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Jute Supply Response in Bangladesh

FILE CO PY Takamasa Akiyama

WORLD BANK STAFF COMMODITY WORKING PAPERS

Number 13

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WORLD BANK STAFF COMMODITY WORKING PAPERSNumber 13

Jute Supply Response in Bangladesh

Takamasa Akiyama

The World BankWashington, D.C., U.S.A.

Copyright (© 1985The International Bank for Reconstructionand Development / THE WORLD BANK

1818 H Street, N.W.Washington, D.C. 20433, U.S.A.

All rights reservedManufactured in the United States of AmericaFirst printing September 1985

This is a document published informally by the World Bank. In order that theinformation contained in it can be presented with the least possible delay, thetypescript has not been prepared in accordance with the procedures appropriate tofornal printed texts, and the World Bank accepts no responsibility for errors. Thepublication is supplied at a token charge to defray part of the cost of manufacture anddistribution.

The World Bank does not accept responsibility for the views expressed herein, whichare those of the author(s) and should not be attributed to the World Bank or to itsaffiliated organizations. The findings, interpretations, and conclusions are the resultsof research supported by the Bank; they do not necessarily represent official policy ofthe Bank. The designations employed, the presentation of material, and any maps usedin this document are solely for the convenience of the reader and do not imply theexpression of any opinion whatsoever on the part of the World Bank or its affiliatesconcerning the legal status of any country, territory, city, area, or of its authorities, orconcerning the delimitation of its boundaries or national affiliation.

The full range of World Bank publications, both free and for sale, is described in theCatalog of Publications; the continuing research program is outlined in Abstracts ofCurrent Studies. Both booklets are updated annually; the most recent edition of each isavailable without charge from the Publications Sales Unit, Department T, The WorldBank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from the EuropeanOffice of the Bank, 66 avenue d'lena, 75116 Paris, France.

Takamasa Akiyama is an economist in the Commodity Studies and ProjectionsDivision of the World Bank.

Library of Congress Cataloging-in-Publication Data

Akiyama, T. (Takamasa), 1944-Jute supply response in Bangladesh.

(World Bank staff commodity working papers,ISSN 0253-3537 ; no. 13)

Bibliography: p.1. Jute industry--Bangladesh. I. International

Bank for Reconstruction and Development. II. Title.III. Series: World Bank staff commodity workingpaper ; no. 13.HD9156.J8B2527 1985 338.1'7354'095492 85-17979ISBN 0-8213-0596-4

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ABSTRACT

This paper uses quantitative methods to identify major factorsaffecting jute supply in Bangladesh. As well as estimating the impact of thejute-to-rice price ratio on acreage harvested, estimates of the impact on jutesupply of weather variations, labor costs, fertilizer availability, value ofjute sticks and irrigation availability were also made. The analysis ofacreage and yield response was carried out at the district level as well as atthe national level to identify district supply characteristics. A distinctionwas also made between tossa and white jute as the prices paid for thesedifferent varieties and the land on which they are grown differ.

Some of the main findings include:

(i) Jute acreage is very responsive not only to jute and rice prices butalso to agricultural labor costs, which differ from district todistrict;

(ii) The production share of Tossa jute has increased substantially in thepast 15 years because of its higher price and because it is lessinfluenced by irrigation (expanded irrigation has expanded thepotential for rice growing);

(iii) Jute yields have increased in all districts over time and arepositively influenced by fertilizer availability and jute prices;

(iv) Higher yield increases were observed *in districts where tossa ismainly grown and where yields were below average 15 years ago;

(v) The value of jute sticks has been an important factor affecting jutesupply.

The potential for jute production in Bangladesh has remained nearlyconstant for the past 15 years, as increasing yield has offset to a largedegree the declining acreage caused by the expansion of irrigation and ricegrowing. The recent low levels of production were largely the result of lowreal jute prices during the 1979-82 period and adverse weather conditions.Under higher prices and more normal weather conditions jute supply is likelyto expand through increases in acreage and yield.

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ACRONYKS AND ABBRVIATIONS

B.B.S. - Bangladesh Bureau of StatisticsHYV - High-Yielding VarietyiJCS - Intensive Jute Cultivation SchemeMJ - Ministry of Jute and Textiles

Conversion Factors

1 maund = 37.326 kg1 bale = 180 kg = 4.822 maunds1 long ton = 1.016 mt

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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.. .17Results . ...................................

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

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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 MajorJute-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 ThreeOfficial 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 MajorJute-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. INTRODUCTION AND SUNKARY

1. Because jute exports are the most important source 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 distinguish it 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 characteristics differ significantly from one district to

another. By distinguishing district characteristics in jute produc-

tion we have been able to improve significantly the understanding of

the effects of factors affecting jute production in Bangladesh;

(ii) Quantitative analysis of factors affecting jute yields at the

national and district levels. Past studies have dealt with explana-

tions of yield determinants in a crude manner. In the present study,

we identified important variables affecting jute yield in each major

jute-growing district;

1/ See References at the end of the paper.

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(iii) Distinction between the supply characteristics of white and tossa

jute. This distinction was 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 distinction between tossa and white

jute production. Sections III and IV give an analysis of acreage response at

the national and district level, respectively. Section V presents an analysis

of yield response. The last section discusses the possible impact of price

fluctuations on production.

3. The main findings of the present study are the following:

(i) Jute acreage is very responsive to changes in the real prices of jute

and rice at the national level. The estimated own-price elasticity

for jute is between 0.68 and 0.77 and the elasticity with respect to

the rice price is between -0.19 and -0.20;

(ii) Price elasticities for jute acreage vary with district over the range

0.4 to 1.0 and the elasticities with respect to rice prices range by

district from -0.16 to -0.70;

(iii) Agricultural wages also have an important impact on jute supply-the

higher the wage the lower the jute acreage;

(iv) Irrigation appears to have reduced jute acreage in a few districts,

especially in the Jat Area where white jute is mainly grown;

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(v) During the period 1970-84, the impact of weather on production was

severe in 1974 and 1984 but minor in other years;

(vi) The value of jute sticks is becoming an increasingly important part

of the total value of the jute crop;

(vii) The share of the tossa variety in total jute acreage and production

has increased in recent years. The reasons for this appear to be the

higher and more stable prices for tossa and the limited availability

of irrigation in areas where tossa is grown. The share of tossa is

likely to continue to increase and the rate of increase could be

enhanced by improved supplies of good quality tossa seed;

(viii) There are significant district-level differences in the trends and

fluctuations in jute acreage and yield. These differences arise from

differences in various factors including soil characteristics, extent

of irrigation, frequency of weather damage, level of agricultural

wages, competing crops and availability of fertilizers.

