Jute Supply Response in Bangladesh
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SCP-13 Jute SupplyResponse in Bangladesh Public Disclosure Authorized FILECO PY Takamasa Akiyama WORLD BANK STAFFCOMMODITY WORKING PAPERS Number 13 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized i..i7i -) -7 E WORLD BANK STAFFCOMMODITY WORKING PAPERS Number 13 Jute Supply Response in Bangladesh Takamasa Akiyama The World Bank Washington, D.C., U.S.A. Copyright (© 1985 The International Bank for Reconstruction and Development / THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing September 1985 This is a document published informally by the World Bank. In order that the information contained in it can be presented with the least possible delay, the typescript has not been prepared in accordance with the procedures appropriate to fornal printed texts, and the World Bank accepts no responsibility for errors. The publication is supplied at a token charge to defray part of the cost of manufacture and distribution. The World Bank does not accept responsibility for the views expressed herein, which are those of the author(s) and should not be attributed to the World Bank or to its affiliated organizations. The findings, interpretations, and conclusions are the results of research supported by the Bank; they do not necessarily represent official policy of the Bank. The designations employed, the presentation of material, and any maps used in this document are solely for the convenience of the reader and do not imply the expression of any opinion whatsoever on the part of the World Bank or its affiliates concerning the legal status of any country, territory, city, area, or of its authorities, or concerning the delimitation of its boundaries or national affiliation. The full range of World Bank publications, both free and for sale, is described in the Catalogof Publications;the continuing research program is outlined in Abstracts of CurrentStudies. Both booklets are updated annually; the most recent edition of each is available without charge from the Publications Sales Unit, Department T, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from the European Office of the Bank, 66 avenue d'lena, 75116 Paris, France. Takamasa Akiyama is an economist in the Commodity Studies and Projections Division of the World Bank. Library of Congress Cataloging-in-Publication Data Akiyama, T. (Takamasa),1944- Jute supply response in Bangladesh. (World Bank staff commodityworking papers, ISSN 0253-3537 ; no. 13) Bibliography:p. 1. Jute industry--Bangladesh.I. International Bank for Reconstructionand Development. II. Title. III. Series:World Bank staff commodityworking paper ; no. 13. HD9156.J8B2527 1985 338.1'7354'095492 85-17979 ISBN 0-8213-0596-4 - iii - ABSTRACT This paper uses quantitative methods to identify major factors affecting jute supply in Bangladesh. As well as estimating the impact of the jute-to-riceprice ratio on acreage harvested, estimates of the impact on jute supply of weather variations, labor costs, fertilizer availability,value of jute sticks and irrigation availability were also made. The analysis of acreage and yield response was carried out at the district level as well as at the national level to identify district supply characteristics.A distinction was also made between tossa and white jute as the prices paid for these different varieties and the land on which they are grown differ. Some of the main findings include: (i) Jute acreage is very responsivenot only to jute and rice prices but also to agricultural labor costs, which differ from district to district; (ii) The production share of Tossa jute has increased substantiallyin the past 15 years because of its higher price and because it is less influenced by irrigation (expanded irrigation has expanded the potential for rice growing); (iii) Jute yields have increased in all districts over time and are positively influenced by fertilizer availabilityand jute prices; (iv) Higher yield increases were observed *in districts where tossa is mainly grown and where yields were below average 15 years ago; (v) The value of jute sticks has been an important factor affectingjute supply. The potential for jute production in Bangladesh has remained nearly constant for the past 15 years, as increasing yield has offset to a large degree the declining acreage caused by the expansion of irrigation and rice growing. The recent low levels of production were largely the result of low real jute prices during the 1979-82 period and adverse weather conditions. Under higher prices and more normal weather conditions jute supply is likely to expand through increases in acreage and yield. - iv - ACRONYKSAND ABBRVIATIONS B.B.S. - Bangladesh Bureau of Statistics HYV - High-Yielding Variety iJCS - Intensive Jute CultivationScheme MJ - Ministry of Jute and Textiles Conversion Factors 1 maund = 37.326 kg 1 bale = 180 kg = 4.822 maunds 1 long ton = 1.016 mt -v - TABLE OF CONTENTS LIST OF TABLES AND FIGURE ............................. vi I. INTRODUCTION AND SUMMARY ......................... ............ 