Sugar bitter as government, trade juggle with numbers

Sugar is tasting bitter for everyone — the industry, mills, farmer, consumer and not the least of all the government which is bracing to win state and general elections.

The government and industry are at loggerheads over estimates of sugar production in the new season that began in October, trend in prices and growth in exports.

Sugarcane farmers are up in arms against mills for the refusal to pay the state administered prices to them. Mills are knocking at the doors of courts to seek redress while combating high input costs.

Mills have delayed crushing on some pretexts and fears are mounting that cane farmers hit by arrears might shift to wheat in the prosperous northern belt, clipping output further next year.

 

Amidst all the infighting, the consumer is continuing to battle the high retail prices of the sweetener, demand for which is likely to shoot up in the ongoing wedding season that extends to the next year.

“Nobody is happy at the moment, the government and the consumers are unhappy, both sugar mills and cane farmers are crying for help,” said Yatin Wadhwana, managing director of the India arm of global sugar trading firm Sucden.

In the midst of all this, the government in an act of bravado to cool the market and signal adequate stocks has extended the time limit for exports of sugar without release orders until the end of the year.

It is another matter that Indian sugar has few takers in an oversupplied world market with buyers opting for better quality sugar at cheaper prices from Brazil, Thailand and Australia. Dramatic fall in freight rates have also thrown a spanner in export efforts.

Indian mills exported 1.7 million tonne raw sugar and over 3 million tonne white sugar in the season that ended September 30. Sales in the new season have been negligible.

Industry experts have forecast India’s total sugar output in the year ending September 2009 to tumble to about 19.50-20.75 mln tn from over 26 million tonne last year. But the government is confident that output will be around 22 million tonne in the season.

Agriculture Minister Sharad Pawar has said more than necessary sugar was available in the market and supplies were adequate due to a large carryover from last year, which is pegged at 11 million tonne.

India annually consumes about 19 million tonnes of sugar. But most analysts and dealers expect millers to sell sugar only gradually, and hold back sales at lower levels to ensure that supplies are limited and prices are competitive.

Fall in production is mainly because of lower cane output triggered by erratic monsoon and floods in large part of Uttar Pradesh. This might lead to lower sugar recovery from cane.

Another factor is a major part of the cane crop was diverted for cattle feed in Maharashtra early this year when the state was facing a fodder crunch after poor rains led to a drought-like situation.

Sugar output in Maharashtra, the country’s top producer, is down 14 per cent with only around 60 of the 160 mills crushing cane because of low sugarcane availability and low recovery rates. Mills in Uttar Pradesh began crushing only last week after the state government intervened to assuage the feelings of millers who had gone to court against high state advised price for cane. Mills said they would start crushing as they did not want to harass farmers.

Some farmers in Uttar Pradesh have started selling cane to jaggery makers to neutralise the loss caused by the delay in crushing by mills.

The possibility of some farmers turning to wheat would mean lower cane for crushing, thereby supporting already firm prices.

“The industry needs to talk the output down to jack up prices while government wants to pull down the rates. At the end of the day, the government is eyeing elections and inflation is a concern,” said Wadhwana. India’s inflation rate, measured by the wholesale Price Index, eased to 8.98 per cent in the week-ended November 1. It was the first time since May the rate had dropped below 10 per cent.

A NewsWire18 poll this month showed sugar prices remaining firm both in spot and futures markets until New Year.

Sugar presently is traded between Rs 1,650-1800 per 100 kg in the spot market, against Rs 1,300-1,400 the same time a year ago. Analysts say the prices were unlikely to drop below Rs 1,600 per 100 kg in the near term.