The Hindu Business Line : Farmers begin selling sugarcane below State advised prices

Less is more
UP farmers are selling to the mills at less than the current State-recommended price of Rs 1,250-Rs 1,300 per tonne Some farmers are selling cane to gur manufacturers since they get cash immediately

Mumbai/Chennai, Nov. 5

Farmers have begun selling sugarcane below State advised prices (SAP), mainly in States such as Uttar Pradesh, with sugar prices hitting a low of Rs 1,000 to Rs 1,100 a tonne. Besides, they are preparing to shift cultivation to the more remunerative wheat crop.

"Some cane farmers have already started selling to the mills at less than the current State-recommended price of Rs 1,250-Rs 1,300 per tonne in Uttar Pradesh since they are keen to clear their land to start cultivating wheat for which the MSP (minimum support price) has been increased," said Ms Sonu Mehta, economist, NCDEX.

"Some farmers have started selling cane to gur (jaggery) manufacturers since they get cash immediately. Selling to sugar mills is on credit and over Rs 1,500 crore arrears are pending for payment in Uttar Pradesh alone," trade sources said. In Uttar Pradesh, some of the private mills have come out openly and urged growers to sell cane to them at a price lower than SAP.

According to Ms Mehta, farmers in Uttar Pradesh are selling the cane at lower prices and they would be the ones who would shift to wheat immediately. A minimum support price of Rs 1,000 a quintal for wheat during the current rabi season and a demand-supply shortage of the grain are seen encouraging growers to take to large-scale wheat cultivation.

ADDITIONAL SUGAR

The Centre's move to release additional sugar of one lakh tonnes for sale in the open market this month has also led to the sale by farmers. "The total sugar available for sale in the open market is 14 lakh tonnes (lt) now. By the time, the sugar comes to the market Diwali will be over and as a result, prices will tend to crash," trade sources said.

Last month also, the Centre released an additional 2.80 lt in two instalments over and above the 16-lt quota. The first allocation of 1.35 lt expired of last month ended on November 4, while the rest 1.45 lt quota will come to an end on November 18. "Now, this additional quota for November comes on top of these," the sources said.

As per the Government norms, the Centre decides on the quantity of sugar that can be sold in the open market and through ration shops. The allocation is made month-wise in an effort to ensure that the market does not crash due to over supply. At the same time, any shortage, especially during festival periods, is also overcome through additional allocation.

The additional release is in view of one of the Centre's nominee failing to lift the quota allocated for distribution through ration shops in time. Such failure forces mills to urge the Centre to take some measures as it creates problem of liquidity and space. This unutilised quota is converted into free sale quota and diverted to the open market.

Sugar in the spot market on Monday, however, gained in view of festive demand. While small sugar was quoted at Rs 1,340-1,396 a quintal, medium sugar closed at Rs 1,400-1,490.

In the futures counter also the prices were up with November contracts quoting at Rs 1,291 a quintal on NCDEX and Rs 1,236 on MCX. December contracts closed at Rs 1,251 on NCDEX and Rs 1,227 on MCX. Two weeks ago, spot prices for medium sugar ruled at Rs 1,410-1,505 a quintal and that for small sugar at Rs 1,355-1,406. On NCDEX, sugar for November delivery then ruled at Rs 1,282.

HIT BY SUGAR GLUT

The country is suffering from sugar glut, having produced a record of over than 300 lt for the season ended September 2007. The annual domestic demand is at 200 lt. In 2006-07 season, Maharashtra produced 90.8 lt while Uttar Pradesh's sugar output stood at 85.3 lt. Production in Karnataka and Tamil Nadu stood at 26.5 lt and 24.5 lt, respectively.

According to the Indian Sugar Mills Association (ISMA) forecast, the country's sugar output in the sugar crop year ending in September 2008 will be about 300 lt. The International Sugar Organisation had estimated production at 33 million tonnes.