Farmers’ organisation, Swabhimani Shetkari Sangathana, had threatened to begin an agitation. However, millers agreed to the demand for full FRP in the first instalment itself, as global and domestic sugar prices are expected to increase substantially from the current levels.
Maharashtra, the second largest sugar producer in the country, had suggested changes to the Sugarcane Control Order, 1966 to make FRP payment in three instalments. Various farmers’ organisations had been gearing up to oppose the move.
However, with expectations of continuation of the bullish trend in sugar prices in 2021-22, millers are keen on producing more sugar by fetching more sugarcane from farmers. “Most of the sugar mills from south Maharashtra, including Sangli, Kolhapur and Satara, have announced to pay the full amount of FRP in one instalment. As prices are strong, mills are keen to crush more cane this year,” said Abhijit Ghorpade, a sugar broker from Maharashtra.
A fall in sugar production in Brazil due to erratic weather has been driving up the global sugar prices. “The sugarcane yield in Brazil has declined to its lowest levels in 10 years. There may be reduction in sugarcane area in Brazil even in 2022-23. The developing Na Nina phenomenon may play a dominant role for sugar production in the next year,” said Karim Salamon, head of Wilmar Sugar Research, while speaking at a recent trade webinar.
Exports remain sluggish
Sugar prices are also being supported by the rising prices of crude oil. Industry veterans are upbeat that raw sugar prices may rise to 25 US cents a pound if the crude oil prices touch $100 a barrel.
High oil price may boost demand for ethanol, which is blended with petrol and used as motor fuel. Since sugar cane is a primary raw material to produce ethanol, this may also drive demand for sugar cane, reducing supplies to sugar mills and affecting prices.
“Everyone is very bullish about sugar prices. Though there are buyers for raw sugar at Rs 3,100/quintal to Rs 3,150/quintal, millers are not willing to contract as they expect prices to increase by about 10-15% in a couple of months. Exporters on the other hand are not too willing to contract at this rate as they expect the millers to offer sugar at some more discount. We expect the pace of exports to gain momentum after mid-December,” said Ghorpade.
India has discontinued the export subsidy this season and advised the industry to export 6-7 million tonnes of sugar in order to reduce excess local stock of the sweetener.