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More area under sugarcane this year likely

Harish Damodaran

NEW DELHI, June 4

THE familiar two-year `sugar cycle' that has become a part and parcel of the industry in recent years may not manifest itself this time round, with the planting of sugarcane in the current season expected to maintain, if not exceed, its normal acreage le vels.

A senior Agriculture Ministry official said going by the sowing trends for April and May -- when bulk of the planting takes place -- a total area of 41-42 lakh hectares is likely to be covered during 2000-01, which is more than the normal cane acr eage of 40 lakh ha. The area under sugarcane stood at 40.76 lakh ha. in 1998-99 and 40.65 lakh ha. in 1999-2000, translating into a cane output of 295.73 million tonnes and 292.64 m.t., respectively.

The official said that while nearly 90 per cent of the country's sugarcane area was irrigated, a good monsoon nevertheless, as forecast by the meteorological department, could take production to a record 300 m.t. this year. What this may do, in turn, is to break the inevitable `sugar cycle' that has come to characterise the industry in the recent period.

The cycle basically involves two years of good production resulting in a glut in the market and fall in sugar prices, leading to a piling up of cane payment arrears. This prompts growers to plant less, thereby reducing the availability of cane for crushi ng by factories and causing a dip in sugar production for the next two years, prior to the onset of the subsequent crest in the cycle.

From the accompanying table, this pattern can be clearly discerned. The years 1990-91 and 1991-92 witnessed a good production, whereas the next two crushing seasons (October-September) saw a slump. Sugar output recovered again in 1995-96 and 1996-97, onl y to dip in the next two years. The ups and downs in output levels have also been reflected in the mills' end-season sugar stocks, with inventories building up in good production season and depleting in years of decline.

Going by the fact that during the last two years, output has once again recovered to touch record levels, most industry watchers have been expecting the coming season to coincide with a fresh trough in the familiar sugar cycle. According to the Secretary , Department of Sugar and Edible Oils, Mr. P. Shankar, sugar production in the ongoing 1999-2000 season is likely to be in the range of 172-174 lakh tonnes, over-and-above the opening stocks of 67.23 lakh tonnes. With domestic consumption being reckoned at 150-155 lakh tonnes, the current season will close with an all-time high stocks well in excess of 85 lakh tonnes, M. Shankar told Business Line.

The more-than-comfortable supply situation is also reflected in open market prices. S-30 grade sugar is now trading at Rs. 1,400-1,435 per quintal in Mumbai's Vashi market, which is below the last year's corresponding quotation of Rs. 1,430-1,460 per qui ntal. The lower prices are notwithstanding imports coming to a virtual halt, following the Government's decision to raise the customs duty on sugar to 60 per cent earlier this year. But the bearish trends in the market have apparently not discourag ed farmers from planting more area under cane this time. Mr. Shankar attributed this mainly to the rather low levels of cane payment arrears owed by the mills to farmers.

``The arrears are now only 17-18 per cent of the total outstandings payable to growers, which is well below the normal levels of cane dues. As the farmers have been receiving payments in time, they probably feel more confident to grow cane'', he said.