Farmers feel pinch of falling sugar prices

NEW DELHI: Farmers are already feeling the pinch of a bearish sugar sector. Cane farmers in Maharashtra have agreed to accept a lower price than last year from state co-operative sugar factories to align it with the fall in domestic sugar prices. In Uttar Pradesh, negotiations are still on between the government and local mills for fixing the politically sensitive state advisory price for cane.

In an agreement reached last week, the Maharashtra Shetkari Sangathan and Maharashtra Rajya Sakhar Sangh decided that farmers would be paid Rs 900/tonne ex-field plus harvesting and transporting charges. Last year, farmers were paid between Rs 1,200-1,400/tonne plus handling and transportation charges.

“As sugar prices have dropped Rs 1.50/kg from the peak, it is only natural that farmers also accept a decline in returns,” said an industry watcher.

“The ban on exports has also reduced the ability of co-operative factories to pay farmers. They were the best located to exploit a bullish world market. That avenue to prop up profits is now lost. Farmers are the ultimate losers from it,” he added.

Maharashtra has seen a bumper production of sugarcane this year following excellent rains. The state expects sugarcane crop of about 60m tonne, which could result in a record production of seven million tonnes of sugar. But sugarcane farmers are demanding that the factories — both in the private and co-operative sectors — pay them a higher price for the cane.

Farmers had been demanding a minimum price of Rs 1,800/tonne as the first instalment in the current season. Last year sugar had given bumper returns on investment to Maharashtra farmers. Several factories distributed additional payments to farmers at the end of the fiscal because of strong balance sheets. However, this good time was short-lived as a large quantity of the same inventory had to be sold off in later months at lower prices.

Factories in Maharashtra produce about 11.5-12 quintals of sugar for every 100 quintals of cane crushed, whereas the average sugar recovery in UP is well below 10%. The main reason for this difference is the winter months in the north, which prevent the planted cane crop from growing beyond 9-10 months. In contrast, the cane in Maharashtra grows for 12-15 months and it also accumulates more sugar. India is expecting to produce 22.5m tonnes of sugar this season, which has subdued the price outlook, at least for now.