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An estimated five-seven per cent rise in raw jute production; higher carry-over stocks and an anticipated drop in demand for sacking from sugar and food grain industry, is likely to exert pressure on raw jute prices this year.
Raw jute prices (TD5 variety) have dropped by nearly 13 per cent in the last three months.
Prices are hovering around Rs 2,700-2,800 a quintal currently, down from Rs 3,200 in April.
According to Raghav Gupta, Chairman of Indian Jute Mills’ Association, sowing was down by 5-10 per cent this year in most parts of North and South Bengal and Assam.
South Bengal districts of Murshidabad and Nadia together account for almost 60 per cent of the country’s total jute production.
“Despite a lower sowing, production is estimated to be 5-7 per cent higher this year on account of a better yield aided by good weather conditions and rains,” Gupta told Business Line. Area under jute cultivation was also down by 11 per cent to eight lakh hectares this year. Raw jute cultivation typically happens on an area of about nine lakh hectare and Bengal accounts for almost 67 per cent of the total area under cultivation.
Sluggish demand
The carry-over stock is close to 27 lakh bales this year.
The high carry-over stocks was primarily due to sluggish demand and poor procurement by food grains industry during the rabi season (mid November to April), Gupta said.
The likelihood of a further dilution in the mandatory Jute Packaging Materials Act (JPMA) of 1987 for packing food grain and sugar might further suppress the demand.
JPMA provides for mandatory use of jute bags for packaging of food grain and sugar up to 100 per cent by the Government procurement agencies.
The Cabinet Committee on Economic Affairs had allowed for 60 per cent and 10 per cent dilution in the JPMA for packing sugar and food grain respectively in 2012-13.
The industry produces nearly 16-18 lakh tonnes of jute bags and clothes annually.
Of this, about 35-40 per cent is purchased by the Food Ministry on behalf of different State food procuring agencies and the Food Corporation of India.
According to industry insiders the Cabinet might approve further dilution in JPMA to the extent of 20-30 per cent for food grains and up to 80 per cent for sugar.
“We are yet to get information on this (dilution) but a further dilution looks most likely this year,” Gupta said.
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