Stockpiles of jute goods hit a nine-year high of 1.69 lakh tonnes in the face of a slump in exports and domestic consumption, putting the entire sector in deep trouble.
Jute mills have begun the current fiscal year with the stock, which is 62 percent higher than last year, according to the Department of Jute (DoJ).
"Exports are likely to fall in both value and volume. I do not see any hope of recovery unless the local demand for jute goods picks up," said Mahmudul Huq, deputy managing director of Janata Jute Mills Ltd, a leading exporter of jute products.
The jute industry, which involves about 40 lakh farmers and 1.5 lakh workers, has been on an acute downturn in export earnings owing to the Middle East crisis and a slump in demand from Africa, Thailand and India.
In fiscal 2013-14, raw jute exports slumped more than 100 percent to 9.84 lakh bales (1 bale= 181kg) from a year ago, according to the DoJ.
In case of processed jute, only yarn exports rose but shipment of jute goods, mainly sacks and bags, went down.
Export receipts fell 20 percent year-on-year to $824 million in fiscal 2013-14, according to the Export Promotion Bureau.
Although the country has mandatory jute packaging rules, domestic sales of jute goods slipped to 1.06 lakh tonnes from 1.13 lakh tonnes in fiscal 2012-13, DoJ data shows.
Huq of Janata Jute Mills said the current stock of jute goods will add to the fresh produce in the mills in the ongoing fiscal year. "It will be a disaster for the industry unless the stocks are cleared," he said," The only way to withstand the current turmoil is to slash production."
Failing to withstand depressed international and domestic demands, nearly 20 mills have been shut over the past one year.
The public and private mills that are still in operation have cut production to overcome the situation. As a result, many casual workers have become jobless, according to operators.
Bangladesh Jute Mills Corporation (BJMC), which operates 24 state-run mills, has slashed production to 400 tonnes a day from 700 tonnes earlier for weak demand for jute goods, mainly sacks, in both international and domestic markets, its Chairman Humayun Khaled said.
To attract buyers from abroad, BJMC also cut prices but got lukewarm responses.
"We are terminating temporary workers due to a drop in sales. We are being forced to do it. The demand in the international market has not picked up despite the price cuts," Khaled said.
He said the payments of wages and bonuses of 80,000 workers and staffs would be uncertain if sales do not rebound.
Currently, 90 percent of the mills are operating in losses, Huq said.
JUTE PRICES ON THE DOWNTURN
Prices of fresh harvest of raw jute have started falling as the public and private mills are not purchasing jute.
BJMC, which aims to purchase 26 lakh quintals in the current fiscal year, has so far bought only 3 percent of its target due to a fund crisis, said its Chairman Khaled.
"Private millers are offering low prices on the ground of a sluggish export demand," said Prabir Kumar Saha, a jute grower and trader in Faridpur, one of the main jute growing districts.
Prices of good quality raw jute slipped Tk 50 to Tk 1,550 a maund (40kg) this week from Tk 1,600 two weeks ago, he said. "It appears that farmers will incur losses this year for low prices," he said.
Huq said the prices of jute are under pressure which affects farmers badly. "It is not good news for future crop," he said.
Raw jute production fell to 67.85 lakh bales in fiscal 2013-14 from 75.72 lakh bales the previous year. Production is expected to be lower in the current harvesting season.
THE WAY OUT
BJMC Chairman Khaled said the problem of the industry is temporary. The government should come up to rescue both public and private mills, he said.
Janata Jute Mills' Huq said the implementation of the compulsory jute packaging law can raise the domestic demand for jute bags and sacks.
The law was passed four years ago but still remains largely ignored, mainly by private sector traders and millers, who are unwilling to use jute sacks for packaging food grains citing higher prices than plastic bags. He said the supply of yarn has to be reduced to keep pace with the current international demand.
The local supply of yarn has become higher than international demand due to an increase in production capacity, Huq said.
"Ultimately almost all jute mills will be sick unless the local demand rises and the supply of yarn is not reduced," he said.
Khondaker Golam Moazzem, additional research director of Centre for Policy Dialogue, also echoed Huq.
"Increased domestic use of jute bags and sacks will help the industry withstand the current turmoil. The government should create pressure on both public and private sectors to ensure compliance with the compulsory jute packaging law," he said.
DoJ Director Mohammed Kefayet Ullah said the government has started mobile court drives to enforce the law for rice packaging and expected that domestic consumption will rise.