International Jute Study Group (IJSG)
Jute Value Chain Analysis Study Report
Khaled Golam Mortuza Senior Research Assistant
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July 2013
2
Executive Summary The objective of the study is to analyze various supply chains in jute economy to investigate how these chains can be in a practical way help the stakeholders under existing trade settings. Value chain analysis, as a tool, has been applied to understand various supply chains as well as the export strategies. It highlighted various subsisting challenges both at the production, processing and marketing segments and come up with plausible solutions, further scopes to analyse that are currently being missed. Using value chain analysis, the study analyzes the systemic issues faced within the whole process—from farming to processing to exporting. It was found that jute as a sustainable and environment friendly natural commodity that can have potentialities to add values at every stages of its lifespan. It also has wider environmental benefits that come from the use of sustainable methods. As a fast growing industry, the sector needs to tap immediately the extended market demand with quality jute fibre and products. In terms of relationships among the various actors in the value chain, the overall picture is positive. The average percent fibre value addition at the farmers level is 23.09% but the overall production cycle add more than 40% of average values. Raw jute export additional 8.82% value is added. There are few raw jute exporters and mills found in Bangladesh who process and export raw jute in the form of cuttings of different size and add up to 53% of average values in raw jute export. At the industry level the average value addition of hessian, CBC, sacking and yarn varies in between 24.77% to 58,91% depending on the various products. The spinning mills add 32.95% average value to the process. Composite mills are also the raw materials suppliers (FJF fabrics) for Jute Diversified Product (JDP) sector and contribute additional 110% average values in two stages 70% value addition for raw jute to fabric yarn production and 40% for Yarn to fabric production.The JDP sub-sector found highly promising and in some cases value addition is about 500% as these products have increasing global market demand. Current statistics show that Bangladesh exports nearly one-fourth of its jute in raw form to other countries. 25% and 30% of jute is consumed by the composite mills and spinning mills respectively. A large portion of raw jute - around 16% is recorded as closing stock on yearly basis which indicates lack of consumption capacities of the country. At the production level, the issue of availability of certified HYV seed is problematic. Quality seeds not only increase the productivity but also it minimises cost of production. On the other hand, scarcity of water at the jute production season for retting purpose is now at breaking point. Alternate improved retting practices need to be implemented immediately. it is noted that, good quality jute fibre can be ensured through ensuring better retting system. Moreover, applications for traditional products need to be look upon in the context of modern market demand. Jute geotextiles, jute composites, jute blended geotextiles etc. could be in focus in this regard. A concerted effort to develop specifications /standards and new application areas need to be carried out. One of the major constraints of the jute value chain is the lack of business services at the steps in the value chain - production, raw jute trading, processing and exporting level etc. Among other policy issues that needs immediate action for the betterment of jute sector in Bangladesh are: adoption of minimum support price, development of raw jute market management, implementation of Compulsory Packaging Act for enhancing domestic consumption, a strategic product market-mix of domestic consumption and global expansion action plan, adoption of contract farming model and appropriate R&D support for Government, industry and other 3
international cooperation.
1. Introduction A value chain describes full range of activities required to bring a product or service from conception, through the different phases of production - involving a combination of physical transformation and the input of various producer services, delivery to final consumers and even final disposal after use. It does not exist in the sense of having a tangible reality rather simply depicting a framework for trying to understand how the system works. Analyzing market information on a particular market is needed in order to understand various aspects of the value chain including value chain players, characteristics and the enabling environment. The concept of value addition ideally represents the value created during the production or manufacturing process conducted by each individual cluster or establishment. It is measured as the difference between the value of all goods and services produced and the value of those purchased non-labor inputs which have been used in the production process. Value chain analysis helps to explain the distribution of benefits, particularly income, to those participating in the global economy. This makes it easier to identify the policies which can be implemented to enable individual producers and countries to increase their share of these gains. The current endeavor is commissioned by the International Jute Study Group (IJSG), an intergovernmental body set up under the aegis of UNCTAD, to function as the only International Commodity Body (ICB) for jute, kenaf and other allied natural fibers. IJSG has the mandate for development of the jute sector, role for the private sector and focusing on commercialization, sustainable development, poverty alleviation through promotion of jute, kenaf and other related commodities. 2. Objective The objectives of the study are: i. to find out the existing distortions in the chain so as to maximise the value addition at every stage. ii. to find out the levels of ‘cost addition’ at each stage so as to optimize the cost of the products to keep it competitive. iii. to find out the ‘margins’ availed by different players and find out ‘unfair disparities’ if any iv. to put up a model for an ideal value chain which incorporates objective (i) to (iii) and is sustainable. v. Identify necessary external and internal players and strategic/ policy options to achieve objective (iv) It analyzes the existing various supply chains with an aim to investigate how these chains can be in a practical way help the jute stakeholders under local, regional and global trade settings. It also canopy the existing constraints faced by the chain stakeholders together with a framework which outlines how the various chain actors can upgrade their position within the existent market system in Bangladesh. 3. Methodology The study used both primary and secondary data available from various sources. A field visit to Faridpur, Rajbari and Manikganj districts had been completed in order to get the cost of production, local market structure and related other information and knowledge. A structured set of questionnaire and list of farmers interviewed can be found at Annex-3 and Annex-4 respectively. 4