(ix) Jute yields have increased in all districts over time but fastest in

those districts where yields were lower. Another trend observed is

the higher yield increase in districts where tossa jute is mainly

grown and where flood damage is infrequent;

(x) In recent years, jute yields have reached the 3.5-4.0 bales/acre

level in all districts, a level which appears to be an upper limit

given present technologies;

(xi) Since jute yields have increased in many districts, compensating for

the long-term decline in jute acreage due to the increase in irriga-

tion (used mainly in rice production), jute's production potential in

Bangladesh has not declined. The low levels of jute production

4

experienced over the last 4-5 years were a consequence of low real

jute prices and adverse weather. Production is likely to increase to

over 1,000,000 mt with a return of prices to higher levels and with

years of more normal weather; and

(xii) It was found to be very difficult to obtain any statistically

significant impact from price stabilization on jute production.

Still, there are reasons to believe that jute price stabilization

would have a positive impact on production.

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11. A (onVIEW OF JUTE PKOICTlON IN BANClAJESH

4. Jute growing is widespread in Bangladesh with the main growing areas

along the Tista, Bramaputra, Jamuna and Ganges rivers. The total Jute acreage

of 1.3 to 2.2 million acres occupies about 6 to 10% of the total agriculture

land area. Although this area is much less than the area sown to rice, jute is

the second most important agricultural crop in terms of land use after rice

(see Table 1).

5. Except for the estimated 300,000 acres of land along the Jamuna

River, where flooding during the monsoon season makes rice growing too risky,

rice can be grown on all land where Jute is grown. In fact, in most jute grow-

ing areas, jute is generally grown next to rice. A typical jute farmer allo-

cates a portion of his rice land to jute, with the extent of Jute acreage

depending in part on the expected profitability of jute growing versus rice

growing. This competition for land use between Jute and rice is a well-known

phenomenon and several studies have investigated it quantitatively.

6. In evaluating Jute/rice competition, there are two socio-geographical

factors to be taken into account. First, as mentioned above, there is some

"hard-core" Jute land for which rice growing does not compete. There is also

additional "quasi-hard-core" jute land where jute/rice competition is limited

due to soil type and frequency of flooding. Second, Jute is a cash crop and

rice is a. food crop. Farmers do not use jute--except for the jute sticks--

therefore, it has to be sold in the market at the prevailing price. 1/ On the

other hand, rice can be consumed by farmers themselves or easily sold to

1/ Since most of the Jute farms are small and land use is very intensive, itis very difficult for growers to store the bulky jute fibers.

TABLE 1: ACREAGE AND PRODUCTION OF MAJOR AGRICULTURAL CROPS INBANGLADESH, 1974/75, 1977/78, 1980/81 AND 1982/83

----------------------------------------------------------------- __----------__----------------------------------------

1974L75 1977L78 1980/81 _ 1982L83Crops Acreage Production Acreage Production Acreage Production Acreage Production

('000 Acres) ('000 Tons) ('000 Acres) ('000 Tons) ("000 Acres) ('000 Tons) ('000 Acres) ('000 Tons)----------------------------------------------------------------- __----------__----------------------------------------

Rice-Aus 7,857 2,859 7,815 3,103 7,689 3,237 7,805 3,018

Rice-Aman 13,469 6,000 14,260 7,422 14,918 7,837 14,812 7,483

Rice-Boro 2,871 2,250 2,703 2,232 2,867 2,589 3,542 3,490

Wheat 311 115 467 343 1,461 1,075 1,283 1,078

Gram 138 39 140 44 143 37 134 40

Masur 173 47 196 51 207 - 49 121 44

Kheshari 196 61 244 70 228 63 230 74

Chillies (Rabi) 179 46 188 45 167 36 170 42

Sugarcane 380 6,635 380 6,670 368 6,495 410 7,242 X

Jute 1,416 632 1,805 975 1,569 883 1,425 872 c,

Tea 107 32 106 36 109 39 110 40

Tobacco 113 40 137 49 127 47 129 49

Potato 232 866 222 849 252 983 272 1,131

Sweet Potato 164 707 177 770 168 693 163 702

Source: Bangladesh Bureau of Statistics (B.B.S.).

- 7 -

neighbors. V/ In this sense, rice has a 'floor" price. This distinction

suggests that farmers with risk-averse tendencies would feel more comfortable

growing rice than jute, if farmers perceive the profitability of the two crops

to be not very different.

7. Competition between jute and rice for land use takes place in two

major ways-with Aus and with HYV (high-yielding variety) Aman/HYV Boro

combination. In order to clarify the nature of this competition, illustrative

year-round cropping patterns of farmers that grow jute are given in Table 2.

8. Table 2 shows the main crops that are grown on jute land during the

non-jute season. Of these, Aus rice is the most commonly grown. However, where

good irrigation facilities are available, the cropping pattern often takes the

following form.

July-Dec Feb/Mar - Apr/MayHYV Aman late HYV Boro

These two EYV rice crops are more profitable than the cropping patterns in

Table 2.

9. Yield per unit of land is a very important factor in analyzing jute

supply. However, little quantitative analysis has been made of jute yields in

Bangladesh. In the short run, jute yield is affected mainly by husbandry and

weather. Deep ploughing and application of fertilizer during sowing are pro-

bably the most significant factors affecting yield. Sowing, weeding, thinning

and application of fertilizer during the maturing period also have a signifi-

cant impact on yield.

1/ Unfortunately, there are no detailed data on the amount of rice tradedwithin districts or among districts.

