Sugar Cane

Sugar cane (formerly reed, bamboo or papyrus) was added in the v1.0.11 patch. It can be found randomly on grass, dirt or sand tiles that are near water and grows to a maximum height of three blocks (though an additional layer may be added manually by the player, or spawned during map generation). More sugar cane may be placed on top of them, and they will also support other blocks.. There appears to be no pattern to the spawn algorithm. Sugar cane may occasionally grow in tundra Biomes, but is extremely hard to find because ice replaces all water next to land.

Like cacti, removing the bottom part causes all parts above it to be removed as well, allowing for quick harvesting; one can also "shave" off the upper sections and leave the bottom section planted. It can be crafted into paper and sugar.

Farming sugar cane is similar to farming crops. Like the real plant, sugar cane must be planted on a grass/dirt block immediately adjacent to water, unlike crops which can be within four blocks of water. Diagonal blocks, as well as blocks above or below the water stream, won't allow it to be placed. If it can be placed on a tile, it will grow there. Unlike wheat, it does not require a tilled field to grow. Planted sugar cane grows quickly to a height of three blocks, however, extra sugar cane blocks can be permanently added if heights over 3 are desired. This has not been confirmed yet, but they are thought to grow faster when the player is within a certain vicinity of them.

If the water source is removed, when the sugar cane next grow, the game will realize it has no adjacent water, and the sugar cane will disintegrate, leaving two sugar cane items instead of one. This is not as efficient as growing sugar cane normally, because you must replace the water supply to re-plant the sugar cane.

Sugar cane is completely fireproof. It can block lava flows, and, when lava hits it from above, the lava is spread out as by a normal block. Neither the sugar cane nor the block they stand on can be lit on fire with the Flint and Steel, although attempting this still lowers the durability of the Flint and Steel, in a manner similar to glass.

The water/lava blocking ability of sugar canes includes being placed in the middle of an existing flow (they still need to be adjacent to water).

Sugar cane will block projectiles as any ordinary block, which means projectiles shot at anything inside or past the sugar canes will be blocked. However, if you stand in a patch of sugar canes and fire arrows/throw snowballs, those projectiles will ignore the sugar canes where your head is located. A Ghast's fireball will not pass through sugar cane, but will collide with the sugar cane as if it is a normal block.

When planted underwater, sugar cane functions similar to sponge, creating an air pocket. However, it will be only 1x1x1 instead of 5x5x5. Also, if a sugar cane block is placed next to or on top of another sugar cane block, they will both be instantly destroyed if underwater, this will still drop the two sugar cane blocks that were destroyed as resources.

Trivia

 * You can walk through sugar cane, but water will not pass through it. This makes it a convenient material for water gates.
 * You can plant sugar cane on a tile covered in snow even if there is no water adjacent to it.
 * A glitch in Beta caused sugar canes to grow beyond the 3 block height limit.
 * Before Beta 1.2, sugar canes were officially called reeds. This name change was because Notch needed some way to craft sugar.
 * Ghasts can not see through sugar cane, which makes it a safe block to make walls out of despite its see-through nature.

Refrences
Schilf