Sugarcane price war hots up in UP

The price war over sugarcane procurement is expected to heat up further in Uttar Pradesh this year. Unlike last year, jaggery producers, this year, have made up their minds to jump into direct competition with sugar mills.

Sugar mills had offered a handsome premium to farmers on sugarcane supply. Despite the fact that the state government had fixed sugarcane price at Rs 120 a quintal, mills in the state jacked up the price to Rs 180 a quintal levels in order to ensure smooth supplies to the mills.

Some offered urea bags to their regular customers. In spite of all this gimmick, the sugar mills were closed one week ahead of schedule owing to shortage of raw material, since sugarcane supplies were diverted lately to jaggery producers as they were offering higher premium.

"The next sugar season will be in election year, and all political parties will be out to cash in on that. The state government will surely like to keep farmers happy with a higher sugarcane procurement price. So, the price war for sugarcane procurement will heat up again this," said Arun Khandelwal, president, Federation of Gur Traders, Muzaffarnagar.

About 22 new sugar mills are setting up their units in Uttar Pradesh, and this will increase sugarcane consumption in the state.

Reliance Industries is planning to enter ethanol production in a big way, which, if successful, will consume the entire small players' market share, making them fight for their survival.

And, on top of all, despite rising consumption of sugarcane in the state, neither acreage nor yield has been increased proportionately.

"In anticipation of higher price, the April gur futures were overbought by a handful of traders. Jaggery producers got higher prices on delivery and that lured them into paying premium to farmers on sugarcane procurement, thereby enabling sugar mills to run dry," Khandelwal added.

Of the existing 48 co-operatives and corporations, about 50 per cent were closed down in the mid-season, ensuring extra payment for procuring sugarcane.

On account of overproduction in the fag end, currently there is surplus stock of 2.5 lakh bags (40 kg each), against 21 lakh bags during the same time last year.

"Today, the pressures are on stockists to clear their stocks," a trader said.

The chaku variety of jaggery is quoting in the range of Rs 550-580 per 40-kg bag, while the laddu variety is selling between Rs 530 and Rs 550.