SUGARCANE is widely planted in Sindh, Punjab and the NWFP. The highest production during 2007-08 was recorded in Punjab with an average yield of 690mds/acre, while the lowest was in NWFP at 566mds/acre. The average yield over the last few years ranged between 45 and 50 ton/hectare, which is one of the poorest among the 16 major cane producers.

The sugar industry works below capacity. Increased production cost at farm and at industry levels have inflated the prices of cane and sugar.

The low prices of sugarcane raise doubts whether adequate supplies will be continued in future for the mills. There are several issues for investigation as to how to improve crop yield and increase its quality.

The profitability analysis of cane cultivation has been carried out based on a survey of cane producing areas. The information was collected from selected sugarcane growers through stratified random sampling technique during the crop year, 2007-08. The survey covered the farm size, cropping pattern, varietals adoption, labour and input costs, credit sources, transportation and processing costs. In addition, profit of other competing crops was also analysed. The number of analytical techniques such as, farm cost analysis, gross margin analysis was used to access the profitability of sugarcane.

The farm cost is based on cane production and its competing crops. The costs consist of expenses from the profit and loss account (cash costs, depreciation, etc.), and opportunity costs for farm-owned factors of production (family labour, own land, own capital). The estimation of these opportunity costs must be considered carefully because the potential income of farm owned factors of production in alternative uses is difficult to determine.

Cost of crop production: The cost of sugarcane production by provinces has been examined and found that the average total cost of production of fresh crop was higher by Rs44,126/acre in NWFP followed by Punjab Rs39,753/acre. The lowest total cost of production of fresh crop Rs30,819/acre was estimated in Sindh. In addition, the cost of production for first ratoon was higher Rs29,536/acre in Punjab, followed by NWFP Rs26,742/acre. Whereas, the lowest cost of production of first ratoon was Rs18,303/acre in Sindh.

Yield and price: The yield and price of sugarcane by province has been collected and analysed and found that sugarcane rotation generally covers a three year period. The first year planted crop will be harvested after 11 months of cultivation. The first and the second ratoon crops take around 10-11 months for maturing.

The average yield of fresh crop provides the highest yield than the first and the second ratoon crop in all provinces.

The yield of sugarcane in Punjab obtained is some what higher than in Sindh and NWFP. Interestingly, Sindh received higher price Rs57/mound, Punjab Rs52/mound and NWFP Rs54/mound. This price difference appeared due to higher sucrose percentage in Sindh crop. These prices have been obtained by averaging the price each grower received. Results further show that weight deducted by the mills is higher in NWFP 25 per cent followed by Punjab 22 per cent and lowest only four per cent in Sindh. This reflects that Sindh received no frost but there are some non-recommend varieties under cultivation on farmer’s field.

Crop revenue: The total revenue of sugarcane production by provinces has been analysed and found that total revenue of sugar production of fresh crop in Sindh was higher Rs41,816/acre, followed by Rs38,120/acre in Punjab and Rs29,916/acre in NWFP. In contrast, the total revenue of first ratoon was higher Rs35,510/acre in Punjab followed by NWFP Rs31,121/acre and in Sindh Rs30,654/acre. On an average the highest total revenue of Rs35,686/acre was achieved by Punjab.

Profitability: The average profit of sugarcane production by province indicates that first ratoon crop lead growers received the highest profit of more than Rs10, 584/acre, while production of fresh and second ratoon crop gave less profit. This means that sugarcane growers have to wait until first ratoon to get the profit from their investment. So, the sugarcane growers may change to grow other competitive crops. Results also indicate that in Sindh, profit of sugarcane production was the highest than that of other provinces that will generate a positive return and can be determined with the simple calculation of break-even yield analysis.

Gross margin of production: The analysis of gross margin is derived from the difference between total revenue and total variable costs. Total variable costs are calculated from the summation of total labour and factor costs. The results show that sugarcane growers in Sindh have the highest gross margin, whereas in the NWFP it seems to be the lowest. Comparing the average gross margin by ratoon, it is apparent that the average gross margin in the first ratoon is higher than in fresh crop and second ratoon.

According to average total variable costs, there is no big difference between the provinces. The highest variable cost was recorded at Rs23,001/ acre in NWFP and lowest in Sindh at Rs13,073/acre. However, the average total revenue between the provinces is significantly different (between 30,406 and 36,618/ acre). This is the cause of the difference in the average gross margin between regions.

Considering the average total variable costs in different ratoons, it shows that fresh crop has higher total variable cost (Rs25,649/acre) than other ratoons, because fresh sugarcane production has very high total labour costs and total factor costs, while the first and second ratoon of sugarcane production have only half of the labour and factor costs compared to the fresh crop.

Sugarcane growers in Sindh attained the highest average gross margin in the year 2007/08 (Rs20,211/acre) while the growers in Punjab and NWFP only earned an average gross margin of Rs17,022 and Rs7,518 per acre respectively.

Profitability of sugarcane and its competing crops: There are three main crops competing with sugarcane-- cotton, wheat and rice. The variable costs and fixed costs of sugarcane and its competing crops has been examined and found that rice growers had the lowest variable cost and wheat had the second lowest variable costs.

While the highest variable costs were on sugarcane production as a fresh crop, followed by the first and second ratoon crop. Also revenue of sugarcane and its competing crops has been estimated and found that wheat growers had the lowest revenue and cotton and rice had the second lowest revenue. While the highest revenue were on sugarcane production as a fresh crop, followed by the first and second ratoon crop respectively (table).

The cost comparisons noted above are an important part of the analysis. Cost comparisons, particularly total cost comparisons, can be misleading. However, when it is only looked at in isolation, growers income of sugarcane production does appear as attractive for planting sugarcane as fresh and ratoon crops. While, comparing the economic profit with other competing crops, it is found that economic profit of sugarcane is lower than that of rice production, depending on the availability of irrigation water