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Kharif Outlook: Jute output set to rise 55% on better returns

Shobha Roy Kolkata | Updated on June 15, 2021

Larger area brought under jute cultivation; favourable weather a positive factor

India’s jute production could be higher this year on favourable weather conditions, and increase in sowing area due to remunerative prices the golden fibre fetched last year.

The Centre’s decision to raise the minimum support price of ₹4,500 a quintal (TD-5 variety) this year from ₹4,225 last year is also expected to help the higher production.

Also read: Area under jute to go up in Bengal

Raw jute production, particularly in West Bengal, is likely to be higher this year by about 55 per cent at 85-90 lakh bales (of 180 kg each) in the next season starting July, against 55-58 lakh bales during the current season.

The country’s jute cultivation is primarily concentrated in three States — West Bengal, Bihar and Assam. Bengal accounts for nearly 80 per cent of the area under jute and 83 per cent of its production, followed by Assam with a production share of nearly 8 per cent, with Bihar making up the rest.

According to Raghav Gupta, Chairman, Indian Jute Mills’ Association (IJMA), there has been a 20 per cent expansion in sowing area this year as jute farmers have been encouraged by the high prices the fibre fetched last season.

Jute planting, which had dropped to 6.5 lakh hectares (lh) last year, is estimated to have increased to around 7.5 lh this year.

“There has been a 20 per cent expansion in jute acreage and the weather has been very favourable. The crop is very healthy. So we are expecting anywhere between 85 and 90 lakh bales of jute crop this season,” Gupta told BusinessLine.

There is a meagre quantity of carryover stock due to the lower production.

Poor weather conditions and the migration of jute farmers to other crops such as maize dragged raw jute production to 55 lakh bales in 2020-21 against an average production of around 65-70 lakh bales.

This year, growers who had shifted to maize could return to jute as they hardly get the MSP for the coarse cereals fixed by the government. This is despite maize exports rising to a six-year-high last fiscal. The Centre has raised the MSP for maize for the next season by a paltry ₹20 to ₹1,870 a quintal.

In May last year, cyclone Amphan and the rains under its impact damaged the crop in Bengal. Severe rainfall in 21 districts of Assam during July-August last year also affected production of raw jute in the northeastern region.

Remunerative prices

Raw jute prices, which were ruling at around ₹4,750 a quintal at the beginning of the season in July 2020, are currently ruling at around ₹9,000 a quintal, up 89 per cent. This has encouraged farmers to go in for large-scale sowing of the crop this year.

Jute consumption totally is estimated to be 75-80 lakh bales, including demand from both the organised and unorganised sectors. With the drop in production, there was a “perceived shortage” which pushed up prices.

Jute prices hovered around ₹4,500-5,500 a quintal during July-September last year and then began to firm up from October due to lower production and steady demand. Following the sharp increase in prices, the Jute Commissioner restricted fresh purchase of raw jute beyond two months’ consumption requirement.

“Farmers who had shifted to maize during the last season have returned to jute due to the highly remunerative prices,” an industry insider said.

Jute sowing usually starts by the end of March and finishes by May-end.

Prices to stabilise

Prices are, however, likely to stabilise at around ₹5,500 a quintal on the back of higher production this year.

“Right now we are at the fag end of the season (2020-21) where crop production was less; so prices ruled very high. We expect a sharp correction once the new crop comes in,” Gupta said.

Indian jute industry is largely dependent on captive demand for sacking due to the Jute Packaging Material (Compulsory Use in Packing Commodities) Act, 1987. Nearly 85 per cent of the country’s production is used to meet domestic demand, mainly for packaging foodgrain under JPMA.

“The government demand is very robust. We expect to supply the requirement during 2021-22. For kharif, they have a requirement of 21-22 lakh bales, but we may not be able to match the entire supply due to the Covid lockdown and spike in raw jute prices. We expect to supply around 15 lakh bales, but we will fully meet their rabi requirement,” he said.

The Commission for Agricultural Costs & Prices (CACP) in its “Price Policy for Jute: 2021-22 season” recommended a 6.5 per cent increase in raw jute MSP for the next season. The MSP will give gross returns of around 59 per cent over the weighted average all-India cost of production and cover cost of production of all major jute producing states, CACP said.

Need for diversification

The JPM Act has helped jute growers by providing an assured and captive market, but at the same time, it has acted as a major deterrent in product diversification and technological advancements in the sector, said the CACP in its report.

India being the world’s largest jute producer has great opportunities for diversification due to rising demand for high-value jute goods, but availability of quality fibre remains a major constraint. The quality of jute fibre is dependent on retting. Scarcity of good and adequate retting water is one of the major issues.

“Indian jute industry has become increasingly dependent on government demand for foodgrains packaging, and this has resulted in significant decline in production of other segments including diversified jute products. In view of increasing domestic and global demand for natural fibre products, there is a need for a concerted push towards value-addition and diversification of jute goods. The Commission reiterates its earlier recommendation of reviewing the JPM Act and reduce mandatory packaging requirements for foodgrains and sugar in a phased manner,” the report said.

(This is part of a series of Kharif Outlook reports that have been appearing in these columns since last week. The final report will appear tomorrow.)

Published on June 15, 2021

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