- 8 -

TABLE 2: ILLUSTRATIVE CROPPING PATTERNS ON BANGLADESH JUTE FARMS

Jute Species Crops grown in the jute area during(late April - mid-October) non-jute seasonTossa if irrigated (mid-Oct - early March) (Feb-Mar)

HYV BoroWheat

Tossa if not irrigated (mid-Oct-Jan) (Feb-Mar)Potatoes, vegetables PulsesPulses, Tobacco Vegetables

(mid-Feb -July/Aug) (August - Feb)Low Area White if not irrigated Transplanted local Aman

No other crops can be grown if areais deeply flooded

High Area White if not irrigated (May-February)Transplanted local Aman

if irrigated (Aug-Dec) (Jan-Feb)HYV Aman potatoes

pulsesvegetables

Source: EPDCS.

10. Weather crucially affects both area harvested and yield. At sowing

time moderate amounts of water are required. Lack of rain in the months of

February, March and April can prevent farmers from sowing. Even if the crop

can be sown, a reduction in ground moisture can make deep ploughing difficult,

and yields are reduced.

11. Flooding during the months of June through September has reduced Jute

production in Bangladesh by as much as 20% in certain years. White jute, which

is grown on lower lands than the tossa variety, normally is affected more than

tossa in terms of the frequency and severity of flooding. Water is required on

the farm for the process of retting the jute. Lack of water at retting time

(August-October) reduces the quality of the fiber.

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III. DISTINCTION BETWEEN TOSSA AND WHITE JUTE PRODUCTION

12. Tossa jute produces a higher quality (longer and finer) fiber and at

the growers' level tossa is usually priced higher than white jute. An

additional advantage of the tossa variety is that since less of the stick is

lost in cutting, it has a higher fiber yield than white jute. As tossa jute

cannot tolerate flooding, it is grown on higher lands than white jute. The

difference in altitude between tossa and white jute land is subtle-often a

difference of only a few inches. In many districts where both tossa and white

jute are grown, they are grown almost next to each other.

13. Although both tossa and white jute are grown in all the major jute

growing districts, some regional differences can be found (see Table 3). White

jute is mainly grown in the Jat area (Dacca, Mymensingh, Tangail and Comilla)

and the two northern districts of the northern area, Dinajpur and Rangpur. In

the three districts between the Jamuna and Ganges rivers--Bogra, Rajshahi and

Pabna--the ratio is about 50:50. In the three districts south of the Ganges

river--Kushtia, Jessore and Faridpur, tossa is the main variety grown.

14. Farmers prefer to grow tossa because of its higher price and, as a

result, its share in total jute production has increased from 25 - 30X in the

early 1970s to the present level of almost 45X. Information on producer prices

paid for tossa and white jute is shown in Table 4 and Fig. 1. In the last 12

years the premium paid for tossa jute has varied between 4 and 40%. The price

differential widens in years of bumper crops because at that time buyers have

the option of purchasing a higher quality of jute at lower prices and because

the average quality of white jute tends to be low in bumper crop years. As

demand shifts from white to tossa jute, the price differential widens. These

fluctuations in price differentials have important implications for the year-

TABLE 3: AVERAGE ACREAGE AND PRODUCTION OF TOSSA AND WHITE JUTE IN MAJOR

JUTE-GROWING DISTRICTS, 1975/76-1982/83

------------------------------------------------------------- __--------------__----------------

Tossa White Share of Tossa

Districts Area Production Area Production Area Production

('000 Acres) ('000 Bales) ('000 Acres) ('000 Bales) () ---- M----

Jat AreaComilla 4.8 17 79.4 278 6 6

Dhaka 28.3 105 105.6 387 21 21

Mymensingh 55.9 200 363.0 1,056 13 16

Northern AreaDinajpur 5.4 21 55.1 168 9 11

Rangpur 46.5 163 247.3 826 16 16

Bogra 27.0 63 36.5 81 43 44

Rajshani 26.1 82 23.4 70 53 54

District AreaPabna 28.8 92 35.9 115 44 44

Kushtia 62.9 185 2.5 8 96 96

Jessore 133.1 427 27.0 93 83 82

Faridpur 98.8 330 57.8 167 63 66

Source: Bangladesh Bureau of Statistics (B.B.S.).

FIGURE 1: REAL PRODUCER PRICES FORWHITE AND TOSSA JUTE:: BfMLADESH iA

TOSSA JUTE WHITE JUTE

RE A L /

,''1':~~~~~~ \\<R 14.0

C 12. .E

p io.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.

P~~~~~~~~~~:II iYEf - . .

RI

c \%' E S. --

S

1S7281 1982-81ICROP YEARS

/A PRODUCER PRICES IN TAKAMIAIUND DEFLATED BY AVERAGE AGRICULTUR IABORWAGES (TAKA DAY).

SOURCE: B,B.SS.

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TABLE 4: PRODUCER PRICES OF TOSSA AND WHITE JUTE (NOMINAL)

Weighted Average of Ratio ofSeason Tossa White Tossa and White Tossa to White

… ---- (Taka/Maund) …

1972/73 58.37 51.22 54.79 1.141973/74 58.22 53.92 56.07 1.081974/75 92.29 88.73 90.51 1.041975/76 98.38 94.05 96.21 1.051976/77 119.61 101.23 110.42 1.18

1977/78 160.55 154.04 157.30 1.041978/79 151.58 131.12 142.59 1.161979/80 135.52 96.05 116.34 1.411980/81 132.44 99.06 115.75 1.341981/82 155.91 122.31 137.89 1.271982/83 171.38 137.77 155.97 1.24

SOURCE: B.B.S.

to-year price fluctuations of tossa and white. Because tossa prices decline

less steeply in bumper crop years, the year-to-year price fluctuations are

much less pronounced for tossa. In fact, the coefficient of variation for

white jute prices is found to be 30% higher than that for tossa prices for the

period 1972/73-1982/83.

15. A regression analysis of the tossa/white jute price ratio shows that

the ratio is inversely related to the production ratio of tossa and white jute

and to a weighted average of jute prices expressed in real terms. I/

(1) log PPROLI 1.415 0.576 JUPPRB 0.261 log PROOLI(1) logP-PRCAPm (7.40)- (5.92)'09 -WA-GAGB (2.87)° PFR_OCA P

R - 0.88 S.E.E. m 0.034 D.W. - 1.96

1/ The deflator used to obtain "real" jute prices is the daily wages ofagricultural labor (without food). There is further discussion on thedeflator question later.

