Economic analysis of the relationship between exchange rate and sugar prices and its effect on sugar beet production

Sugar is one of the basic and strategic products that has always been considered and supported by governments. Sugar is an international and strategic commodity that has a special place in the trade, social and economic policies of many countries. Given that part of the country's needs is met through imports, therefore, one of the important issues in the sugar market in the country is the effect of domestic sugar prices on exchange rate fluctuations, which in turn affects the production of sugar beet and sugar. The aim of this study was to evaluate the effect of variation in foreign exchange policies on sugar price using the monthly time series data of 2018-20 and also due to the relationship between imports and sugar beet and sugar production, the indirect effect of this policy on production be analyzed. Monthly data were analyzed to using VAR model. Results showed that change in foreign exchange policy (exchange rate change from 42,000 Rials to the Nima currency) with a two-month break had a direct effect on sugar price. Due to the causal relationship between the variables, it was also observed that variation in foreign exchange policy has also affected the sugar beet production. Considering the results of this study, in order to sustain the effect of this policy in the coming years, it is necessary to pay special attention to the effect of these variables in designing related policies so that from the beginning with the implementation of the policy to other effective factors in this regard, including increase in the productivity of production factors and supporting technology, especially the production of suitable and economical seeds for producers, more attention should be given to the growing trend of production in the country against the import of sugar.