Market prices of jute expected to fall below MSP in the coming crop year

Though the government has already increased the minimum support price (MSP) of jute to Rs 4,500 per quintal for the next crop year against Rs 4,225 per quintal for the current season, the rise in cultivation cost of about 20 percent at Rs 48,000 per acre for the next crop year, which, along with bumper production, will in all likelihood affect farm gate prices.

It is expected that the prices will not be remunerative for jute growers in the next harvest season (July-June 2022), even though the average price of raw jute hovers around Rs 8,500 per quintal at the end of the harvest season.

As the yield has been good this year, it is estimated that the production for the next crop year will reach 90 lakh bales given that around 55 lakh bales were produced during the current harvest season.

In that context, market prices are expected to fall below the farm gate MSP, as the jute acreage in West Bengal has increased by 1 lakh hectare to 6.5 lakh hectare as high crop prices have prompted farmers to grow more jute this year.

Typically, the Jute Corporation of India buys about 5-6 percent of the total production for capacity constraints. But for the coming crop season, it may have to buy more if open market crop prices fall below the MSP.

According to North Bengal Jute Balers Association the price trend will reverse in the next harvest season. Initially, from July to August, average prices can be above the MSP at around 5,000 to 5,500 rupees per quintal. But it will gradually decrease as the crop year progresses.

At the start of the current crop year, average farm gate prices were higher than the MSP at Rs 4,700-4,800 per quintal. It gradually crossed Rs 8,000 a quintal towards the end of the year.

In April, West Bengal’s jute sector went through a major crisis as around 16 mills were shut down due to price rise and a growing scarcity of raw material and shortage of labourers arising out of restrictions imposed by the state government to contain the spread of COVID-19.

The Jute Commissioner of India’s office, from the start of the coming jute year, wanting to keep prices under control has passed an order to liquidate stocks and prevent any unaccounted accumulation of the fibre.

The order dated June 1 directs traders, dealers, and stockists of raw jute to liquidate their holdings by end of June.

However, the concerns being raised by industry watchers is that there are only few large buyers left in the trade as the market is getting flooded with small-time buyers maintaining stocks, much below 500 kg.

This patchy market has given rise to middlemen, who will ensure small players inflate the market and force large traders to buy from them. In the end, the farmers will be forced to sell their produce at prices much below MSP. 

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