Components of analysis were - functional analysis, flow analysis, technical analysis, financial analysis, economic and social impact analysis. Functional analysis was performed to identify the chain stakeholders along with the functions they perform within the commodity chain. Flow analysis helped to identify the various chain flows that are necessary to understand the insights into different sub-flows of the commodity. Technical analysis revealed the constraints of the stakeholders in the chain. This was necessary to understand and framing the potentials of the plausible growth strategy. Financial analysis was done to get the chain stakeholders profit analysis and value addition, distribution of value added. The overall efficiency was measured by analyzing the relative earnings of each agent compared with their value added. Economic and social impact analysis was done to reveal the degree of the vulnerability of the stakeholders viz. the total number of households dependent on the commodity, the total value generated by the chain, distribution of value generated by the chain stakeholders etc. The sequences of actions were: 1. Mapping the value chain to understand the characteristics of the chain actors and the relationships among them. 2. Identifying the distribution of actors benefits in the chain by analyzing the margins and profits within the chain and therefore determining who benefits from participating in the chain and who would need support to improve performance and gains. 3. Defining upgrading needs within the chain by assessing profitability within the chain and identifying chain constraints with upgrading solutions. These may include interventions to improve product design and quality and move into more sophisticated product lines to gain higher value and/or diversify production. 4. reorganizing the production system or invest in new technology to upgrade the process and enhance chain efficiency. 5. Emphasizing the governance role within the concept of value chain and the structure of relationships and coordination mechanisms exist among different chain actors. 4. Jute in Bangladesh Jute is a natural fiber with golden and silky shine. It is grown in Bangladesh, India, Nepal, Thailand, Myanmar and China but the best quality jute is produced in Bangladesh. Jute is called in different names in different parts of the world. For instance, jute fiber is often called Hessian fiber, jute fabrics are also called Hessian cloth, and jute sacks are called Gunny Bags in some European countries. The fabric made from jute is popularly known as Burlap in North America. In Spanish, jute is called Yute and jute fabrics are called Arpillera. It is used to make gunny bags, ropes, carpet, geotextiles, twin, fine yarns, cloths mixed with cotton etc. Jute fiber is entirely biodegradable and recyclable and thus environment friendly. Jute and jute products are the major agricultural export items of Bangladesh. Bangladesh earned USD 805.82 million in year 20112012 from raw jute and jute goods export and USD 860.16 million in 5
year 2012-2013 which is 6.74% higher than the previous year. (Source: Export Promotion Bureau, Bangladesh). It is called the golden fiber of Bangladesh. In Bangladesh two species of jute are cultivated in two ecosystems viz. Corchorus capsularis in low land it can withstand water logged condition and Corchorus olitorius under upland condition. Presently jute is grown on about 0.50 million ha which is 2.6% of the total net cropped area. Out of this C. capsularis occupies 20% and C. olitorius occupies 80% area and their productions are 0.96 million bales and 4.37 million bales respectively. Apart from jute there are two other minor fiber crops such as kenaf (Hibiscus cannabinus) and mesta (Hibiscus sabdariffa) are sporadically cultivated in some areas of the country. The area of kenaf and mesta cultivation of the country is about 0.15 lakh hectare and primarily used as like as jute fiber. The area, production and yield of jute in Bangladesh for the last few years reveal that the average area of jute is 522 thousand hectares of land with average production of 1154 thousand tones. From the statistics it is clear that area and production both have sharp upward and downward directions that indicate various factors within. Jute is being pushed to the marginal land due to expansion of food crop cultivation during this period. However yield per unit area (ha) has increased from 1.73 tons to 2.43 tons over this period. This might be happened due to dissemination of modern technologies including high yielding varieties of jute at farmers level. But the average yield obtained from varietal demonstration during the last few years at farmers field is over 2 tones except year 2009-2010. One remarkable point here is that mean yield per hectare of the modern varieties of jute at research station with optimum management is around 4 tons per hectare (22.20 bales) which is practically double of the national average. So, there is a wide yield gap between national average and on research station yield. Bangladesh Jute Research Institute (BJRI) should try to develop high yielding varieties for the stress environment and confer attention to disseminate production technologies among the jute growers of the country.
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The importance of jute got global momentum due to sharply growing consciousness with environment. Bangladesh
could
utilize
this
opportunity by expanding jute
cultivation in the non-traditional areas, such as -
prone and hilly areas. Currently, jute is being cultivated around 4.74% cultivation area in Bangladesh. The above mentioned graph show the major cro There is an opportunity for promoting jute and al Bangladesh. C. capsularis varieties and a kenaf variety in the saline belt.
