Sugarcane Market in India

Sugarcane is the key input for sugar production. In India, it accounts for around 70 per cent of the cost of production of sugar. Sugarcane is also utilised to manufacture alternate sweeteners, such as gur and khandsari.

The crop grows for 8-14 months, depending on the climate and the seeds used. Factors that determine the yield and quality of sugarcane are temperature, rainfall and soil. Sugarcane is usually grown in a frost-free, warm and humid climate (high temperatures of 20 to 40 degrees centigrade for at least 8 months). Temperatures above 50 ^degrees centigrade arrest its growth; those below 20 ^{degrees centigrade} slow it down markedly and severe frost proves fatal. The crop grows best in the tropical regions receiving a rainfall of 750 to 1,200 millimetres.

In India, sugarcane is usually sown during October, February, March and July every year. Once planted, a farmer can theoretically produce sugarcane for a period of 3-6 years. The first year crop is known as plant crop and subsequent growth after harvesting from the stem is known as ratoon. Although the ratoon crop has a lower sugarcane yield as compared to the plant cane (first crop), the savings on planting labour make the ratoon crop profitable.

India has ideal conditions for growing sugarcane at a low cost, such as tropical climate, easy availability and low cost of labour, and low cost of irrigation facilities (through subsidised water and power). In India, the major sugar cane producing areas are Uttar Pradesh, Maharashtra, Andhra Pradesh, Gujarat, Karnataka, and Tamil Nadu. These states together account for 85-90 per cent of the sugarcane produced in India. In India, around 90 per cent of the sugarcane cultivation is under irrigated land.

In most parts of the world, sugarcane is handled by hand and involves extensive labour. Labour costs account for a significant share of the total cost of producing sugarcane. However, this trend has been changing with the need to mechanise the operations in order to improve the recovery rate.

There are three primary methods of harvesting sugarcane: manual, semi-mechanised and fully mechanised harvesting. In manual harvesting, the sugarcane is cut and loaded manually. Semi-mechanised harvesting generally means that the cane is manually cut but loaded mechanically. In case of mechanised harvesting, machines level the canes at a uniform height, cut them off at ground level, and deposit them in rows. Leaves and trash are burned from the cane in the rows by use of flamethrower-type machines. An alternate method is to burn the leaves from the standing cane, after which it is cut and taken directly to the mill. Delay between cutting and milling in either case is kept as short as possible, since delay results in loss of sugar content.  In India, either semi-mechanised or fully mechanised harvesting is employed.

In India, every farmer within the command area of a mill is provided with a calendar, which tells him when he can expect a mill supply ticket (also called purchy in the Northern states), against which he delivers the sugarcane. After receiving the supply ticket, the farmer harvests the cane and transports it either in a bullock cart or tractor trolley to the mill. Cane is also bought to the mill's own centres within the command area. This cane is then transported in trucks or through rail to the mill. Cane is weighed using an electronic weigh bridge and unloaded into cane carriers. It is then prepared for milling with knives and shredders. After that, sugarcane juice is extracted by pressing the prepared cane through mills.

Table 1: Sugarcane - Modes of transport

	Bullock carts	Tractors	Trucks
Distance	Short (< 5 km)	Medium (< 10 km)	Long (10 to 50 km)
Weight	2 to 3 tonnes	4 to 7 tonnes	12 to 20 tonnes
Plying limitations (road requirements)	Can operate even in absence of roads	Can operate even if roads are not good	Need good roads to operate
Transit time and Turnaround time	Very high	Medium	Low
Driage (per cent) (weight and sugar loss)	High	Medium	Low
Unloading speed	Low -manual and semi mechanised unloading	Medium -semi mechanised unloading	Low - mechanised unloading
Investment and Operating costs	Low - mainly used by small farmers	Medium - mainly used by big farmers	High - generally operated by mills
Source: Bajaj Hindustan Ltd

Sugarcane largely consists of sucrose. It also contains dissolved substances, cellulose and woody fibre. The sucrose content in sugarcane is determined by the sugarcane variety and maturity, soil condition, climate and the agricultural practices followed.

Figure 1: Sugarcane - Material balance

Source: CRISIL Research

Sugarcane production

Sugarcane production depends on the sugarcane area under cultivation and the sugarcane yield.

Sugarcane area under cultivation

The total sugarcane area under cultivation depends on the following:

·         Ratooning

·         Profitability of sugarcane cultivation compared with that of alternate crops

·         Weather conditions during the previous and current seasons

·         Payment of remunerative prices in a timely manner

·         Mill support

Ratooning

The extent of ratoon crop is one of the determinants of the overall area under sugarcane cultivation. Although farmers realise a lower yield in ratoon crop as compared to a plant crop, they prefer to grow another sugarcane crop rather than switch to alternate crops due to lower costs of a ratoon crop, as a result of low seed and labour requirements.

Profitability of sugarcane cultivation as compared to that of alternative crops

The profitability involved in growing sugarcane as compared to that of alternative crops (sugarcane prices as compared to those of alternative crops) also determines the total area under sugarcane cultivation for a particular season.

Weather conditions during the previous and current seasons

Weather conditions of the past season, as well as the expectations of farmers regarding the agro-climatic conditions in the current season, determines the preference for sugarcane crop.

