Sugar mills are betting on a better crop yield in the next season (beginning October), as farmers intensify their efforts on the sugarcane crop to reap better profits. While the acreage has gone up marginally, mills say the yield could improve by about 20 per cent as farmers are being cautious.
“There has been a 10 per cent increase in sugarcane planting but we are expecting a yield improvement to the tune of 25 per cent. Farmers are taking keen interest in the crop due to timely payments above the government decided price, both by mills and the gur producers,” said CB Patodia, president, Uttar Pradesh Sugar Mills Association and advisor to the Birla Group of Sugar Companies.
This development will enable mills to crush for more number of days which will further lead to cost benefits. In the current season, Uttar Pradesh mills managed to operate for only 100-110 days due to shortage of sugarcane.
Though price in UP was Rs 140 a quintal this season, a number of mills paid as much as Rs 155-160 to get more sugarcane, since production was down by 30 per cent. This trend is certain to continue next season as well. Industry observers believe the improvement in sugar price may force the state government to increase the sugarcane price. And, since the sugarcane supply would still remain lower than the demand, mills would be prompted to pay a premium, resulting in better income for farmers.
Sanjay Tapriya, director (Finance) of Simbhaoli Sugars said it would be early to comment on the crop yield. However, he described the farmers’ interest in the crop as a positive factor that could improve yields.
Patodia added, the acreage could have risen by a higher per cent had the farmers kept adequate quantity for seed. However, a number of them ended up selling sugarcane to take advantage of the price war between mills and gur manufacturers.
Meanwhile, mills as well as analysts, expect sugar prices to remain firm in the year ahead since even with a projected 20-25 per cent improvement, the output next year will be lower than the demand of 22 million tonnes. Output this year is estimated to be 14.7 million tonnes, down 44 per cent from the previous year. Retail sugar price has jumped by 40 per cent since October last year to Rs 28 a kg.