Notwithstanding higher production, jute prices rule firm

The 55 per cent jump in production notwithstanding, raw jute prices are ruling firm due to lower availability as farmers are holding on to their stock in anticipation of better prices. The low carryover stock from last year is also pushing up prices.

Prices of raw jute in West Bengal is hovering around ₹7,000-7,200 a quintal, as against the usual average of around ₹4,500-4,750 a quintal during the beginning of the crop season.

Raw jute production in the State is estimated to be close to 85-90 lakh bales in 2021-22, as against 55-58 lakh bales in 2020-21. The higher production is on the back of favourable weather conditions and increase in sowing area due to the highly remunerative prices the golden fibre fetched last year.

According to Raghav Gupta, Chairman, Indian Jute Mills’ Association (IJMA), raw jute prices were highly volatile last year due to the lower crop. Prices had touched as high as ₹9,000 a quintal towards the end of the last crop season (that is in June this year). However, when the new crop started arriving, prices began to drop and touched around ₹5,500 a quintal.

“Farmers were reluctant to sell at these prices and so were holding on to the produce. This pushed up prices,” Gupta told BusinessLine .

Higher jute acreage

Jute cultivation in the country is primarily concentrated in three states including West Bengal, Bihar and Assam. Bengal accounts for nearly 80 per cent of jute acreage and 83 per cent of production, followed by Assam with a production share of around eight per cent and then Bihar.

The sowing acreage in West Bengal, which had dropped to 6.5 lakh hectare in 2020-21, is estimated to have increased to around 7.5 lakh hectare during this season.

It is to be noted that poor weather conditions and the migration of jute farmers to other crops such as maize dragged down raw jute production to 55 lakh bales in 2020-21, as against an average production of around 65-70 lakh bales.

While the cyclone Amphan in May 2020 and the subsequent rains destroyed the crop in Bengal. Severe rain in 21 districts of Assam in July-August last year had also impacted production of raw jute in the northeastern region.

In contrast to this, jute production this year has been higher due to favourable weather conditions and increased cultivation, industry insiders said.

Prices were expected to stabilise around ₹5,500 a quintal on the back of a higher production this year. However, that did not happen as farmers have been holding onto their stock.

It is to be noted that the Commission for Agricultural Costs & Prices (CACP) in its “Price Policy for Jute: 2021-22 season” has recommended a MSP of raw jute (TDN3, equivalent of TD5) for the season 2021-22 to be fixed at ₹4,500 a quintal. This is an increase of 6.5 per cent over MSP of ₹4,225 a quintal for the last season.

Price ceiling

The jute regulator Jute Commissioner’s office has imposed a price ceiling of ₹6,500 a quintal on raw jute trade in order to ensure supply of raw material to the mills at a fair price.

The Indian Jute Mills Association (IJMA), which feels that the price ceiling is likely to be counterproductive for jute cultivation, has sought the intervention of West Bengal Chief Minister Mamata Banerjee to take up the matter with the Centre to review its decision.

“The jute farmer will be dis-incentivised to cultivate raw jute next year with these regulations in place. The West Bengal jute farmers will be worse off than their counterparts in Bangladesh. Indirectly this will result in growth of the Bangladesh industry at the cost of India,” IJMA said in the letter to the Chief Minister.

COMMENT NOW