Jute sector at a glance: 2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
Cultivation Area (in hectare)
533.4
500
408.1
485.8
587
620.2
Opening Stocks (in ‘000 tonnes)
0.3
19.5
68
6.3
0.3
189.9
Production (in ‘000 tonnes)
990
990
931
1080
990
1 323.1
Total Supply (in ‘000 tonnes)
990.3
1009.5
999
1086.3
990.3
1 513.0
Mill Consumption (in ‘000 tonnes)
486
468
617.8
650
540
820
Village Consumption (in ‘000 tonnes)
45
45
60
60
50
50
Closing Stocks (in ‘000 tonnes)
20
1.5
6.3
61.3
31.9
247
Total Domestic Requirements (in ‘000 tonnes)
551
514.5
684.1
771.3
621.9
1 117.0
Exports (in ‘000 tonnes)
439.3
495.5
314.9
315
368.4
396
Source: FAO and IJSG Website 7
5. Value Chain Map & Relationships Jute is a well-established sector in Bangladesh with decades old relationships and marketing channels. At the national level, jute is a major contributor to Bangladesh’s GDP and serves as a cash crop to millions of farmers. Faridpur and Madaripur are the sources of best quality jute in Bangladesh. Although the end markets are mainly found in Dhaka or overseas, but, it was found a well-functioning market system and dynamic private firms at every step of the chain as shown in the value chain map below:
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The value chain typically begins with input suppliers of seed, fertilizer, pesticides and other. The farmers typically sell to a trader or series of traders at the local haat (market) who act as middlemen for either the raw jute exporters or processors. From this point, the product flows diverge - some raw jute are directly exported to other countries while the remaining goes to various processors, for example, at the spinning and composite mills, who typically export it as yarn, hessian and other forms of product. These composite products also used as input materials of a huge range of jute diversified products and goods. The following table showing cost and margin analysis at various value chain stages. It also depicting average percent value addition at each level. It is mentionable that overall value addition at the farm house level is over 40%. Cost of production details can be found in Annex-1. But, farmers directly contribute 23.09% of added value while calculating values only seed to fibre. The raw jute traders do not add additional values to the chain but consume 15.07% additional values at the production level where farmers could have possibilities to enjoy more. In case of raw jute export, the additional 8.82% value is added in the jute economy of the country. At the industry level composite mills produces hessian, carpet backing cloths, sacking etc. and added additional 57.40%, 58.91% and 24.77% average values respectively. It is to be noted that composite mills are the major raw materials suppliers, for example - FJF fabrics, for Jute Diversified Product (JDP) sector and contribute additional 110% average values in two stages - 70% value addition for raw jute to fabric yarn production and 40% for Yarn to fabric production. The spinning mills produces 9
various types of yarns and add 32.95% average value to the process. There are few raw jute exporters and mills found in Bangladesh who process and export raw jute in the form of cuttings of different size and add up to 53% of average values in raw jute export. Another very promising section in Bangladesh is jute based diversified product manufacturing where the average value addition seems to be pretty higher - in some JDP products average value addition is nearly 500% as these products have huge global market. Cost and Margin at Production and processing level: Production cost / Purchasing price (in taka)
Selling price (in taka)
Margin (in taka)
% Value addition
Farmer
32.65
40.19
7.54
23.09%
Raw Jute Traders
40.19
46.25
6.06
15.07%
Hessian
46.25
72.80
26.55
57.40%
CBC
46.25
73.50
27.25
58.91%
Sacking
42.50
53.03
10.53
24.77%
Yarn
46.25
61.49
15.24
32.95%
Raw Jute Export
42.50
46.25
3.75
8.82%
Fine Jute Fabric (FJF)
52.5
110.25
57.75
110%
110.25
284.32
174.07
157.89%
Diversified Product (Bag)
In Bangladesh jute economy, there exists various well functioning chain relationship. Followings are few of them: 1. Farmer - Raw jute trader - Jute exporter - End user (Global) 2. Farmer - Raw jute trader - Spinning mills - Exporter ( apart from mills directly) - End user (Global / National) 3. Farmer - Raw jute trader - Composite mill - Exporter (apart from mills directly) - End user (Global / National) 4. Farmer - Raw jute trader - Composite mill - JDP manufacturer - JDP exporter (apart from JDP manufactures directly) - End user (Global / National) In terms of relationships among the various actors in the value chain, the overall picture is positive with large numbers of buyers and sellers at each step of the jute value chain. The chain also depicted that farmers and other sellers of jute or jute products have the opportunity to trade around and receive the best price possible for their product based on prevailing market conditions and the quality of their product.
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The above mentioned graph show how per kg. of jute add values on its various stages over different product manufacturing and export chains. It is found that JDP sub-sector is the tallest and sacking is the lowest most bar. From the export figure of various jute products in Bangladesh (shown in section 5.4, page-13) it is found that hessian and CBC export has sharply gone down in recent years, while at the same time yarn export has moved upward. Here noted that, in terms of percent value addition hessian and CBC has higher value over yarn. It is also found that sacking, which is the lowest most value addition product, has relatively more higher share in the export market. Thus, Bangladesh should focus to maintain appropriate balance in between production and consumption matrix of the jute economy as well as a market mix in between domestic and global expansion.
