Raw jute prices might fall 10%

The price of raw jute is poised to fall 10 per cent, owing to a better supply position, though crop output is likely to fall by five per cent for 2012-13 to 10.6 million bales, according to the advance estimates of the Union agriculture ministry.

The price correction will be on the back of an inventory of three million bales (a bale is 170 kg). The availability of raw jute for 2013-14 has been projected at 13.5 mn bales. The ministry had targeted a production of 11.2 mn bales. Actual output might be less, due to delayed rains in Assam and parts of north Bengal and Bihar.

"The average prices of raw jute are currently around Rs 3,000 a quintal. But prices are headed for a 10 per cent drop due to a better supply position," said Sanjay Kajaria, joint managing director, Hastings Jute Mill and former chairman, Indian Jute Mills Association.

Says Manish Poddar, director, Budge Budge Jute Mill, "Even if crop output drops five per cent, it will not have any major impact on mill owners unless demand is stable. The raw jute prices are presently Rs 700 higher than the minimum support price for the crop (at Rs 2,300/qtl). Any significant price movement will depend on demand."

An area of 389,000 hectares (ha) was covered under jute cultivation, lower than last year's 426,000 ha. As mentioned earlier, an inventory build-up of 3.1 mn bales between 2009 and 2012 is expected to ease prices.

According to the Jute Advisory Board (JAB), import of raw jute from Bangladesh went up from 300,000 bales in 2009-10 to 900,000 bales in 2012-13. Inventory build-up during this period registered almost the same rise, indicating low consumption by mills. Between 2009 and 2012, consumption varied between 7.7 mn bales and 9.2 mn bales, against total supply of 10.8 mn bales and 13.2 mn bales, respectively.

JAB has recommended import of high quality raw jute from Bangladesh and revised its import estimate from 800,000 bales to 960,000 bales for the current year. This, it says, would facilitate Indian manufacturers in producing specialised carpet quality yarn and other value-added products.