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Period of estimation: 1/ 1976/77-1982/83

where:

PPROLI - Producer price of tossa variety

PPRCAP - Producer price of white variety

JUPPRB - Weighted average of jute prices

WGAGB = Agricultural labor wage

PROOLI - Bangladesh production of tossa variety

PROCAP - Bangladesh production of white variety

16. Another important reason for the difference in the production trends

for the two varieties is that white jute land faces more severe competition

from rice. Because white jute land is of lower elevation, irrigation is more

feasible, which favors rice growing. It should be noted, however, that the

increase in the share of tossa jute in total production from 30% in the early

1970s to about 45% in recent years has not been due to increased planting of

the more popular variety. In fact, white jute acreage has been declining at

the rate of 3.5% p.a. since 1971/72, whereas there is no statistically signi-

ficant trend for tossa jute acreage during the same period. However, in the

lowlands where the chance of flooding is high, white jute will continue to be

grown as farmers face a higher possibility of complete crop loss if tossa is

grown.

17. A shortage of tossa seed may have been responsible for a slower

increase in the share of that variety than would otherwise have occurred. 2/

Because the time for sowing tossa variety is later than for white jute, far-

1/ The estimation period is rather short because no reliable data on tossaand white jute production exist before 1976/77.

2/ The acreage share of tossa jute fell sharply in 1981/82. This fallcoincided with a reduction in the share of tossa seeds distributed underthe Intensive Jute Cultivation Scheme (IJCS).

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mers who intend to grow the tossa variety lose the chance of sowing any jute

if they are not able to obtain tossa seeds by late April. Also, because it is

more profitable to grow tossa, farmers may be interested in growing it exclu-

sively and shortages of tossa seed could hamper total production. Improvements

in the supply of tossa seeds could lead to an increase in jute production.

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IV. AN ANALYSIS OF JUTE ACREAGE RESPONSE AT THE NATIONAL LEVEL

Data

18. As noted above, several studies have analyzed the relationship

between jute acreage and the jute/rice price ratio. In the present study, the

analysis is focussed on a recent period--1970/71 to 1982/83. The reasons for

choosing this period are: (i) some data, especially data on a district basis,

were available only for this period; (ii) there are good reasons for doubting

the reliability and consistency of data of the 1950s and 1960s; and (iii)

analysis of a short period is less prone to biases introduced by structural

changes in the sector.

19. Needless to say there are shortcomings in doing time series analysis

on short periods of data. We attempted to compensate for these by comparing

our results with longer-term analysis carried out by other researchers.

However, we have to stress that the main drawback of long-term time-series

analysis for Bangladesh agriculture is inconsistency in the acreage data. For

example, the data for the period 1969/70-1971/72 are considered to be

unreliable due to the social turmoil Bangladesh experienced during the war of

independence. Jute experts at the Extension Services of the Ministry of

Agriculture and The Bureau of Statistics indicated to us that data prior to

1974/75 are not accurate. Therefore, while the data used in this study cover

mainly the period 1970/71-1982/83 there is rather free use of "dummy

variables" in the early years of the period, whenever we considered data to be

"out of line".

20. There is another complicating factor in respect of the jute acreage

and production data-the existence of three sets of data (see Table 5). These

are: (a) production, acreage and yield data at aggregate and district levels,

estimated by B.B.S. (published in the "Monthly Statistical Bulletin of

TABLE 5: ESTIMATES OF JUTE SUPPLY FOR BANGLADESH ACCORDING

TO THREE OFFICIAL SOURCES, 1969/70-1982/83

B.B.S. Ministr of Jute and TextilesProduction Area Yield Production Area Yield Trade Estimates

'000 -000 bales/ '000 '000 bales/ Productionbales acres acre bales acres acre '000 bales

1969/70 7,171 2,465 2.91 7,084 2,410 2.91 7,449

1970/71 6,670 2,200 3.03 6,930 2,267 3.06 6,855

1971/72 4,193 1,675 2.50 4,320 1,714 2.52 4,3201972/73 6,514 2,194 2.97 6,566 2,212 2.97 6,6771973/74 6,000 2,197 2.73 6,048 2,195 2.76 6,199

1974/75 3,476 1,417 2.45 3,999 1,440 2.79 4,0321975/76 3,938 1,277 3.08 4,381 1,262 3.47 4,381

1976/77 4,806 1,603 3.00 5,544 1,627 3.41 4,737 0

1977/78 5,359 1,805 2.97 6,048 1,798 3.36 5,5511978/79 6,443 2,052 3.14 7,056 2,099 3.36 6,774

1979/80 5,962 1,874 3.18 6,082 1,899 3.20 7,295

1980/81 4,942 1,569 3.15 4,674 1,459 3.21 4,820

1981/82 4,645 1,412 3.27 4,536 1,249 3.63 4,351

1982/83 4,881 1,429 3.42 5,558 1,551 3.58 5,514

Source: B.B.S. and Ministry of Jute and Textiles.

- 17 -

Bangladesh" and "Agricultural Yearbook of Bangladesh"); (b) production,

acreage and yield data at aggregate and district levels estimated by the

Ministry of Jute and Textiles (published in "An Annual Review" of the Ministry

of Jute and Textiles); and (c) aggregate production estimates made by the

Ministry of Jute and Textiles, based on the actual jute arrivals in the market

(published as "Trade Estimates" in "Quarterly Jute Goods Statistics" of BJMC).

21. The B.B.S. data is the official data and their discrepancies with the

first data set of the Ministry of Jute and Textiles are in most years small.

Efforts have been made in recent years to consolidate the two sets. For these

data, estimates were made using sampling techniques at the thana levels. 1/

However, large discrepancies exist in the production estimates from these two

sources and the data in "Trade Estimates." In some years the difference is as

much as 15%. The major reasons for the discrepancies are thought to be due to

traders' and farmers stock changes and to smuggling.

22. In the present study we utilized B.B.S. data for the analysis at

district level and both B.B.S. data and the first data set of the Ministry of

Jute and Textiles at the aggregate level. Because the jute supply that impacts

most directly on jute prices is market arrivals, and because the "Trade

Estimates" sources balances production, consumption, exports and stocks in

Bangladesh, "Trade Estimates" data are also used in the World Bank's global

econometric model for jute.

Supply Response Specification

23. The main variables used in the regression analysis to explain jute

acreage changes are: (i) weather variations; (ii) extent of irrigation; and

(iii) "real" producer prices of jute and rice.

