Despite delayed payments, farmers plant more cane

Depressed domestic prices caused by five consecutive seasons of surplus sugar output and more than ₹10,000 crore arrears to farmers in Uttar Pradesh and Maharashtra do not seem to have impacted sowing of sugarcane this Kharif season.

The crop was sown across nearly 49 lakh hectares (lh),as of August 19 – up 3.5 per cent from last year. Unlike other seasonal crops, such as rice and soyabean, drought conditions prevailing in much of India are unlikely to hurt sugarcane, a water-guzzler.

“Almost 92 per cent of the country’s sugarcane area is irrigated. It’s a relatively hardy crop than rice or maize. Barring extreme climates with temperatures approaching 45 degrees Celsius, harsh weather is not likely to affect the crop,” said Ashok Kumar Srivastava, principal scientist, who heads the Agro-Meteorology Unit at the Indian Institute of Sugarcane Research, Lucknow.

Acreage in UP, the largest cane-producing State, has touched 21.06 lh, higher than the 19.43 lh recorded during the same period in 2014-15. The yield is expected to increase due to a shift in varieties planted across the State, while average sugar recovery rate is expected to remain at around 9.6 per cent.

“Yields in the State will rise to between 590 and 600 quintals/hectare from about 580 last season. This can be attributed to a varietal shuffling with better ones like CO 238 being planted extensively. A poor variety giving low sugar content, such as CoSe92423, has been rejected this year,” an industry official said.

Poor rainfall in Maharashtra has seen acreage drop to 10 lh from 11.34 lh at the same time last year.

The figure, however, remains higher than the normal area of 9.23 lh, while sugar recovery is traditionally higher compared to UP. The area under cane in Karnataka and Tamil Nadu is also higher compared with last year.

“Despite delayed payments, farmers have planted cane since it’s a sturdy crop and the returns are higher even if it is delayed. The government has already announced a fair and remunerative price (FRP) of ₹230/quintal for the 2015-16 season,” said Manohar Joshi, Managing Director, National Federation of Cooperative Sugar Factories.

The Indian Sugar Mills Association expects a sixth season (October -September) of surplus sugar output and has pegged the production at 280 lakh tonnes (lt) in 2015-16, slightly lower than 283 lt produced this season.

It estimates a carryover stock of 102 lt from the ongoing season, far higher than the requirement of 43 lt.

Domestic consumption in the next season is pegged at 252 lt, leaving a surplus of around 130 lt.

Despite government intervention in the form of soft loans and export incentives on raw sugar this season, the glut has kept prices suppressed and below the cost of production, leading to mills defaulting on payments to farmers.

At present, cane dues are estimated at ₹7,500 crore in UP and about ₹3,000 crore in Maharashtra. Ex-mill prices in Maharashtra are around ₹22/kg, lower than the cost of production of ₹28-30. In UP, the ex-mill price is about ₹24, also lower than the production cost at ₹31-33.

“Exports are unviable since domestic prices are higher than international prices. Effectively, the more mills crush, the more they lose,” said Joshi.

Without a rationalised pricing policy in States such as UP that have a State Advised Price typically higher than the FRP, prices firming appreciably in the next season seem unlikely, as the supply-demand mismatch is set to prevail.

“There has been a slight improvement in prices recently on expectation that the Centre will take proactive steps to help the industry and farmers. However, given the glut and subdued demand globally, it’s difficult to see sugar prices improving,” said Ashwini Bansod, senior analyst, Phillip Commodities.