Jute, kenaf and allied fibres

Introduction

Jute and kenaf are cultivated almost exclusively in developing countries of East Asia and in some parts of Latin America. Bangladesh, India and Thailand account for over 90 percent of world production. The fibre is processed mainly in the producing countries themselves and is used for the manufacturing of traditional products such as hessian cloth, food grade bags, carpet backing and other floor covering. Diversified jute products, such as geo-textiles and composites are also manufactured in relatively small quantities. Jute constitutes a low proportion of the value of world trade, but its cultivation and processing is labour-intensive and therefore provides a livelihood and an important source of food security for many farmers and their families in Asia.

In the medium term, developments in the world jute market are expected to be determined negatively by the intensity of competition with synthetic fibres and positively by market expansion of diversified jute products. The continuing extension of facilities for the bulk handling of various agricultural commodities will also exert pressure on the jute market, although at a slower rate than in the past and in line with improvements in the infrastructure of developing countries.

These projections have been generated by means of a partial equilibrium econometric model under the assumption of normal weather and economic environment conditions. The model is dynamic, in the sense that it allows for gradual adjustments, thus taking into consideration biological, behavioural and other inertia in the production and consumption of jute products. The model covers 27 countries and regions and consists of estimated behavioural equations for the area and yield per ha of jute, as well as for demand, exports and imports of jute fibre and jute products.

Production

Jute is predominantly a rainfed annual crop. Its cultivation is labour-intensive, but it requires relatively small quantities of other inputs, such as fertilizer and pesticides, and can be carried out in smallholdings. For these reasons, jute production is increasingly concentrated in Bangladesh, India, China and Thailand, which from 1998-2000, together accounted for more than 95 per cent of the world production, compared to a share of 90 percent in the early 1970s.

Jute competes for land with food crops such as paddy rice in Bangladesh and India, and cassava in Thailand. Land allocation between rice and jute depends on the relativity of price levels and price variability. In general, producers attempt to adopt a multi-cropping strategy with jute in rotation with paddy. Nevertheless, substitution between the two crops does take place, as producers attempt to minimize the risk of lower paddy yields that result from delayed paddy transplanting. However, depending on the region, the possibilities of substituting paddy rice for jute may be limited due to flooding.

Until the late 1990s, world production of jute fluctuated between 3 million and 3.7 million tonnes, with the notable exception of a record crop of over 6.0 million tonnes in 1985. Between 1998 and 2000, world production exhibited a marked decline to an average level of 2.6 million tonnes. This decline was the result a decline in jute’s competitiveness relative to polypropylene fuelled by decreases in the latter’s price.

Assuming that weather conditions and yield per ha of jute follow their normal patterns, world production of jute is projected at 2.4 million tonnes by 2010, well below the average production level of the past decade. This decrease in production in the medium term is expected to result from a weakening in price incentives due to declining global demand for jute fibre.

In the medium term, the area under jute in the Far East is expected to contract by 3.1 percent per annum from an average of 1.6 million ha in 1998-2000 to 1.2 million has in 2010 as producers adjust to market conditions through disinvestment. Production is expected to decline by 1.6 percent per annum from an average of 2.6 million tonnes during the years 1998-2000 to 2.3 million tonnes in 2010.

India is projected to increase its dominance of global jute production, accounting for 66 percent of the world production by 2010, compared to 58 percent during the period 1998-2000. In the medium term, the area under jute in India is expected to contract by 2.7 percent per annum, although production is expected to remain at approximately at 1.6 million tonnes due to increases in yield. Between 1990 and 2000, yields increased from 1.60 to 1.86 tonnes per ha and are expected to continue increasing to 2.1 tonnes per ha by 2010.

In Bangladesh the area under jute is projected to contract from 447 000 has to 387 000 by 2010, as producers respond to lower market prices and allocate land to competing food crops. The contraction of the land under jute will be partly offset by increasing yields. Yields are projected to increase from the 1998-2000 average of 1.70 tonnes per ha to 1.76 tonnes per ha in 2010. As a consequence, production is expected to decline by 1.9 percent annually from 768 000 tonnes in 1998-2000 to 681 000 in 2010.