1/ Details of the estimation method are given in 1982 Agricultural Yearbookof Bangladesh, B.B.S., December 1982, pp. 12-14.

- 18 -

24. Changes in the weather affect jute acreage in two main ways-water

availability during sowing time (late February to mid-April) and damage caused

by flooding during the period June to September. As deep-ploughing is neces-

sary for jute planting, a moderate amount of water is required for proper soil

preparation before sowing. As farmers tend to economize on the use of pumps

for irrigation of jute land, the amount of rainfall has an important influence

on jute sowing (especially in the northern growing areas). Although it is

known that lack of rain during the sowing season was an acute problem in the

northern districts in 1979/80 and 1983/84, we do not have quantitative esti-

mates of the impact on jute acreage. The extent of damage from floods in the

summer, on a district basis is well documented by the Bureau of Statistics. At

the national level, the 1984 flood caused by far the most serious damage to

jute output in recent memory, followed by the 1974 floods (see Table 6). It is

of interest to note, however, that during the 1975/76-1983/84 period, jute

output suffered little from adverse weather conditions.

25. As noted in Section II, irrigation enables farmers to grow two crops

of high-yielding rice within a year-HYV boro and HYV aman. As these two rice

crops are more profitable than the jute-aman combination, the increased avail-

ability of irrigation in recent years has resulted in reduced jute acreage.

This reduction is more prominent on the white jute growing land of Jat Area

and Dinajpur 1/ as irrigation can be implemented much more easily and less

costly than on tossa growing land which is at a higher elevation.

1/ See discussion on Dinajpur in Section V below.

- 19 -

TABLE 6: ESTIMATES OF BANGLADESH JUTE CROP DAMAGE CAUSED BY FLOODS, 1969-84

Area Completely Area Partially Loss of Production /aYear Damaged Damaged (Bales) X of Tc-tal

1969 1,711 21,462 23,146 0.31970 53,285 141,420 278,330 4.01971 19,446 49,705 105,563 2.51972 16,820 78,990 475,725 6.81973 103,844 238,140 512,640 7.3

1974 61,625 175,470 374,875 12Bi1975 90 370 631 0.01976 30,452 82,549 173,834 3.51977 11,621 67,767 108,015 2.01978 8,629 31,388 41,513 0.6

1979 221 5,049 1,417 0c1980 0 0 0 0h 1981 11,376 8,937 44,621 1"1982 0 0 0 0.01983 0 0 0 0.01984 /b - - 872,000 16.2 /c

/a Percentage is calculated with the sum of production loss and aecproduction as the denominator.

/b Estimates made by B.B.S./c Based on the estimated production of 4,500,000 Bales.

Source: B.B.S.

26. Probably the most important influences on the jute acreage are the

prices of jute and rice in the preceding year (see Table 7). In many 0o-7 thah

statistical studies of jute supply response, the price ratio of jc ;

was used to explain changes in jute acreage. This specification implicitly

assumes symmetry in the price elasticities. In other words, it is assumed that

a 10% increase in the jute price would have the same effect on jute acreage as

a 10% decline in the rice price. The advantage of using the price ratio is

that the difficult question of which deflator to use (to obtain real jute and

rice prices) is avoided. In this study, district-level agricultural wages were

used as deflators and the deflated jute and rice prices were included as

- 20 -

separate explanatory variables. The choice of the deflator was made on the

basis that: Ci) agricultural labor wages largely reflect production costs and

the opportunity cost of growing jute and rice; and (ii) other deflators such

as the Consumer Price Index or the Wholesale Price Index are not available at

the district level. Even if it were available the Consumer Price Index would

pose difficulties as it is strongly correlated to the price of rice. Use of

the jute and rice prices as separate explanatory variables enables us to test

the symmetry of the price elasticities.

TABLE 7: JUTE ACREAGE AND JUTE AND RICE PRICES IN BANGLADESH,1970/71-1982/83

------------------------------------------------------------- __--------------_

Crop Year Jute Acreage /a Real Jute Real Rice Ratio of JutePrice /b Price /b to Rice Prices--of Preceding Year ---

______________________________________________________________________________

('000 Acres) (Taka/Maund) (Taka/Day)

1970/71 2,267 10.06 12.89 0.781971/72 1,714 11.23 12.00 0.941972/73 2,212 11.14 14.05 0.821973/74 2,195 11.48 15.95 0.701974/75 1,440 7.89 15.02 0.53

1975/76 1,262 9.51 23.15 0.411976/77 1,627 10.19 14.12 0.721977/78 1,798 11.24 12.71 0.881978/79 2,099 14.91 14.75 1.011979/80 1,899 13.07 14.05 0.93

1980/81 1,459 9.19 16.17 0.571981/82 1,249 7.27 12.02 0.601982/83 1,551 8.90 14.33 0.62

/a Data of Ministry of Jute and Textiles./b Prices deflated by daily wages of agricultural labor.

Source: Ministry of Jute and Textiles, B.B.S.

27. Jute sticks are produced as a by-product of fiber production, and the

value of the sticks is recognized as an increasingly important component in

- 21 -

evaluating the profitability of jute growing. Unfortunately, no reliable time-

series data exist for prices of jute sticks. The main use for jute sticks is

as firewood. 1/ Assumptions have been necessary to estimate the value of jute

sticks for the period since 1970. We take a recent estimate of the price for

jute sticks (22 Taka/maund for 1981) and assume that before 1981 prices moved

in the same manner as the prices of gazari firewood, for which data exist. Two

maunds of jute sticks are produced for each maund of jute fiber. Therefore, to

estimate total revenue from jute production the price of one maund of jute has

been adjusted by adding the value of two maunds of jute sticks. In recent

years the value of jute sticks has become much more important in relation to

the value of the fiber, increasing to over 30% of the value of fiber (see

Table 8).