Payment of remunerative prices in a timely manner

The payment of remunerative prices, in a timely manner, favourably influences the planting of sugarcane in the current season.

Mill support

Support provided by a mill, in the form of subsidies, for the procurement of seeds, irrigation facilities, fertilisers, pesticides and for harvesting and transportation of cane, would favourably influence sugarcane cultivation.

Sugarcane yield

The overall sugarcane yield would depend on the following:

·         Climatic conditions - rainfall and temperature

·         Type/variety of seed used

·         Extent of ratoon crop

·         Soil conditions

·         Weed, pest and disease control

Climatic conditions - rainfall and temperature

The crop does best in the tropical regions receiving a rainfall of 750 mm to 1,200 mm; though, it can also be grown in sub-tropical areas. But where the climate is subject to extremes and the dry season is long, the growth period of the crop is restricted to a bare 4 months in the year and yields tend to be distinctly lower than those in the tropics. In tracts receiving a relatively high rainfall (1,200 to 1,500 mm), for example, in parts of Uttar Pradesh, Bihar, Orissa, West Bengal and Assam, the crop is grown without irrigation and thrives on the moisture conserved in the soil. For ripening, it needs a cool, dry season; but where rainfall is too heavy and prolonged, the quality of the juice tends to be low; where the weather remains comparatively warm and moist throughout the year, it does not ripen well. In years of drought, the crop becomes a little fibrous and in the dry areas generally, only the harder and more fibrous varieties can be grown. The climatic conditions of Maharashtra and parts of Karnataka, and the Telengana area of Andhra Pradesh are ideal for sugarcane.

Temperature is one of the most critical factors in the production of sugarcane. The minimum mean air temperature for active growth is 20 degrees Celsius. Depending on the seed variety used, the average temperature may vary between 20 to 40 degrees centigrade. The length of the period, when the temperatures are significantly below 20 degrees, influences both the growing season and the ripening period. Temperatures above 50^°C arrest its growth; those below 20^°C slow it down markedly and severe frost proves fatal.

Sunshine is another important factor as the photosynthesis rate of the sugarcane plant is affected by the natural light intensity.

Type/variety of seed used

The quality and treatment of seeds has a significant impact on yields. Different varieties of seeds have different yield potential, pest and disease resistance and are bred for different ecological and economic conditions. A lot of research goes on in India in search of new varieties of cane to maximise the yield per hectare.  The seed varieties are considered with respect to the following properties:

·         Percentage pol: A term used in the laboratory for the determination of the sucrose (polarimetrically determined sucrose) content in cane. This is important as the economic value of cane depends on its pol value.

·         Biomass yield: Is important as a high level of vegetative material is required for sucrose production

·         Resistance to pests and diseases.

The growth period for sugarcane, from planting to maturity, ranges from 1-2 years based on the variety. This is important as harvesting has to be synchronised with the ripening of the sugarcane crop, when the sucrose content is the maximum.

Extent of ratoon crop

As the extent of ratooning increases, the sucrose content in the cane decreases and, hence, the yield per hectare of the crop decreases. Also, the susceptibility of the crop to pest attacks and diseases increases with the extent of ratooning. Thus, a second ratoon crop would usually have lower cane yields compared to a first ratoon crop.

Soil conditions

Sugarcane is a highly versatile crop that can be grown under a range of soil conditions. Sugarcane grows best on the medium heavy soils, but can also be raised on the lighter soils and heavy clay, provided there is adequate irrigation available in the former type of soils and drainage is good in the latter type of soils. In northern India, it is cultivated largely on the loams and clay loams of the Gangetic plain and other alluviums, whereas in Peninsular India, it is grown on brown or reddish loams, laterites and black cotton soils.

Weed, pest and disease control

Sugarcane requires a weed-free environment during the first 3 months after planting, as weeds can significantly affect the yield of sugarcane. This is due to the fact that weeds compete with sugarcane for water and nutrients and also harbour pests, which in turn affect sugarcane productivity.

Sugarcane prices

The government regulates sugarcane prices. The Central government determines the minimum price payable to farmers, called the Statutory Minimum Price (SMP), which is linked to a basic recovery rate. Higher the recovery rate, higher the minimum price payable by the mill. However, some of the state governments determine their own price, called the State Advised Price (SAP), which has to be paid by the sugar producers. In the last 2-3 years, a few of the state governments stopped announcing SAP. In fact, the Tamil Nadu government passed a bill in the state legislative assembly to discontinue this practice of announcing State Advised Prices. However, in the Northern states such as Uttar Pradesh, the practice of announcing a SAP is still in vogue.

Table 2: State Advised Prices ( SAP ) of Sugarcane - (Rs Per Quintal)

States	2000-01	2001-02	2002-03	2003-04	2004-05	2005-06	2006-07	2007-08*
Uttar Pradesh	90	95	95	95	107	115	125	125
SMP	73	75	85	88	89	90	91	91
Note: Uttar Pradesh SAP is for the normal variety of cane
The SMP has been calculated by taking the base price and adding a premium for recovery beyond the base level
* The matter is under litigation in courts
Source: CRISIL Research