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The above showing graph depicting distribution percentage of jute in both domestic consumption and export pattern in Bangladesh. The significant issues here in jute sector is that the country exports nearly one-fourth of its jute in raw form, with approximately half going to India. 25% and 30% of jute consumed by the composite mills and spinning mills respectively. A large portion of raw jute have not been consumed and recorded as closing stock each year which indicates lack of domestic consumption capacities of the country. Literature review also show that about 15% of Bangladesh’s jute is consumed locally whereas in case of India it is over 50%. One of the reason of this internal consumption might be due to strictly enforced regulations on jute packaging in India. But, mandatory packaging act is not mandatory yet in Bangladesh, where there is a potential for huge increase in domestic consumption. Again, almost 10% of India’s production is high value products, while Bangladesh comes in around 2%. This simple analysis shows the opportunity for Bangladesh to move towards higher value added products and create more income and prosperity in recent years,for business-firms and smallholders through higher revenues and margins. 5.1 Input Suppliers Jute production mainly requires seed, pesticides and fertilizers as input. Out of these, seed is the most important factor in case of Bangladesh. Based on the field observation and other sources it was found that jute seed is sold for a very short period of time - just before the start of the season. There are various seed retailers in the market who sell seed directly to the farmers. Seed retailers mostly sell Indian seed which occupied approximately 80-85% of the market size. The rest 1520% is supplied by the Bangladesh Agricultural Development Corporation (BADC). These retailers mostly procure seed from the importers. In very few cases, retailers directly import from India and then sell it to the farmers. Other than these permanent seed retailers, hawkers and mobile seed vendors also sell jute seed. The basic issue regarding supply of certified seed is that the government licensing system for seed import is so inconvenient that the vast majority of the seeds arrive too late for the sowing season. They are in some cases stored in sub-standard conditions until the following year resulting germination becomes problematic.
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Discussions with farmers through individual interviews revealed that in jute growing, pest attacks are minimal. Therefore, the use of pesticide is somewhat insignificant in jute production. On the other hand jute requires comparatively less amounts of fertilizer than is required for competing other crops. The fertilizer required for jute varies depending on the previous crop cultivated in the same land. For example, if jute is cultivated after onions, it requires less amounts of fertilizer. 5.2 Producers In Bangladesh, hundreds of thousands of farmers are engaged in jute production as part of their annual crop cycle. The jute production suitability map can be seen below. Although jute cultivation requires relatively high expenditures on inputs, farmers still appear to earn net margins. Jute is grown in Kharif-1 season mostly under rainfed condition in the following cropping patterns: ● Jute - Rice – Wheat / Potato / Maize / Chilly / Tomato / Coriander / Onion / Garlic ● Jute - Radish - Potato / Amaranths / Sweet gourd ● Jute - Black gram – Wheat ● Jute - Green gram – Lentil / Mustard The availability of retting water in time is becoming a limiting factor for producing quality jute. Due to global warming it is observed that the rainfall pattern is changing fast. So new technologies should be developed for utilizing whole jute plant in the jute growing areas where water is a limiting issue. As, water issues have a serious impact on the retting process and sometimes degrade quality of the fibre the issue of introducing improved, water efficient retting processes – for example, ribbon retting is highly needed. Another opportunity to increase production is to introduce saline resistant strains of jute in the coastal areas based on new varieties currently being promoted by Bangladesh Jute Research Institute (BJRI). The logic is that as the global demand for natural fiber is increasing day to day and we have to sacrifices our good land for food crops, so the better option would be to explore the saline zones for jute cultivation. Another challenge is to produce and distribute quality certified seed. Because jute is a notified product in Bangladesh, the government holds the licensing of seed imports. What tends to happen is that seed arrives too late for the sowing season and sits for 10 to 11 months in sub-standard conditions where it germinates. This leads to poor quality of production, yet farmers have little choice but to purchase it. As can be seen in the cropping patterns mentioned above an important factor with jute is that it could be inter-cropped with other vegetables. 13
Price of Raw Jute in Bangladesh (July 2013) (Taka per kg)
TOP
MID
B.BOT
C.BOT
X.BOT
White
56.25
53.75
51.25
45.00
41.25
Tossa
57.50
55.00
52.50
46.25
42.50
Mesta
56.25
53.75
51.25
45.00
41.25
Source: Bangladesh Jute Association and IJSG website
The prices of raw jute shown in the above table. From the field visit it was also found that B.BOT and C.BOT are the categories where jute mills have relatively greater interests to purchase. Composite mills mostly use these grades. in case of fine yarn production, at local level, very few mills uses relatively higher quality jute. From the secondary sources, but not practically found, another value addition at the production level that ensures bulk use of raw jute is making paper pulp from green jute plant that also minimizes the retting problem in the water scare area found practically less imperative. 