Nice discussion here.
I have been reading up on sugar cycle in India and it seems that this season also there will a bumper production
http://www.agrimoney.com/news/indias-sugar-output-in-2015-16-to-stay-near-record-levels–8258.html
The main issue with the sector has been that the cane prices are still remunerative for the farmers to deter them from production, notwithstanding arrears from the mills.
The below is an excerpt from one of the sugar companies con-call
When do you see the cane acreage in India coming down? This is becausein the last four years we have not seen a significant decrease in the cane acreage beside the sugar industry going through a bad phase.
There is only one sign to look for. The historical sugar cycle has been based on cane arrears. Whenever arrears have exploded, you had the willingness of a farmer to move from sugar cane to other crops. If you look at the figure that I had mentioned on the call i.e on 31st of January 11,000 crore of cane arrears which will expand to 20,000 crore by the end of the sugar season is an astronomical number. That is the number at which one will see people moving away from sugar cane on an all India basis. Every State has different ramifications because different State Governments view cane price arrears in different manners. So that is the first sign to look at. The next thing of course is to look at the competing crops. Traditionally and I am speaking generally for the Country, the competing crops would be rice, paddy, and wheat. Now the prices of paddy and wheat have also suffered over the last couple of years. The moment you see any upswing in those prices, you will have farmers that will willing shift from Sugarcane to other crops
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