TABLE 8: ESTIMATED VALUE OF JUTE STICKS, 1970-82

Estimated Price Producer Price Percentage of the Value ofof Jute Sticks of Jute Fiber 2 Maunds of Jute Sticks to(Taka/Maund) (Taka/Maund) One Maund of Jute Fiber

1970 3.7 35.15 21.11971 3.4 38.80 17.51972 5.0 52.58 19.01973 7.6 52.81 28.61974 9.8 86.08 22.71975 10.6 89.84 23.61976 11.3 100.01 22.51977 11.9 140.00 17.11978 14.1 141.65 19.91979 15.6 114.47 27.31980 19.6 101.86 38.61981 22.0 136.86 32.21982 23.0 151.98 30.3----------------------------------------------------------------- __----------

SOURCE: EPDCS AND B.B.S.

1/ They are also used for fencing and thatching and as inputs in the manufac-ture of particle board.

- 22 -

28. Jute prices used in the regression analysis below include theestimated value of jute sticks.Results

29. The results of the regression equations estimated to explain the jute

acreage for Bangladesh are set out below:

JUPPRBL RCPRB1(2) JUAHBA - 238.5 + 42.61- - 8.67 + 218.69 DM 7273

(3.23) (10.35) -1 (2.91) WGAGB 1 (9.80)

R2 0.97 S.E.E. = 28.65 D.W. = 2.31

BBS JUPPRB1 1 RCPPRB_(3) JUAHBA - 321.66 + 36.70 - 9.16 + 217.93 DM7273

(4.78) (9.78) WGAGB 1 (3.38) WGAGB_1

i2 = 0.97 S.E.E. - 26.11 D.W. = 1.54

Period of estimation: 1971/72 - 1982/83

where:

JUAHBA - Bangladesh jute acreage; superscripts MJ and BBS refer todata by the Ministry of Jute and Textiles and by B.B.S.,respectively; ('000 hectares).

JUPPRB1 - Sum of average yearly jute producer price and value of 2maunds of jute sticks, as given in Table 8.

WGAGB - Average agricultural labor wage (Taka/day) (see Table 9).

RCPPRB - Producer price of rice (Taka/maund).

DM7273 - Dummy variable for 1972/73 and 1973/74 seasons. Takes valueof 1.0 for these seasons and zero otherwise.

30. The differences between the two regression equations are rather

small. In both equations the jute and rice price variables were statistically

highly significant and, with the dummy variable, explain 97% of the variations

in Jute acreage. The equations capture all the major turning points. For these

acreage equations the inclusion of the total irrigated area and the area

- 23 -

acreage equations the inclusion of the total irrigated area and the area

damaged by floods did not improve the results. The reason for this lack of

response may be due to: (i) the overwhelming influence of jute and rice prices

on changes in jute acreage; (ii) errors in the estimated area damaged by

floods as well as in the area under jute; and (iii) the rather small impact

which floods and irrigation have had on jute acreage in the sample period

(1984 is not included).

31. The estimated jute price elasticities are 0.77 (using the Ministry of

Jute and Textiles data) and 0.68 (using B.B.S. data), and for the rice price

-0.19 (Ministry of Jute and Textiles data) and -0.20 (B.B.S. data). Equations

(2) and (3) suggest asymmetry in the price elasticities. In order to confirm

the asymmetry, a regression using Ministry of Jute and Textiles data was run

with the price ratio, JUPPRB1/RCPPRB. The result with R2 of 0.88, S.E.E. of

111.9 and D.W. of 1.23 suggests that equation (2) explains the changes in jute

acreage better and reinforces the notion of asymmetry in the price elasti-

cities. 1/ As discussed below, one of the main reasons for this asymmetry is

probably the increasing importance of tossa jute which does not compete with

rice as directly as does white jute. The estimated price elasticities are

within the range of elasticities estimated by other researchers.

32. Equations (2) and (3) also suggest that farmers adjust area planted

to recent jute and rice prices changes very quickly; 2/ they also suggest that

1/ A regression including jute and rice prices deflated by the consumer priceindex was also run but showed significantly inferior results compared withequation (2). It was also found that the correlation coefficient betweenthe jute acreage and the one-year lagged real prices showed a higher valuethan that between the jute acreage and jute/rice price ratio, i.e. 0.79for the former and 0.76 for the latter for the period 1972/73-1982/83.

2/ A regression with a lagged dependent variable showed no statisticalsignificance for that variable.

-24-

the agricultural wage is an important factor in determining jute acreage. In

order to examine this latter point more closely, equation (2) can be

rearranged to give:

JUPPRB1 WGAGB -

(4) JUAHBA 1142.0 + 1294.6 1 9770 3 -1 + 557.1 DM7273(7.35) (8.21) RC -1 (3.23) _1 (9.11)

R2 0 0.94 S.E.E. - 78.2 D.W. - 1.58

Period of estimation: 1971/72 - 1982/83.

33. Equation (4) implies that the higher the agricultural labor wage the

lower the jute acreage. It confirms the a priori expectation that jute acreage

is inversely correlated to the production cost, a major portion of which is

labor cost.

- 25 -

V. AN ANALYSIS OF JUTE ACREAGE RESPONSE AT THE DISTRICT LEVEL

34. The preceding analysis identified jute and rice prices and agricul-

tural wages as important determinants of jute acreage in Bangladesh. The

present section examines the characteristics of jute acreage behavior by

district and thus identifies factors affecting jute acreage in more detail.

35. For the district-based jute acreage analysis, the area data used were

the sum of the estimated jute acreage and the jute area estimated to be

completely damaged by flooding (both B.B.S. data series). This adjusted

acreage is believed to represent the jute area farmers intended to harvest had

there been no flood damage.

36. Jute producer prices were calculated for each district, taking into

account the relative importance of tossa and white jute acreage in each

district and the value of jute sticks, as follows:

(5) JUPPR = Wi PPROLI + (1-Wi) PPRCAP + 2.0 PRJS

where:

JUPPRi = Estimated jute producer price in district i

wi = Average share of tossa acreage in district i during the period1975/76-1982/83

PPROLI = Producer price of tossa jute (Taka/maund)

PPRCAP - Producer price of white jute (Taka/maund)

PRJS - Estimated price of jute sticks (Taka/maund)

37. Since producer prices of rice by district are not available, country-

wide data were used. The deflators used for jute and rice prices were

district-level agricultural wages (see Table 9). The wages paid to agricul-

tural labor are fairly uniform across the major jute growing districts except

in Dhaka and Comilla. The relatively high agricultural wages paid in these two

TABLE 9: DAILY WAGES OF AGRICULTURAL LABOR (WTT'HWt F:X3T3) BY D'TRICT LS

Division/District 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83

(Taka per day)