5.3 Processing The export growth is reflected by new investments and the attitude of the private sector. The growth data reinforced a strong indicator that private sector sees a bright future in the jute sector in Bangladesh. Another sub-sector that exhibited optimism and apparent growth is the high end jute diversified products or handicrafts segment. Based on discussions and interviews with progressive diversified product manufacturers and exporters, they are seeing significant growth potential based on a combination of easily accessible raw materials, relatively low cost and high productivity labor and innovative high end processing and design. For now, these JDP firms are clustered in Dhaka, but investment incentives could be put in place to bring them to regional or local places in Bangladesh. Bangladesh Jute Research Institute (BJRI) has developed a technology for producing lightweight shopping bag that could easily be popularized over the country and abroad. Besides, a number of technologies for producing eco-friendly jute goods which could be disseminated in the global market will add value in the forward and backward chain. On the other hand, jute industry is differentiated by inadequate technology development and the absence of large multinational players. The relatively small size of the industry has also contributed to its weakness in the markets, resulting inadequate capacity to perform to respond quickly to market needs with consumer friendly specifications and standards for new products have affected the growth of this industry. Inadequate research and development in products and lack of improvement of processing machinery have also contributed to the present state of affairs. Development of new products such as, composites, non-woven, wood substitutes etc. need to be experimented. Since the world is likely to experience a shortage of wood, a part of the paper production may have to be shifted to jute based pulp. Replacing wood in other appropriate applications will also be an area of research and development. Key links in the chain are the highly competitive networks of traders that buy raw jute from farmers and then sell it to various processors or raw jute exporters. These traders specifically do not add additional value on the product rather sharing cost being essential part of the chain. 14
Exceptions to all this, although Bangladesh and its exporters are dominant players in the export of jute yarn, they appear to be in some ways price takers in their negotiations with foreign buyers who mostly use the yarn for carpet backing. This came in the context of the recent downturn in demand because of instability in the Middle East and reduced demand for carpets. 5.4 End Market A prerequisite for building a competitive value chin is to identify market segments that have the potential or currently strong growth and the ability to support expanded production by the target chain. jute appears to be a sector like this. Bangladesh jute yarn sub-sector has exhibited 15% growth during 2006-2010. Besides, The 10% cash export incentive provides a very comfortable margin for exporters of jute products on top of any standard margin that they make in their business. The following table highlight export of raw jute products by type from Bangladesh: (in ‘000 tonnes)
Hessian
Sacking
CBC
Others
Total
2010-11
20.94
84.11
6.504
6.301
117.855
2009-10
23.147
68.931
8.219
5.501
105.798
2008-09
31.39
110.6
9.15
1.97
153.11
2007-08
42.833
113.954
18.526
36.929
212.242
2006-07
37.787
104.508
18.617
32.499
193.411
2005-06
56.241
118.099
21.048
19.217
214.605
Source: BJMA, MoTJ-GoB, IJSG Website
It is found that among the products sacking volumes highest. The export trend of hessian and CBC sharply gone down over time. Bangladesh should focus to maintain appropriate balance in between production and consumption matrix of the jute economy as well as a market mix in between domestic and global expansion. This will require more research and development reasonable support to strategies timely policy implication.
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With the changing scenario in global natural fiber markets, development strategy for promotion of jute is highly necessary. Over time, jute lost its market share to synthetics and also to technological changes in the packaging sector. The declining trend in consumption is also reflected in the declining trend of prices of both jute and jute products. Most of the jute producing countries has moved up the value chain in manufacturing/textile processing. Jute’s contribution to exports has declined as a percentage of total exports of the major jute producing countries. In spite of low prices, farmers have continued to grow jute mainly not having suitable alternatives. Hence, its contribution to agriculture and employment remains significant. The loss of market share by jute to synthetics has been attributed mainly to the price factor. In addition, synthetics, as an industry, has been more progressive in terms of manufacturing new products to meet exact end user specifications and have invested substantial sums of money in research and development. Applications for traditional products need to be look upon in the context of modern market demand. Jute geotextiles, jute blended geotextiles etc. could be in focus in this regard. Geotextiles are high volume products and if jute can get a good share of this market, the impact could be substantial. A concerted effort to develop specifications/ standards and new application areas need to be carry out. Synthetics are also dominated by huge multinational and national companies. They have, therefore, been able to displace jute from many segments of the market by superior product specifications and financial strength. A driving force behind the growth in the use of jute are rising prices of petrochemicals which are used in competing products such as plastic bags, yarns and sacking. In addition, a global shift towards natural fibers is also fueling demand for jute and other natural fibers such as coir that are viewed as sustainable and cost competitive in the context of high oil prices. 5.5 Service Providers and Mechanisms Service providers play a key role in enhancing the competitiveness of the entire jute industry. 1) Several government organizations are providing support services to jute industry, such as:
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Department of Agriculture Extension (DAE) provides information to farmer through training and demonstration. It also disseminates new varieties and technologies invested by Bangladesh Agriculture Development Corporation (BADC) and BJRI. Bangladesh Agriculture Development Corporation (BADC) produces jute seeds and distributes to farmers through their own dealer network. It produces seeds through its contract farming system. Bangladesh Jute Research Institute (BJRI) is a research based organization works particularly on jute. They invent new varieties and also jute based technologies and disseminate to farmers through DAE. Jute Diversification Promotion Centre (JDPC) is another government organization promoting diversified jute products. It assists enterprises in identifying new products, designs and also markets. Bangladesh Jute Mills Corporation (BJMC) is a government owned mills association. It provides market and price related information to its members. 