Molasses prices to rise on low cane output

Be prepared to shell out more for your favourite bottle of alcohol

In times of slowdown, if you are thinking of drowning your sorrows in your favourite bottle of alcohol, then be prepared to shell out more. For, the price of sugarcane molasses, a key input used in manufacturing Indian made foreign liquor (IMFL), is likely to rise in April, following a sharp decline in sugarcane production over the past three years.

Molasses is a thick syrup that is produced after boiling and processing sugarcane juice. Molasses contained alcohol accounts for around 85 per cent of the total consumption of alcohol in the country.

One reason for sugarcane production falling short in the country is because of the decrease in the area under cultivation for sugarcane in the rabi season, especially this year. Figures made available by the National Federation of Cooperative Sugar Factories suggest that molasses production for the year 2008-09 (provisional) has fallen to 72.50 lakh tonnes. The production of sugar molasses has gone down significantly over the past three years, falling from 131.11 lakh tonnes in the 2006-07 season to 113.13 lakh tonnes in 2007-08.

The production of sugarcane has also fallen sharply, from 3,555.20 lakh tonnes in 2006-07 to 2,946.56 lakh tonnes in 2008-09, the production for 2007-08 being 3,405.57 lakh tonnes. Consequently, the production of sugar has fallen to 160 lakh tonnes for the year 2008-09 from 263. 57 lakh tonnes in 2007-08, a decline of 103.57 lakh tonnes. Sugar production in 2006-07 was pegged at 283.67 lakh tonnes.

A sugar industry official who did not want to be named said that sugarcane output was expected to remain low in the second sowing season of 2009, which starts in October. He said that liquor companies were under pressure because of the expected lower production of sugar molasses in the next season as well. Sugar mills in the country close down in April after the cane crushing period, which generally ends in February.

Another industry official said that distilleries producing liquor that contains molasses would have to sacrifice on their margins. Farmers are now shifting to other crops instead of growing sugarcane because of the worldwide crash in sugar prices. In India, many farmers had shifted to other crops such as oilseeds, which fetch better prices.

According to Anand James, senior analyst at Geojit COMtrade, sugar shortage from India is likely to push the world sugar market into deficit for the first time in three years. “India, the second largest sugar exporter in the world, is running into supply deficit this year. While it had exported 49 lakh tonnes in 2008, it may have to import 50 million tonnes in the first half of 2009,” he added. James added that with elections scheduled in May, the government might be keen to ensure that prices do not get out of hand.

source: mydigitalfc