Around 40 mills have suspended production because of a shortage of raw jute in recent months
Jute prices have jumped to record highs due to shortages of raw jute for production at jute mills combined with high demand for raw jute in both local and international markets.
Farmers and traders said one maund of jute is currently being sold for up to Tk6,300, which is double last year’s price. In the years prior to that, the price of one maund of jute ranged from Tk1,500-2,000.
“Jute may become even more expensive as it is still in high demand,” said Shariful Islam, a jute grower and trader in the southern Chuadanga district. He has been producing and selling jute since 2003 and is elated with the potential for high profits this year.
Azadul Islam, a farmer in Natore, said farmers sold jute for Tk1,600-2,000 per maund in 2019, but prices at bazars of the district ranged from Tk5,000-6,000 over the last several months.
Azadul and some other farmers in Kurigram, Kushtia and Lalmonirhat said they were planning to cultivate more jute next season in hopes of getting good prices once again.
Meanwhile, several privately-owned jute mills have shuttered production due to insufficient supply and high prices of raw jute.
“Around 40 mills have suspended production and more may follow,” Bangladesh Jute Mills Association (BJMA) General Secretary Barik Khan told Dhaka Tribune on Monday. “This is no good sign when we expect jute will get back to its golden days again.”
The closures of the private mills follow the government decision to suspend production at 25 state-owned jute mills in July last year.
There are about 2,000 privately-owned mills of various sizes in Bangladesh. The country requires about 6 million bales of jute each year for the production of yarn and various other products, as well as another 500,000 bales for household necessities.
In addition, between 800,000 and 1 million bales are exported to India, Pakistan, China and Vietnam each year.
According to the government, the jute production target for the current fiscal year was 8,414,000 bales but 7,414,000 were produced. But the BJMA said only 5,500,000 bales of jute had been produced.
Why was production low?
Barik Khan said the supply of raw jute was severely affected by floods and cyclone Amphan last year. He also claimed some traders had hoarded jute to raise their profits.
The BJMA general secretary urged the government to stop jute exports and prioritize domestic needs for the sake of local jute mills.
“The Awami League government has been encouraging the use of jute products but has failed to revive the state-owned jute mills. The private jute mills are struggling in the absence of any comprehensive plan to tap into the rising demand for jute in the country and in international markets,” Barik Khan said.
“If we can produce enough jute, it will not only meet local demand but also earn foreign currency as several countries are now demanding jute,” he added.
Jute Ministry officials have been raiding warehouses across the country on the assumption that some traders were hoarding jute. However, Jute Department Director General Hossain Ali Khandaker, who raided 10 jute warehouses himself, said they had not found any evidence of hoarding.
Some jute mills owners suspected that a section of local traders had smuggled a significant amount of raw jute to India.
95% of mills may shut down
With 40 mills having already suspended production, jute mill owners feared that 95% of the mills may be shut down in the next month due to the shortage of raw jute.
Such fears were voiced at the BJMA annual general meeting on Tuesday.
BJMA Chairman Mahbubur Rahman informed the meeting that the current market price of per maund row jute had gone up to Tk5,800-6,300, as compared to Tk 5000-5,500 a week ago.
“No one has experienced such a low supply of raw jute before,” he said.
Extensive closures could adversely affect about 40 million people involved in the sector, including farmers and employees, said the owners.
The BJMA president blamed the government for failing to take early measures to deal with the raw jute shortage, unlike the steps taken in India.
“Farmers will be encouraged by the high prices and they may grow more jute next year, but there will be no one to buy the raw jute if all the mills are closed,” he said.
Jute Ministry Secretary Lokman Hossain Mia told Dhaka Tribune: “Due to the Covid-19 pandemic, we failed to produce the desired quantity of jute. In addition, the demand for jute products is rising around the world and that’s why the high demand and low production resulted in record jute prices.
“I hope it’s a good sign for our farmers and they will produce more jute in the future,” he added.
“I think this demand and supply crisis will be solved in the upcoming year; we are taking initiatives to solve it,” he further said.