Bittersweet surplus: Farmers, governments in crisis as sugar output surges

India's surging sugar production is turning out to be bitter news for sugar producers and governments in sugar-producing states.

The nation is set to overtake Brazil as the biggest producer of the sweet commodity with the production pegged at more than 35.5 million tonnes in 2019 financial year. Brazil's production is estimated at 32.5 million tonnes.

Farmers in general and sugar farmers, in particular, are up in arms demanding relief measures in many states including Karnataka, Maharashtra and Uttar Pradesh, media reports say.

A meeting on Thursday between sugar factory owners and Karnataka Chief Minister HD Kumaraswamy, who was looking for a solution to farmers' agitation demanding a higher price for sugarcane and release of the arrears for the sugarcane already supplied, failed to reach a resolution. The farmer leaders have said they will continue the agitation until the millers meet their demands.

The sugar factory owners took the stand that they would pay the government-announced Fair and Remunerative Price (FRP) for this year, but many were unwilling to fulfil their ex-field commitment (agreement made with farmers promising rates above FRP), which they claim add up to Rs 450 crore. Mill owners have now sought more time to settle the matter.

There were indications that the talks remained inconclusive and the millers wanted to talk directly to the farmers.

Export orders

India has sought to get back to the export market for the first time in three years to bolster the prices. The country is exploring exports to China as a new market.

Sugar millers in Mumbai have signed contracts to supply sugar to New York dealers, which have threatened the margins of Brazilian and Australian traders, a news report said.

In March, India wanted the mills to export 2 million tonnes of sugar in order the reduce the inventory buildup. Though the authorities fixed mandatory export targets for each mill, the mills together managed to export only around 450,000 tonnes in the 2017-18 market year that ended on September 30 due to the uncompetitive prices, according to the millers' trade body Indian Sugar Mills Association.

The current year target is 5 million tonnes, which looks difficult to achieve, given the current price situation and bumper harvest in most producing nations.