Brazil in large quantities that it is also an exporter to other regions (Troy 2007). The United States gains much profit from exporting sugar to other regions but this solely depends on the harvests in Brazil. Evidently, from the 2002 event, importers of sugar such as the US did not get the supply yet the demand was high, from both these importers and their exporters; on the other hand, Brazil lacked the power to meet the increased demand of their product.

The high demand resulted to an increase in the prices going up to two times more than the standard international costs. Despite the fact that the United States imports large quantities of sugar, compared to the harvests and total exports of Brazil this is not much; moreover, the sugar that Brazil exports to the US is not processed and most of their exports are refined. The general idea behind the increase in prices is a clear depiction of the laws of demand and supply i.e. there are many states that are interested in large quantities of sugar from Brazil so the increase in price does not really matter, but one can trace it back to the high demand.

Moreover, if investors such as the United States decided to take on another exporter, which is hard to come by, Brazil would still flourish in the sugar business. Conclusion Resolutely, the number of exporters is an issue as Brazil is a prominent producer of sugar but lack of rainfall has decreased the produce: despite the demand being high, the supply is very low affecting the general equilibrium. The prices also hiked increasing the cost at which Brazil factories are producing the sugar while for distributers like the United States the proceeds lessen (Troy 2007).

Shortage plays the major role in this event as the sugar harvests is much less than the quantity that the United States and the rest of the purveyors are used to getting or need at that moment making the equilibrium frail. REFERENCES Troy, G (2007) Brazil’s Domination of the World’s Sugar Market: Morrison School of Agribusiness and Resource Management, 2(7): 1-29 http://repository.asu.edu/attachments/75803/content/0207.pdf