Why Sugarcane production is so important....

Today there was headline on bussiness line on the front page " Center mulls bonus on cane above price".

This news contained the efforts by the govenment to encourage the farmers to grow sugarcane. Government always decides Statutory Minimum Price (SMP) which is the minimum price sugar mill owners have to give to farmers while buying sugarcane from farmers.

This year govenment has decided this price as Rs. 107.76/quintal for (oct - sept '09). But to encourage farmers, govenrment has announced bonus on SMP. so now sugermills have to pay 170-175 rs. /quintal.

After reading this article i thought why this move has taken by government.. why sugercane is so impotant commodity.. so i came across following information about this commodity..

1. India is the 2nd largest producer and consumer of Sugar.
2. Sugar industry is India's 2nd largest Agro processing industry.
3. Sugar industry comprices of 600 mills in private, public and corporate sector with capital employed totallyRs. 60,000 cr. and annual turnover of 40,000-50,000 cr.
4. Sugar sector gives direct employement to 6 lakh persons and nearly 4.5 crore farmers.
5. 5 million hectars of indian land is under cultivation of sugercane produces 300 million tones of sugarcane.
6. 20-25% of output of sugarcane is utilized to produce traditional sweeteners like Gur and Khandsary. and rest for Sugar.
7. This is the exceptional industry where government still exercises control.

This year Sugar prices have rised to Rs 30/Kg. which is 28 years high. Reasons are

1. In India the area under cultivation of sugarcane redused almost by 5 %. This has affected the production.

2. Sugarcane is currently used for food, feed, fuel and fertiliser. Due to rising prices of Oil, many countries including India are tending to use ethanol as fuel. So considerable part of sugarcane has diverted towards this fuel purpose.

3. Due to less production and increasing demand, from exporter, INDIA has become the importer. This has set global sugar markets on fire.

Oil prices and exciting figuers.

Today I read one article in a magzine, and I came across some important facts and figures which made me use my brain for brain storming...

We all know that all the prices are decided by the demand and supply forces. In 2008, oil prices touched its all time high of $140/ barrel. there were many reasons given by different sources of media and economists. but some of the reasons i found interesting in the article are as followes..

1) Since Aug 2007, The Bush govenment had been adding 50000 barrel a day to US's STRATEGIC PETROLIUM RESERVES (SPR), which is its emergency stock pile. In september 2008 US SPR was 700 mn barrels which is enough to keep US economy running for 56 days if imports suddenly stops. So stock pilling has added 10% to price of crude oil.

2) From 2003- 2007 6.6 mn barrel/day demend of oil has increased in which China contribued 30%,Mid-east countries 21%,US 11% while India 5%.

On an average each year the oil damand has increased by 1% but prices grown by 92% in $ terms.

3) Weakening of $ against most of the other currencies.

4) perception of the market about the weakening of Dollar will continue, gave rise to high trading in future contracts. And as future contracts are indicators of future spot prices, it again made impact on rising oil prices.

5) OPEC countried reluctant to go for high expansion plans due to crash in 1990's , although demand is rising.

6) Geo political risks- conflicts wars also making OPEC countries reluctant to invest in expansion plans.

So this artical made me think on the whole how different events in the world directly or indirectly affects the price of the commodity.