Cane price up 17-18 percent in key Indian state – 26.10.2009

India's top cane-producing state, Uttar Pradesh, has raised the price mills must pay cane farmers by 17-18 percent, striking the middle ground between demands of tillers and millers and disappointing both, government and industry officials said.

 

The price for early-maturing variety has been raised to 170 rupees per 100 kg from 145 rupees last year, while the rate for the general grade has been increased to 165 rupees from 140 rupees, a spokesman for the Uttar Pradesh government told Reuters on Friday.

 

Cane prices are a key influence on a farmer's choice of crop, and last year many switched to more-lucrative wheat, reducing India's sugar production in 2008/09 to an estimated 15 million tonnes from 26.4 million tonnes in the previous year. This forced India to import about 5 million tonnes after exporting a similar amount in the previous year, helping New York raw sugar futures climb to a 28-1/2 year high.

 

Sugar industry officials said the price was too high for mills as the amount of cane available had dropped after the worst drought in 37 years and the government had doubled the amount of "levy sugar" - forced low-cost sales for welfare schemes. "The paying capacity of the mills is not more than Rs 155 for which we had given the representation to the government.

 

This price will ruin the mills," said K.M. Shukla, an official of the Uttar Pradesh Sugar Mills Association. Farmers had demanding a price of 300 rupees, arguing that if sugar prices had doubled, cane prices should rise commensurately. "The country is already facing a crisis of sugar and this rate will further discourage farmers from opting for cane," said M.K. Mishra, president of Cane Growers Association.

 

He said cane was a long-duration crop, and a farmer could cultivate both wheat and rice in the time it takes for the cane crop to mature. "Why would cane farmers not start growing wheat and rice, which bring better prices?" The federal government announces a minimum price for sugarcane to prevent distress sales by farmers. Some states, including Uttar Pradesh, announce a higher mandatory price to help farmers.