Jute MSP raised, prices in open market may be unremunerative next crop year

Cost of cultivation has been around 20% higher at Rs 48,000 an acre for the coming crop season, and this coupled with a bumper production will hit prices at the farm gate, Lahoti said.

Prices are unlikely be remunerative for jute cultivators in the coming crop season (July-June), even as the average price of raw jute hovering around Rs 8,500 a quintal at the end of the current jute season.

Production in the coming crop season is estimated to reach 90 lakh bales from around 55 lakh bales produced during the current crop season. The Centre has already fixed the MSP at Rs 4,500 a quintal for the coming crop season, up from Rs 4,225 a quintal in the current season.

Market prices are, however, expected to fall below MSP at the farm gate since jute acreage in West Bengal has increased by one lakh hectare to 6.5 lakh hectare, with high crop prices luring farmers to cultivate jute this year.

The Jute Corporation of India procures around 5-6% of the total production for capacity constraints. But for the coming crop season it may have to procure more if crop prices in the open market fall below MSP.

Satyanarayan Toshniwal of the North Bengal Jute Balers Association said the price trend will be reverse the coming crop season. Initially, during July-August, the average prices may be above MSP at around Rs 5,000- 5,500 per quintal. But it will gradually decrease as the crop year moves ahead, he said.

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

A shortfall in production has led to closure of 15 jute mills since April. The Jute Commissioner’s office, from the start of the coming jute year, wants to keep prices under control. It has issued an order for raw jute traders to get registered with its smart jute portal for a specified period. While the duration of the specified period is yet to be decided, the order is aimed at those trading 500 kg of raw jute or more.

“We are trying to create a data bank of raw jute traders to keep them on track,” Koushik Chakraborty deputy jute commissioner, said. Millers couldn’t supply the Centre’s indented quantity of jute bags equivalent of 31 lakh bales. The Centre had to fork out an additional Rs 2,000 crore for procurement since sack prices were higher.

A separate order has been issued, directing jute traders to clear stocks by June 25, to enable at least some jute mills to resume operations and ensure there is no carryover stock left in the market for the next jute year.

But these orders won’t affect the market prices in the coming crop season as much as the order limiting traders’ stock to 500 quintals did. “This order has thrown many balers and stockists out of trade with economies of scale being hampered,” Bhagwan Lahoti of the North Bengal Balers Association said.

Warehouses of most large jute traders are being used to stock other commodities, and few large buyers are left in the trade with the market getting flooded with small-time buyers maintaining stocks much below 500 kg, he said.

This fragmented market has given birth to a new sect of middlemen, who will not register with the Jute Commissioner and cannot be tracked by the government. Such small players will inflate the market, forcing large traders to buy from them. Farmers will be forced to sell their produce at prices much below MSP, Lahoti said.

Cost of cultivation has been around 20% higher at Rs 48,000 an acre for the coming crop season, and this coupled with a bumper production will hit prices at the farm gate, Lahoti said.

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