The area and production of jute in China are projected to continue to contract. Production declined from 726 000 tonnes to 126 000 tonnes in the course of the 1990s and is expected to continue to decline to 7 000 tonnes by 2010 as more land is sown to food crops. During the same period, production in Thailand is also projected to decline to 17 000 tonnes, while in Viet Nam production is expected to remain stable at 12 000 tonnes.

Consumption

Jute is used to make yarn for the manufacturing of traditional products such as hessian cloth, sacks, carpet backing and other floor covering materials. In developing countries, it is consumed mainly in the form of hessian cloth and food grade bags for cereals and sugar, while carpet backing is the main jute product consumed in developed countries. Diversified products such as composites, geo-textiles, paper pulp and decorative materials comprise a small proportion of total consumption.

During the past decade, world jute consumption contracted as the market continued to be shaped by two important factors, namely the intensity of competition with, and the displacement by, synthetic fibres, and the extension of commodity bulk-handling facilities. These factors contributed to a 16 percent decrease in world jute consumption from 3.4 million tonnes of fibre equivalent in 1988-90 to 2.9 million tonnes in 1998-2000. In developed countries the decline in consumption of jute products amounted to 40 percent from 668 000 tonnes in 1988-90 to 395 000 tonnes in 1990-2000. In developing countries, the jute market contracted by 10 percent from 2.8 million tonnes in 1988-90 to 2.5 million tonnes in 1998-2000.

Jute’s competitiveness relative to polypropylene is determined by both price and non-price factors. Increasing returns to scale in the petrochemical industry, as well as its vertically-integrated structure that allows a flexible allocation of cost components along processing stages for different outputs, contribute towards decreasing unit costs. This therefore results in polypropylene polymer and the related synthetic products being price competitive with their jute counterparts. Non-price factors include technical characteristics such as the heavy weight and the related unsuitability of jute sacks for automatic filling systems as compared to polypropylene sacks; the superior breathability of jute sacks vis-à-vis the water-resistant qualities of synthetic sacks; and the biodegradability of jute. In addition to the above technical characteristics, other important factors such as reliable and regular supplies of fibre of consistent quality have resulted in further displacement of jute by synthetic fibres, the former being an annual crop subject to instability due to weather and long- distance transport,.

Between 1988-1990 and 1998-2000, prices for polypropylene fibre decreased at an average rate of 2 percent per annum in real terms, while world demand has been growing during the same period at approximately 8-10 percent per annum. During the past decade, world consumption of jute fibre and products declined by 1.54 percent per annum to 2.9 million tonnes in 1988-2000. In the medium term, it is expected that additional polypropylene capacity set up in Asia in the form of large production units will contribute towards lower unit costs, thus increasing pressure on the jute market.

In general, the rate of adoption of bulk-handling facilities, and consequently the rate of substitution of food sacking use in transport, depends on capital investment on infrastructure, such as port facilities, roads, and warehousing. It is difficult to provide estimates of the impact of bulk-handling extension on the market for jute, although the smaller reduction in jute consumption in developing countries over the past decade reflects the continuing widespread use of food sacking and a slower rate of adoption of bulk handling transport technologies due to poor road and rail networks. In the longer term, however, further improvements in the infrastructure of the developing countries are expected to continue to constrain the demand for sacking.

During the last decade, diversified uses of jute accounted for small quantities of fibre. However, their share in the value of total exports is rising. Diversified jute products include geo-textiles for land erosion control, jute-reinforced plastics, jute laminates, pulp and paper, decorative fabrics, carpets and handicrafts. Between 1997-1998 and 2001-2002, the share of exports of diversified jute goods from India increased in terms of value from 10 percent to 24 percent of total export value, highlighting the potential for growth in the medium term and the opportunity for market expansion given effective research and development strategies and intensified marketing efforts.

In the period from 1998-2000 to 2010, global consumption of jute is expected to continue to contract due to competition from polypropylene and bulk-handling technology. It is projected that global consumption will decline by 1.07 percent per year from 2.89 million tonnes in 1998-2000 to 2.62 million tonnes in 2010. Consumption of jute and jute products in the developed countries is expected to continue to decline in the medium term, albeit at a slower rate than in the 1990s. A slowdown in the contraction of the market may reflect the gradual exhaustion of substitution possibilities between jute and competing products or technologies, at least in these countries. In the developing countries, consumption is expected to decline at an annual rate of 0.95 percent from 2.49 million tonnes in 1998-2000 to 2.33 million tonnes in 2010.

