Millions of farmers keep faith in sugar cane, shrug off poor returns

By Rajendra Jadhav

AHMEDNAGAR, India (Reuters) - It is a Catch-22 for Nandkumar Patil, one of the millions of sugar cane farmers in India.

Millers have not paid up for his cane this year as falling sugar prices have hit their income. But switching crops is not an option as prices for most agricultural produce have dropped and forecasts for weak monsoons have raised worries on yields.

With farmers like Patil staying put on cane fields, India is seen producing excess sugar in 2015/16. A sixth annual surplus, the longest such stretch ever, will allow the world's No.2 sugar producer after Brazil to remain a net exporter, denting global prices that hit six-year lows in March on ample supplies.

    In the past, lower prices have prompted Indian cane growers to switch to other crops, but given uncertainties about the monsoons this year, farmers see more sense in staying with resilient cane than moving to delicate crops.

"In changing weather conditions, sugar cane is more reliable than others. You may get lower returns, but at least something is assured," said the farmer Patil from India's top sugar producing state, Maharashtra, who is still owed nearly 50,000 rupees by a mill for cane sold this year.

"In other crops you may not get anything if weather becomes erratic," said Patil, whose onion crop on two acres was damaged this year by unseasonal rainfall in February.

    Vivek Shinde, another cane farmer, agreed.

    "Cane prices can't fall below a certain level, but that is not the case with vegetables. They can rise to 100 rupees per kg or fall to 5 rupees," said Shinde, from Ahmednagar district, 250 km east of Mumbai.

Shinde should ideally get 2,500 rupees per tonne for cane as per the price fixed by the central government, but millers have been paying him 40 percent less.

TAKING HEART FROM GOVERNMENT MEASURES

    Cane farmers in India are, however, taking heart from recent government measures, such as a subsidy for raw sugar exports and higher import duties, aimed at helping the country's beleaguered mills as well as its farmers.

Due to plunging domestic sugar prices, down 16 percent over the past seven months, mills' financial health has been eroded to the extent that they now owe more than $3 billion to cane growers for purchases made since Oct. 1, 2014.

    "The government measures are providing farmers hope that their income will improve going ahead," said Pallavi Munankar, commodity analyst at Geofin Comtrade.

    Also, given the low cost of taking a second harvest from the stubs of cane roots, known as ratoon, means farmers will stay with it, Munankar added. Indian farmers usually take one ratoon crop as after that yields begin to drop.

    India's sugar output in 2015/16 could reach 25.7-26 million tonnes, versus its demand for around 25 million tonnes, said Rahil Shaikh, managing director of commodities trader ED&F Man Commodities India. That would account for 15 percent of total global sugar output, almost unchanged from this year.

    With its recent surplus, India is set to start the sugar marketing year in October with carry forward stocks of 9.5 million tonnes, the Indian Sugar Mills Association said.

(Editing by Himani Sarkar)