Sugar Cane Farmers in India Seek Higher Price, May Delay Supply to Mills

Sugar cane farmers in Uttar Pradesh, India’s biggest grower, are seeking higher prices than rates set by the state government today, likely forcing mills to delay processing the crop, according to two farmers’ groups.

Growers in the northern state that is home to more than 100 mills will withhold supplies if factories don’t pay at least 280 rupees ($6.3) per 100 kilograms, said Rakesh Tikait, national spokesman of Bharatiya Kisan Union. Mills paid an average 285- 290 rupees last year.

“Mills must pay higher than the government price as they did last year,” Tikait said by telephone. “Farmers will sell to whoever pays them a higher price.”

Delayed output in the world’s second-biggest producer may hinder plans by the nation’s mills to ship as much as 3 million metric tons, adding to global supply concerns. Raw sugar in New York has more than doubled since reaching a 13-month low on May 7 on concern adverse weather will pare output in Brazil, Russia, China and Pakistan.

“There is a fair amount of deficit in the market,” said Michael McDougall, a senior vice president at Newedge USA, in a telephone interview from New York yesterday. The rally in prices “shows that the market needs Indian sugar.”

Uttar Pradesh government today increased prices mills must pay growers to as much as 210 rupees for the season started Oct. 1, from 170 rupees last year. Vivek Saraogi, managing director of Balrampur Chini Mills Ltd., India’s second-biggest producer, said in July that he expected prices of 175 to 180 rupees.

Producers in Uttar Pradesh pay a so-called state-advised price. The rate, aimed at shielding 4 million cane farmers, is usually higher than the floor rate set by the federal government.

Price Talks

“Mills will have to discuss with farmers to arrive at a solution,” Avdhesh Mishra, president of the Cane Committees’ Association, said by phone. “As per the current mood of the farmers, they’re unlikely to sell at the state-advised price.”

While sugar is the best performer on the Reuters/Jefferies CRB Index of 19 raw materials in the past six months, wholesale prices in India have slumped 24 percent this year amid forecasts of output exceeding demand for the first time in three years.

“At current domestic sugar prices, it may not be feasible to pay the cane price” fixed by Uttar Pradesh, Abinash Verma, director general of the Indian Sugar Mills Association, said in a phone interview. “If prices stay at current levels, it is difficult for mills to pay the state-advised price for cane.”

Last year, a price dispute delayed crushing by as much as four weeks in the northern state. Thousands of growers, holding cane stems, held demonstrations in November near the parliament, seeking 280 rupees, more than double the benchmark rate of 130 rupees set by the federal government.

“When jaggery makers are not making losses, how come mills are losing money,” said Bharatiya Kisan Union’s Tikait. “They make profit by selling by-products such as alcohol and molasses. We won’t even allow mills to process imported raw sugar.”

Jaggery, a traditional unrefined sugar, is a concentrated product of cane juice, without separation of the molasses and crystals, and can vary from golden brown to dark brown in color.