Rajshani 2.74 2.84 3.21 4.26 5.71 7.39 8.06 7.83 7.92 9.78 11.00 12.23 13.88 14.82Dinaipur 3.03 3.18 3.92 4.35 5.62 7.89 8.30 8.00 8.00 10.00 10.83 10.50 11.83 14.00Rangpur 2.56 2.64 2.64 4.10 6.18 6.79 7.35 7.54 7.50 9.58 10.17 14.80 15.17 14.33Bogra 2.82 2.71 3.17 4.06 5.33 6.83 7.92 8.42 8.42 9.58 10.00 10.00 12.08 15.00Rajahani 2.76 3.12 3.25 4.13 5.61 7.88 8.08 7.29 8.00 9.17 13.00 14.00 15.67 14.92Pabna 2.51 2.54 3.08 4.67 5.81 7.55 8.63 7.91 7.67 10.58 10.17 11.83 14.67 15.83

Khulna 2.73 2.78 3.02 3.94 6.10 8.40 8.48 8.63 9.30 9.96 12.27 13.57 13.93 14.73Rushtia 2.37 2.26 2.33 3.18 4.83 7.42 7.32 8.00 8.84 9.50 11.50 11.17 10.92 11.58Jessore 2.44 2.97 2.86 3.17 4.91 6.92 7.50 7.67 9.00 9.67 10.33 12.50 12.92 13.58Khulna 2.85 2.30 2.87 3.29 5.40 7.09 8.55 7.50 9.09 10.00 13.75 15.00 15.17 15.58Barisal 2.81 2.94 2.95 4.41 8.52 10.83 10.20 10.08 10.00 11.33 13.83 15.42 15.83 16.00Patuskhali 3.18 3.41 4.11 5.64 6.82 9.75 8.81 9.92 9.59 9.33 11.33 13.75 14.83 16.92

Dhaka 2.63 3.02 3.25 4.99 6.76 9.02 7.82 8.27 9.17 10.81 12.15 13.80 15.11 16.58

Jamalpur /a - - - - - _ _- - - - - - -

Mymensingh /b 2.76 2.98 3.13 5.26 6.35 8.64 7.63 8.09 8.92 11.08 11.08 11.87 14.17 14.71 '

(Mymensingh) /c (2.61) (2.97) (3.19) (5.15) (6.87) (8.43) (8.09) (8.50) (10.00) (11.83) (12.50) (12.50) (13.50) (15.00)(Kishoreganj) d (2.92) (3.00) (3.07) (5.37) (5.82) (8.86) (7.16) (7.67) ( 7.84) (10.33) (10.67) (11.33) (14.83) (14.42)

Tangall 2.00 2.83 3.20 4.75 6.60 8.21 7.27 6.71 8.00 9.58 11.67 14.50 15.00 15.00Dhaka 3.22 3.71 3.56 5.63 8.92 11.74 9.29 9.29 10.00 10.92 13.83 16.25 21.25 23.50Faridpur 2.41 2.60 3.21 4.06 5.58 7.85 7.27 9.17 10.00 11.42 12.50 12.58 14.08 15.00

Chittagong 3.75 3.87 4.02 5.68 8.18 11.40 10.92 10.85 11.15 12.81 15.23 16.43 18.60 22.08Sylhet 3.67 3.88 4.59 6.47 8.86 11.52 11.55 10.29 11.17 12.42 15.00 15.00 15.42 20.00Comilla 2.96 3.26 3.28 4.82 6.51 10.14 9.42 8.96 8.67 12.42 14.75 15.00 17.08 18.75Moskhali 3.53 3.94 3.74 5.70 8.50 12.38 11.27 9.33 10.25 11.75 16.42 16.42 19.42 22.75Chittagong 4.52 4.38 4.50 6.23 8.77 12.08 11.07 12.27 12.84 13.00 13.75 18.50 20.25 24.25Chittagong Mill Tracts 4.06 3.88 4.00 5.17 8.27 10.86 11.29 13.42 12.84 14.50 16.67 17.25 20.83 24.75

Country Average 2.96 3.13 3.38 4.72 6.69 9.05 8.82 8.90 9.39 10.84 12.46 14.01 15.38 17.05

_ _______________--_-_------------------_------------------------_----------------------------_--_________________________________________------------------

/a Jamalpur was a subdivision of Mymensingh until December 26, 1978./b Including Jamalpur from 1967/68 through 1981/82.

7-c In some presentations of agricultural statistics, data for Mymensingh district are shown separately for Kishoreganj subdivision and for the rest of Mymensinghdistrict; in this table, Jamalpur is included in Nymensingh agricultural district from 1967/68 through 1981/82.

Note: All district, division and country averages are unweighted averages of the wage rates in the respective constituent administrative units.

Source: Bangladesh Bureau of Statistics.

- 27 -

districts reflect higher agricultural productivity and/or higher wage

opportunities in non-agricultural activities. Other variables used in the

regression equations were the total area irrigated in each district and dummy

variables for observations which appeared to be "out-of-line".

38. A summary of the statistical results is given in Table 10. Due to the

unavailability of reliable price and acreage data by district, the time

periods for which the statistical analyses were performed are short--often

only 9 observations covering the period 1974/75 and 1982/83. However, this

difficulty is compensated for by the large number of districts (11), which

made possible extensive comparison of estimated elasticities.

39. The statistical results shown in Table 10 reveal several significant

characteristics of jute acreage behavior including:

(i) Jute acreage declined in all the major jute-growing districts, except

in Bogra, Kushtia and Jessore where tossa occupies a large share of

total jute acreage and where flood damage has been less frequent and

less severe;

(ii) Irrigation is found to have had an important influence in reducing

jute acreage in all three districts in the Jat area and in Dinajpur

where white jute is mainly grown;

(iii) Price elasticities are considerably higher in districts where tossa

jute is mainly grown than in districts where white jute is mainry

grown.