1 II. AN OVERVIEW OF JUTE PRODUCTION IN BANGLADESH ...............9o**..... 5 III. DISTINCTION BETWEEN TOSSA AND WHITE JUTE PRODUCTION .................0 9 IV. AN ANALYSIS OF JUTE ACREAGE RESPONSE AT THE NATIONAL LEVEL.. ........15 Data ................................................... 15 Supply Response Specification. o.o.o.e.................... .... .o.. o... .17 Results . ................................... V. AN ANALYSIS OF JUTE ACREAGE RESPONSE AT THE DISTRICT LEVEL ..........25 VI. ANALYSIS OF JUTE YIELD RESPONSE ..... ... o.. ........... ..oo . .31 VII. IMPACT OF PRICE FLUCTUATIONS ON PRODUCTIONo...o..o................36 P-EFERENCES ............................................................ o38 - vi - LIST OF TABLES AND FIGURE Table 1: Acreage and Production of Major Agricultural Crops in Bangladesh, 1974/75, 1977/78, 1980/81 and 1982/83 .......................... 6 Table 2: Illustrative Cropping Patterns on Bangladesh Jute Farms........ 8 Table 3: Average Acreage and Production of Tossa and White Jute in Major Jute-Growing Districts, 1975/76-1982/83...... 4..**... *..... .10 Table 4: Producer Prices of Tossa and White Jute (Nominal).............. 12 Table 5: Estimates of Jute Supply for Bangladesh according to Three Official Sources, 1969/70-1982/83.......... ..................16 Table 6: Estimates of Bangladesh Jute Crop Damage Caused by Floods, 196-8................................................ ...........019 Table 7: Jute Acreage and Jute and Rice Prices in Bangladesh, 1970/71-1982/83............... .*o.................................oe.0.. 20 Table 8: Estimated Value of Jute Sticks, 1970-82 ................. 21 Table 9: Daily Wages of Agricultural Labor (without Food) by District, 1969/70-1982/83........ 6.......................................2 Table 10: Trends and Price Responses of Jute Acreage in Major Jute-Growing Districts***..*****.***** ........................28 Table 11: Estimated District-Wide Jute Yield Equations...................34 Figure 1: Real Producer Prices for White and Tossa Jute: Bangladeshl......l I. INTRODUCTIONAND SUNKARY 1. Because jute exports are the most importantsource of foreign revenue for Bangladesh, several studies, including previous studies by staff of the World Bank, have been carried out on jute supply response in Bangladesh.1/ In most of these earlier studies, the main focus has been the quantitative relationship between jute acreage and the jute to rice price ratio. Other possibly relevant variables such as irrigation,jute stick prices and weather were not explicitly incorporated into these quantitative analyses, although they were recognized as important factors affecting jute production. The present study examines the impact on acreage and yield of relevant non-price factors as well as jute and rice prices at the national and district level. In detail, the main features of the present study which distinguishit from other jute supply studies include: (i) Analyses of factors affecting area harvested at the district level. We expected and were confirmed in our expectations that jute supply response characteristicsdiffer significantly from one district to another. By distinguishingdistrict characteristicsin jute produc- tion we have been able to improve significantlythe understandingof the effects of factors affecting jute productionin Bangladesh; (ii) Quantitative analysis of factors affecting jute yields at the national and district levels. Past studies have dealt with explana- tions of yield determinantsin a crude manner. In the present study, we identifiedimportant variables affecting jute yield in each major jute-growingdistrict; 1/ See References at the end of the paper. -2- (iii) Distinction between the supply characteristicsof white and tossa jute. This distinctionwas necessary because the types of land where the two main jute varieties, tossa (olitorious) and white (capsularis),are grown, differ and because producer prices of the two jute varieties differ; and (iv) Quantification of the effects of factors relevant to jute supply other than producer prices of jute and rice, such as weather variation, the extent of irrigation and fertilizer distribution. 2. Following the summary the paper presents an overview of jute produc- tion in Bangladesh and a discussion of the distinctionbetween tossa and white jute production. Sections III and IV give an analysis of acreage response at the national