2) There are also a number of jute-based private sector associations: Bangladesh Jute Association (BJA) is the association of raw jute exporters. Bangladesh Jute Goods Association (BJGA) is the association of jute goods exporters. Bangladesh Jute Spinners Association (BJSA) is the association of jute spinning mill owners. Bangladesh Jute Mills Association (BJMA) is the association of private jute mills owners. Many of the members of above associations are simultaneously members of several associations. However, all of these associations regularly update their members on new technology and market dynamics and some of them also publish newsletters. Quality Control: This service is provided to ensure the quality of the products in different level of the value chain. BADC ensures the quality of its own produced seed. Seed Certification Agency (SCA) controls the quality of the imported seed. Marketing: Individual mills and JDP manufacturers play an important role in marketing of their products. However, BJMC, jute agents and JDPC also work in marketing of the jute and jute goods. Packaging: Packaging is involved in different levels of the value chain such as in the trader level, mill level and export level. There are mainly two types of packaging i.e. kaccha bale and pucca bale. Pucca bale is the one where jute is compressed in one stack and kaccha bale is the one which is not compressed. Transportation: Different types of transports i.e. boat, truck, ship etc. are used for transportation of the jute and jute goods. In the local level transportation, truck and van are the most common. For export purpose, sea shipping is the only option as air transportation is not cost effective. 5.6 Business services development : 17
One of the major constraints of the jute value chain is the lack of services, especially in the first steps in the value chain. A separate map can be drawn below to make this visible.
6. Policy Issues: There are few policy issues that have a positive and negative impact on the jute sector: Export incentive: Exporters of jute products receive a 10% cash incentive of their products. Seed import licensing system: licenses are currently given to many small importers who don’t have capacity to import in a timely manner nor store seed in a professional way which resulting increasing spoilage rates. Credit constraints for jute mills: Many of the jute mills were taken by government just immediate the independence of Bangladesh. After then it was transferred back to private owners, where, getting loans for the original private owners is difficult. On the other hand, under government operation the mills went into default. The current private owners struggle to get financing. In order to make operation of jute mills financially viable, the debt burden needs to be restructured and written off where necessary. The private mill owners (those which were under government in the middle) have already raised this issue in the recently formed Jute Commission of Government of Bangladesh, but the issue is yet to be resolved. Some other policy issues that needs immediate action for the betterment of jute sector in Bangladesh, for example: ● Initiatives for sufficient HYV production and timely supply of certified jute seeds ● Solving the issue of water scarcity for retting of jute by applying modern techniques. ● Reform in raw jute market management ● Need to implement Compulsory Packaging Act for enhancing domestic consumption. ● Creation of a reliable supply chain for raw jute and jute products with win- win situation for all players ● Market-mix of domestic consumption and global expansion ● Time for minimum support price for Bangladesh ● Solving the challenges from bio-plastics ● Adoption of contract farming model from other cash crops ● Spending on R&D – role of Government, the industry and international cooperation ● Product development with market feedback and required market promotion need to be monitored and evaluated regularly 18
7. Conclusion: Jute sector holds great potential in terms of geographic coverage, employment generation, environment protection and contribution to the national economy both in internal income generation and export earnings of the producing country. The existing market competitiveness potential indicators highlights the increasing global demand of jute in the coming years. studying various chain relationships reveal that jute commodity chain is a buyer-driven chain where specifications and standards determined by the end user upon the suppliers. This demand is likely to be increasingly met by producers with better support services, know-how, and the economic and regulatory infrastructure necessary to allow them to shift to sustainable production. A global consciousness has already been developed against the use of artificial fibres and synthetic products. This has created opportunities for jute as being replaced by the environmentfriendly commodity resulting a huge potential market for jute is being created. To convert these potential markets into real markets, comprehensive market promotional activity is highly needed. To meet this demand, Bangladesh jute sector has scopes for increasing production through both horizontal and vertical expansion (through increasing the yield). For this,farmers need to fetch a better price through knowledge of their fibre grade and also corresponding price and also to avail themselves of good quality seed for higher yields and ensured retting facilities. Therefore, initiatives for sufficient HYV production and timely supply of certified jute seeds and retting of jute by applying modern techniques is highly needed. In addition, jute mills with access to financial support from commercial banks can pull the demand up for raw jute. Again, implementation of Mandatory Packaging Act could play a vital role in promoting domestic consumption. The entire sector need to strategies appropriate balance in between production and consumption matrix as well as a market mix in between domestic and international expansion. Diversified product development found highly value added sub-sector among any other sub-sector that needs a holistic strategy initiatives through more investment in R&D. It will help to locate prospective future markets with required product specifications. The present study tried to cover up the issues and aspects of jute sector in Bangladesh. It also identified the loopholes, which created further space to the policy makers and support agencies to act together. Taking proper measures to fill these gaps can certainly improve the situation and lead to a more vibrant and competitive jute sector in Bangladesh.