In India, the largest market in the world, consumption of jute products is likely to remain at approximately 1.6 million tonnes in spite of the revised administrative regulations that determine the shares of jute and synthetic fibres in food grade sacks for agricultural commodities. The new provisions, introduced in the 2002-2003 season, allow a reduction in the amount of foodgrains packed in jute from 100 per cent to 80 percent and a reduction in the amount of sugar packed in jute from 90 percent to 75 per cent. These percentages are to be further reduced in the 2003-2004 season to 60 percent for foodgrains and 50 percent for sugar. These relaxations of the regulations are expected to weaken demand for jute in India, exert a downward pressure on its price, and reduce the jute market growth below that during the last decade. However, there are some factors, such as the preference for jute packaging for foodgrains due to its breathability, as well as jute sacks re-usability, that may work to offset the impact of these regulations.

In the medium term, jute consumption in Bangladesh is projected to grow at an annual rate of approximately 1 percent from 152 000 tonnes in 1998-2000 to 162 000 tonnes in 2010. This is partly due to the ban imposed on polythene shopping bags introduced in 2002 for environmental reasons, which should strengthen demand for jute. In China, it is expected that the consumption of jute will decline at around 13 percent per annum, faster than during the last decade, because of increases in the capacity of synthetic fibre production plants and the subsequent intense competition by synthetic sacks. Consumption in other countries in the Far East, such as Thailand, Viet Nam, Nepal and Pakistan, is also expected to continue to decline, while in the Near East, consumption is expected to grow at a slow rate, mainly driven by increases in the consumption of yarn for carpet backing in Iran. In Africa and Latin America, consumption is projected to follow a downward trend due to competition by synthetic packaging materials.

Trade

During the period from 1998-2000 to 2010, trade in both jute fibre and products contracted by 3.0 percent annually, following a long-term downward trend determined initially by the shift of the processing industry from developed to developing countries, as well as by faster rates of decline in consumption in non-producing than in the producing countries. As a result, global trade during the 1990s accounted for a diminishing proportion of total global production.

In the medium term, as consumption in both non-producing and producing countries continues to decline, it is expected that trade in jute fibre and products will contract slowly from 948 000 tonnes in 1998-2000 to 920 000 tonnes in 2010.

Exports of fibre are projected to remain at around 250 000 tonnes. Further reductions in trade in the medium term are expected to be constrained by China's strengthening import demand. China was a net exporting country during the period 1979-1994, and although net imports have been erratic during the last years of the 1990s (e.g. 100 000 tonnes in 1998 and 4 500 tonnes in 2000), production is expected to contract faster than consumption, resulting in an increase in imports to 41 000 tonnes by the year 2010. China’s emergence as an established net importer in the world market is expected to increase the proportion of jute traded, from 36 percent of total world production in 1998-2000 to 39 percent in 2010. It is expected that the rate of growth of fibre imports in China will offset the fast decline in consumption and import demand by Pakistan, a traditional importer of fibre.

As the jute processing industry has now shifted entirely to the developing countries, exports of yarn are expected to decline in line with the global market. Intense competition by polypropylene will depress trade in hessian cloth, which is likely to decline at a faster rate than total trade. Sacking and carpet backing are likely to be the main jute products exported.

Bangladesh is expected to remain the largest net exporting country accounting for over 75 percent of world trade in aggregated jute fibre and goods. However, exports are projected to contract in line with the global market developments by an annual rate of 0.62 percent from 742 000 tonnes in 1998-2000 to 703 000 tonnes in 2010. Net exports from India, the second largest net exporting country, are expected to remain stable at approximately 185 000 tonnes.

Issues and uncertainties

In general, it is expected that the world jute market will continue to contract in the medium term, albeit at a slower rate than in the past decade. Increased capacity in the synthetic fibre industry, especially in East Asia, is expected to increase polypropylene's competitiveness vis-à-vis jute fibre, and further erode the demand for the major jute products, such as sacking and carpet backing, thus exerting downward pressure on jute prices. Producers are expected to react to lower jute prices by reducing the area under jute and decreasing production.

Table 2.72. Jute: area planted and fibre production, actual and projected