IJMA seeks action against speculators and hoarders.

Jute has became another commodity where consumer industry (jute mills) has not been able to procure enough raw material as prices kept rising and mills could not use the hedging mechanism to secure supplies at a lower price. Jute prices have gone up by 63 per cent in the current jute season, beginning last June, on reduced crop.

The prices have been on a rise since June 2008, the beginning of the present jute year, when jute spot prices were close to Rs 1,400 per quintal. The prices increased to Rs 2,000 per quintal in February 2009.
 

For April delivery, raw jute prices are being quoted close to Rs 2,400 per quintal at the Multi -Commodity Exchange (MCX).

Since farmers have shifted to other high yielding crops such as oilseeds and grains, the raw jute crop is expected to be lower by 1.3 million bales, from 9.5 million bales to 8.2 million bales in the current jute season. After a long time, farmers are getting good prices for their crop.

Since the prices have gone up sharply, mills are complaining of increased level of speculation and hoarding.

A senior official at the Jute Commissioner’s office said that the rise in prices was on account of low supplies. Now, with distress sales by the farmers stopping and they getting adequate compensation, mills were finding it difficult to purchase the crop at high prices, he added.

Meanwhile, the government is also making efforts to increase jute demand which is also adding pressure to the prices. The textiles ministry has allowed the sugar industry to use alternative packaging material such as polyethylene and polypropylene only up to 20 per cent, till May 1, on account of shortage of jute bags for packaging.

The supply of raw jute has also been affected, as stocks have fallen to 1.2 million bales, equivalent to consumption for only about six weeks as on April 2009, according to Sanjay Kajaria, chairman, Indian Jute Mills Association (IJMA).

“The sharp rise in prices is due to massive hoarding by speculators, who have been holding about 2 million bales of jute in the commodity exchanges. The mills are not getting the opportunity to build stocks at the desired levels and they have fallen to dangerously low levels, “ said Kajaria.

The total raw jute supply this year will be close to 10.6 million bales (one bale =180 kg), of which the crop accounts for 8.2 million bales, carryover stock at 2.2 million bales and imports at 200,000 bales.

Last year, the total supply was close to 11 million bales, and the crop size at 9.5 million bales, declining by about five per cent over the previous year.

In a letter to the Union ministry of textiles recently, Kajaria had urged a ban on futures trading in jute. He pointed out, “As futures trading in raw jute is being aided by the Forward Markets Commission (FMC), it is necessary for the government to look into the matter and initiate steps for stopping the practice.”

The letter further said, “Speculative trading has resulted in rigging up prices beyond limits, which only suits the needs of those involved in the speculation. There is also a fear in the industry circles that unless a clear picture emerges on the arrival of the new crop, during the current season, speculation of the fibre might increase further together with illegal hoardings.”

IJMA has also urged the Jute Commissioner to launch a de-hoarding exercise, restore liquidity and take penal steps against the hoarders.

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