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Annex-1: Calculation of Average Cost of Production: (Calculated on 0.5 Acres of land) Input Items
Cost in Taka
Seed
300
Land Preparation with Fertilizer
1,000
Weeding (2 times)
2,500
Irrigation
1,600
Fertilizer
1,500
Thinning
1,200
Harvesting
2,200
Post Harvest Cost
1,200
Fibre Extraction and Drying
8,000
Total input cost =
19,500
Production: Average fibre production = 16 maund Average stick Production = 28 maund ( 75% of the fibre) Other bi-product production = 3 maund Per kg. fibre production cost = 32.65 taka ( 1 maund = 37.32 kg.) Selling: Fibre selling @ taka 1500 per maund (year average) = 1,500 X 16 = 24,000 taka Sitck selling @ taka 150 per maund (year average) = 150 X 28 = 4,200 taka Per kg. fibre selling price = 40.19 taka % Value addition at production stage = = 44%
20
Annex-2: Calculation of Per Kilogram Jute Export Price: Export Price of Raw Jute and Jute Mill Products in Bangladesh: Hessian (taka per 100 yard)
Sacking (taka per 100 bags)
CBC (taka Per tonnes)
Yarn (taka per tonnes)
Raw Jute (USD/Tonnes)
2005-2006
1353
3429
46713
-
-
2006-2007
1243
4594
54347
46767
365
2007-2008
1863
4692
63659
46865
422.9
2008-2009
1904
5489
65095
48673
564.6
2009-2010
2161
6446
75780
67024
831.3
2010-2011
2924
8573
96500
86112
830.8
2011-2012
2980
8869
112460
73482
589.8
Average Export Price
2061
6013
73508
61487
600.73
Source: BJMA, BJMC, FAO, MoTJ-GoB and IJSG Website
for hessian: 100 yards Hessian = 28.31 kg of jute fibre. Hence, average per kg. export price of hessian is 72.8 taka for sacking: 100 bags sacking = 113.4 kg of jute fibre. Hence, average per kg. export price of hessian is 53.03 taka for CBC: 1 tonnes CBC = 1000 kg of jute fibre. Hence, average per kg. export price of hessian is 73.51 taka for yarn: 1 tonnes yarn= 1000 kg of jute fibre. Hence, average per kg. export price of yarn is 61.49 taka for raw jute: 1 tonnes raw jute = 600.73 US $. ~ 46,256 taka (app.) Hence, average per kg. export price of raw jute is 46.25 taka
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Annex-3: Questionnaire for Production Cost Analysis
Farmer Information Name * Address *
Section-1: Land setting and preparation related information (In case of own / family labor, cost have to be calculated as per the market value) 1. Which of the following type of Jute you plant? * ● White ● Tosha ● Kenaf / Mesta ● Other: 2. How many acres of land used? *(Acre) 3. Land Ownership Pattern? * ● Own land ● Sharecropping ● Mortgage ● Lease ● Other: 4. If leasing, what amount of money you have to pay anually? *(Taka) 5. Ploughing cost *(Taka) 6. If rented, What amount of money you have to pay for Ploughing? *(Taka) 7. Cost for using Mechanical Instruments, for example, Power Triller *(Taka) 8. If rented, What amount of money you have to pay for using mechanical instruments? *(Taka) 9. Any other related costs ? *(Taka)
22
Section-2: Seed, sowing, insecticide, pesticide and irrigation related information (In case of own / family labor, cost have to be calculated as per the market value) 10. Amount of seed required *(Kg) 11. Seed Cost *(Taka) 12. Sowing Cost *(Taka) 13. Costs related to using of Insecticides and Pesticides *(Taka) 14. Costs related to irrigation *(Taka) 15. Any other related cost *(Taka)
Section-3: Fertilizer and organic manure related information 16. Which of the following fertilizers and Manures you used? * ● Urea ● TSP ● MOP ● DAP ● Organic Manure ● Other: 17. Amount of Urea used? *(Kg) 18. Cost for using Urea *(Taka) 19. Amount of TSP Used? *(Kg) 20. Cost for using TSP *(Taka) 21. Amount of MOP Used *(Kg) 22. Cost for using MOP *(Taka) 23. Amount of DAP Used *(Kg) 24. Cost for using DAP *(Taka) 25. Amount of organic and farmyard manures Used *(Kg) 23
26. Cost for using Organic and farmyard manures *(Taka)
