Trade with Commodities: THE taste of sugar in expected to turn bitter soon.

Tuesday, May 26, 2009

THE taste of sugar in expected to turn bitter soon.

Despite the lure of remunerative returns to the tune of Rs 140 per quintal for their canes in the current sugar season and an additional Rs 15 per quintal by the private sugar mills, in the form of cane development incentive, the farmers in Uttar Pradesh, the country's second largest sugar producing state, do not seem inclined towards planting sugarcane this year.

Even the prospect of the Centre considering a hike in the statutory minimum price (SMP) for sugarcane to Rs 107.76 per quintal for the 200910 season, instead of Rs 81.18 as in the last season, has not enthused farmers, who have shifted from cane to other crops like wheat and paddy.

In fact, the constantly dwindling acreage in the state is set to shrink further in the coming season by almost 6%, leading to lesser cane for the mills to crush. While in the crop season of 2007-08, the total cane area stood at 28.50 lakh hectares, in 2008-09, it came down to 21.40 lakh hectares and as per preliminary survey, it is expected to go down to 20.15 lakh hectares in the coming season, which is almost 6% lesser than last year.

As a result of this, sugar production also registered a marked dip. While in 2007-08, UP produced 73.19 lakh tonne of sugar, in 2008-09, the state's contribution came down to 40.48 lakh tonne. Low production of sugarcane also resulted in prices of sugar shooting up to an all time high of Rs 26-27 in the retail market.

According to sources in the sugar industry, sugar production in the state is expected to further go down to an all-time low of 40 lakh tones this season, following which prices are expected to skyrocket further.

The repercussions of the dwindling cane supplies in the state are enormous, not only for the sugar mills, which register low capacity utilisation and premature shutdown of plants, as seen in the last season, but also for the country.

India is the world's second largest sugar producer after Brazil and the biggest consumer of the sweetener in the world. However, in the season ending 2008-09, the country witnessed a dip of nearly 17 per cent in cane production to 290.45 million tonne.

Sources in the state sugar industry are also of the opinion that in order to check the disenchantment of the farmers in Uttar Pradesh and encourage them to grow more and more sugarcane, the state government is contemplating giving more sops, in terms of a substantial increase in the State Advisory Price for sugar, which will be over and above whatever statutory minimum price (SMP) the Centre announces. .

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