Sugar can be used in some potions, and also crafting different food items like pimpkin pie.
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'Use' a piece of sugar cane on some grass or dirt, that is adjacent to some water.
sugar cane is found by water (but not really in the water by the snow
you have to find sugar cane witch is always near water and then destroy it and replant it.
Milk milk milk sugar egg sugar wheat wheat wheat
Sugar canes are naturally found on dirt and grass next to the water.