Section-4: Information related to weeding, harvesting, retting, peeling (fibre extruction) and drying (In case of own / family labor, cost have to be calculated as per the market value) 27. Number of laborers required for weeding purpose * 28. Cost of laborers for weeding *(Taka) 29. Number of laborers required for harvesting purpose * 30. Cost of laborers for harvesting *(Taka) 31. Number of laborers required for retting of jute * 32. Cost of laborers for retting purpose *(Taka) 33. Number of laborers required for peeling/ fibre extruction of jute * 34. Cost of laborers for peeling/ fibre extruction purpose *(Taka) 35. Number of laborers required for drying of jute * 36. Cost of laborers for drying purpose *(Taka)
Section-5: Information on Production 37. Total production of jute fibre *(maund) 38. Total production of jute stick *(maund) 39. Market Price of Jute *(Taka) 40. Market Price of Jute stick *(Taka)
General Questions: 41. Why you produce jute? * 24
42. How did you get jute production knowledge? * 43. Have you got any training on jute production and marketing? * ● Yes ● No 44. if yes, where did you get it? * 45. Where do you get jute related agricultural information? * ● from other fermers ● Upazila Agriculture Office ● Radio / TV / Newspaper ● Private organization / NGO ● Local BJRI Station ● Other: 46. In which input area you feel barriers? * ● Seed ● Fertilizer ● Insecticide and Pesticides ● Irrigation ● Laborer ● Land ● Capital ● Availability of water for retting ● Appropriate machineries ● Transportation ● Other: 47. Do you use sprayer machine or modern effective equipments in applying pesticides. * ● Yes ● No 48. Where usually you sell your production? * ● Local Market ● Farias ● Arotder ● Industry ● Other: 49. Do you feel happy while trading your product *( in terms of price burgeoning, decision making when and where to sell) 50. What usually you do with the profit? *(Profit forwarding linkage / utilization of profit) 51. Any other Issue ..? *
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Annex-4 : A list of farmers interviewed Name
Village
Union
Upazila
District
1.
Abul Hasem Munshi
Maniknagar
Talma
Nagarkanda
Faridpur
2.
Rahim Mandal
Maniknagar
Talma
Nagarkanda
Faridpur
3.
Kholil Hawlader
Maniknagar
Talma
Nagarkanda
Faridpur
4.
Ruhul Amin
Maniknagar
Talma
Nagarkanda
Faridpur
5.
Ram Pada Sarker
Santosi
Talma
Nagarkanda
Faridpur
6.
Md. Chan Miah
Brahmankanda
Ambikapur
Sadar Upz.
Faridpur
7.
Md. Sheikh karim
Kabirpur
Kaijuri
Sadar Upz.
Faridpur
8.
Amir Uddin Sheikh
Darpanarayanpur
Goalanda
Sadar Upz.
Rajbari
9.
Md. Moniruddin
Darpanarayanpur
Goalanda
Sadar Upz.
Rajbari
10. Kasem Ali Sheikh
Darpanarayanpur
Goalanda
Sadar Upz.
Rajbari
11. Latif Sheikh
Darpanarayanpur
Goalanda
Sadar Upz.
Rabari
12. Kurban Khan
Darpanarayanpur
Goalanda
Sadar Upz.
Rajbari
13. Md. Alim Sheikh
Darpanarayanpur
Goalanda
Sadar Upz.
Rajbari
14. Mugur Ali
ChandirChar
Jagir
Sadar Upz.
Manikganj
20. Md. Sirajuddin
Nabagram
Sadar Upz.
Manikganj
21. Md. Abdur Rahim
Nabagram
Sadar Upz.
Manikganj
15. Md. Bashir Uddin
Garakol
Jagir
Sadar Upz.
Manikganj
16. Abdul Aziz
Diyera Golora
Jagir
Sadar Upz.
Manikganj
17. Md. Mizanur Rahman
Junikalsha
Shibalay
Manikganj
18. Md. Mahtab
Junikalsha
Shibalay
Manikganj
19. Md. Ershad Ali
Janna
Saturia
Manikganj
22. Md. Shamsher Ali
Saturia
Saturia
Manikganj
23. Md. Rajib
Saturia
Saturia
Manikganj
26
Annex-5: A List exporters visited
of
Mills,
JDP
manufactures,
traders,
CORR-The Jute Works House 27, Road 119, Block CES (B), Gulshann Dhaka 1212
The Golden Fiber Trade Centre Limited 109, Old DOHS, Banani, Dhaka
Janata Jute Mills Limited South Avenue Tower (7th Floor), SW (H)-2 7, Gulshan Avenue, Gulshan-1, Dhaka-1212
Haimokanti Fashion Cuttir Ltd. 6/7 Adarsha Chayanir, Ring Road Shyamoli, Adabor, Dhaka 1207
The Golden Fibre Trade Centre Ltd. 109 Old DOHS, Masjid Road, Banani, Dhaka 1206
Alam Fibre Impex House 6/A, Road 13, Gulshan 1 Dhaka 1212
Rochdale Biz Ltd. Plot 13, Lane 19, Block A, Section 10, Mirpur, Dhaka 1216
Asia Jute 13/2 Aurangajeb Road, Mohammadpur Dhaka-1207
Mawada Traders 96/1 Moneswar Road, Zikatola Dhaka 1209
27
