(In)efficiency of the Sugar Production in European Union - a Microeconomic Approach

Sugar production in the world amounted to € 53.5 Bill. in 2012. It can be produced using sugar cane in tropical and subtropical climate belt or sugar beet in moderate climate. In this paper the input allocation efficiency is analysed. First part of the efficiency analysis is the microeconomic analysis of transformation of two inputs (cane and beet) into sugar. It is shown that there is no microeconomic approval for sugar production from sugar beet. Further analysis has shown that vast areas of arable land in EU could be reallocated to more profitable cultures but it would then cause price shocks on the other agricultural markets. Finally, it is shown that Croatian farmers do not have to raise revenues per hectare by switching form sugar beet to other cultures, but only to improve low productivity in its production, since the yields are below the EU average by 24%. JEL Classification: D240