Raw jute, jute bag prices to firm up on govt buying
Raw jute prices have almost spun out of control, touching an unprecedented high of Rs 50,350 per tonne
 "Raw jute, jute bag prices to firm up on govt buying")
The price of raw jute and jute products such as B Twill sacking bags and Hessian is likely to increase with government procurement agencies stepping up procuring jute bags for sugar and food grain packaging.
Raw jute prices have touched Rs 50,350 a tonne, 50 per cent higher than a year-ago. Since the arrival of jute crop this season, raw jute prices have been volatile, starting at Rs 4,100 a tonne, an increase of 52 per cent over Rs 2,690 a tonne in August 2014.
B Twill jute bags prices have reached Rs 74,635 a tonne on the back of large orders in packaging by government agencies from the level of Rs 39,410 in December 2014. Raw jute contributes 67 per cent to the price of B Twill bags. “So long as government buying remains robust, prices of raw jute and jute bags will continue to rise further. Fixation of stock-holding limits for mill owners has not eased prices. De-hoarding drives are needed to curb prices,” said the owner of a jute mill.
In a report, the Jute Commissioner has forecast serious and long-term implications for the sector. “The most obvious impact of the unprecedented price rise is an increase in the price of jute goods. The huge government purchase of B Twill is responsible for the apparent in-elasticity of overall demand for jute goods against price increase,” the report says.
Raw jute prices have touched Rs 50,350 a tonne, 50 per cent higher than a year-ago. Since the arrival of jute crop this season, raw jute prices have been volatile, starting at Rs 4,100 a tonne, an increase of 52 per cent over Rs 2,690 a tonne in August 2014.
B Twill jute bags prices have reached Rs 74,635 a tonne on the back of large orders in packaging by government agencies from the level of Rs 39,410 in December 2014. Raw jute contributes 67 per cent to the price of B Twill bags. “So long as government buying remains robust, prices of raw jute and jute bags will continue to rise further. Fixation of stock-holding limits for mill owners has not eased prices. De-hoarding drives are needed to curb prices,” said the owner of a jute mill.
In a report, the Jute Commissioner has forecast serious and long-term implications for the sector. “The most obvious impact of the unprecedented price rise is an increase in the price of jute goods. The huge government purchase of B Twill is responsible for the apparent in-elasticity of overall demand for jute goods against price increase,” the report says.
Manish Poddar, chairman, Indian Jute Mills Association (IJMA) said, "Raw jute prices have not softened despite fixing stock holding limits for the mills. It cannot be predicted whether jute prices would rise or fall in the near term."
The Jute Commissioner has proposed that government agencies may go for dilution to avert pitfalls. Taking note of the shortfall in availability of raw jute, the textiles ministry has allowed a dilution of 134,000 bales (one bale is 180 kg) for foodgrains packaging. A further dilution of 30 per cent is also under consideration since IJMA has informed that the jute industry would not be in a position to supply more than 0.2 million bales a month from December.
For the next Kharif season, the Food ministry can take a decision not to requisition jute sacking in April and May 2016. The Jute Commissioner feels this step would help curb excessive speculation in the raw jute market.
Also, the Jute Commissioner can fix a ceiling price for B Twill sacking beyond which the state agencies would not buy the sacking bags.
If the government agencies do not modulate buying of sacking bags, prices would only jack up further. While a handful of jute mills with financial clout may continue to buy raw jute at higher prices, most of the jute mills facing working capital stress would be forced to suspend operations.