40. The conclusion (i) above, stating the relationship between the tossa

jute acreage share, the frequency of flood damage and the trend in total jute

acreage, does not apply in Rajshahi district, which has a large tossa acreage

and infrequent flood damage but showed a large decline in 'ate :-

TABLE 10: TRENDS AND PRICE RESPONSES OF JUTE ACREAGE IN MAJOR JUTE GROWING DISTRICTS…___________…_____ ------- -- …-- ------------------------------------------------

Average Share Annual Average Coefficient of Price Elasticities Effect of

District of Tossa Growth Rate Variation /A Jute 7B Rice 7B Irrigation /C1975/76-1982/83 1972/73-1982/83 (CV)

____(%- __- -(% p.a.)-

Jat AreaComilla 6 -3.8 2.5 0.49 -0.49 -0.35

Dhaka 21 -2.0 3.9 0.45 -0.54 -0.63Mymensingh 13 -3.8 2.5 0.42 -0.21 -0.37

Northern AreaDinajpur 9 -5.7 3.1 0.44 -0.44 -0.50Rangpur 16 -2.1 2.5 0.44 -0.16 N.S. /DBogra 43 3.7 9.9 0.63 -0.43 N.S.

Rajshahi 53 -5.7 6.9 0.69 -0.27 N.S.

District AreaPabna 44 -2.3 9.2 1.19 -0.25 N.S.Kushtia 96 0.8 8.1 1.44 -0.50 N.S.

Jessore 83 3.2 6.5 1.26 -0.70 N.S.Faridpur 63 -2.8 4.7 0.30 -0.44 N.S.

_ _ _ _ _ - ---- -- _-_--------------_-_--_____________________________________

/A CV - S.E.E. of log linear trend regression / mean of log values of acreage./B Deflated by agricultural wage./C Acreage reduced by unit area of irrigation. For example, the-value -0.35 for Comilla implies that

with 1.0 acre of irrigation, 0.35 acres of jute land will be displaced./D Statistically not significant.

SOURCE: EPDCS.

- 29 -

reason for this exception is most probably the large population increase which

Rajshahi has experienced in the last 10 years, which in turn has increased the

demand for rice.

41. The relationship between irrigation and jute acreage, stated in item

(ii) above should be interpreted with caution. Since in many districts the

irrigated acreage has been increasing with time, the coefficient for the irri-

gation term might represent the underlying secular time trend. Thus, these

coefficients have to be examined in light of other district information avail-

able. The sign and the magnitude of the irrigation coefficient for the three

districts in the Jat area appear to be reasonable as irrigation is extensive

in these districts. However, in Dinajpur the area under irrigation is limited,

which casts doubt as to whether the irrigation variable for Dinajpur is cap-

turing the time trend instead of the actual irrigated area. In fact, when a

time trend variable is used as an explanatory variable instead of the irriga-

tion variable, a better fit is obtained while the price elasticities remained

virtually unchanged. The reason for the negative trend in Dinajpur's jute

acreage is probably the same as in Rajshahi. Rajshahi and Dinajpur have had

the highest population growth rates among the districts with no major urban

centers i.e. 3.0% p.a. and 3.2% p.a. respectively during the period 1974-1981.

42. The exception to conclusion (iii) above is Faridpur. The reason is

probably the frequent and severe flooding experienced in this district. As the

risk of losing the jute crop due to flooding is high, the expected revenue

from jute is lowered. This may make farmers less responsive to prices.

- 30 -

43. The higher estimated price elasticities for tossa jute 1/ are thought

to be due to three factors: (a) only white jute is grown in the "hard-core"

jute land, i.e. in these areas jute is grown irrespective of price levels; (b)

because tossa jute is less prone to flood damage and to price fluctuations,

farmers are likely to feel more confident in their expected profitability for

tossa jute when adjusting acreage in response to prices; and (c) tossa jute

land is less suitable for rice growing and thus competes with other cash crops

besides rice, such as vegetables. The farmer's decisions on which of these

cash crops to grow are very sensitive to price changes.

1/ The district-level acreage response analysis carried out by the Bank in1973, using 17-year data for the period 1950/51-1966/67, also obtainedhigher price elasticities in districts where tossa jute has importantshares. The magnitude of the elasticities estimated therein are not verydifferent from those in this report.

- 31 -

VI. ANALYSIS OF JUTE YIELD RESPONSE

44. After sowing, the jute yield is determined mainly by the height the

plant is able to achieve before harvest. Factors that influence jute yield

include; (i) the availability of good quality seeds; (ii) the extent of

fertilizer application and the depth of ploughing before sowing; (iii) the

application of fertilizer during the maturation period; (iv) weather during

sowing and maturation; and (v) the extent and timing of weeding and thinning.

45. In the following statistical analysis only those factors which can be

quantified and for which data are available have been included. The explana-

tory variables used here are deflated prices of jute and rice, fertilizer

consumption, extent of flood damage and jute acreage.

46. In most cases farmers who grow jute also grow rice at the same time.

Thus it is hypothesized that the amount of time a jute farmer spends on jute

growing in terms of weeding, thinning and applying fertilizer depends on

relative prices of jute and rice.

47. Although only a small amount of fertilizer is known to be applied to

jute, the availability of fertilizer should have an effect on jute yields. A

greater availability of fertilizer enables farmers to allocate organic manure

and fertilizer to jute which otherwise would be used for rice. Another way in

which fertilizer availability affect jute yields is indirect. If fertilizer

were not used directly for jute growing, but for a crop that preceded jute

sowing, jute yields could be improved by the residual fertilizer in the soil.

This residual effect may be significant, especially in cases where crops such

as potatoes, tobacco and vegetables precede jute sowing, as these crops are

normally heavily fertilized.

- 32 -

48. The flood damage variable used in the acreage analysis was also used

in the yield equation under the hypothesis that flooding reduces yield. Jute

acreage is used as an explanatory variable on the assumption that when jute

acreage is expanded, more land less suitable for jute is sown to jute, and as

a consequence, yields will decline. A complementary hypothesis is that when

jute acreage is large, farmers are able to spend less time per acre of jute

land for crop husbandry.

49. At the country-wide level, the statistical analysis was performed on

two sets of yield data-one published by the Ministry of Jute and Textiles,

the other published by B.B.S. The regression equations for nation-wide Jute

yields are shown below:

NJ(6) log JUYLD 1.272 - 0.219 log JUAHBA t 0.196 log JRPRRAT

(2.87) (4.19) (4.71)

- 0.201 DM71 t- 0.095 log FTDSTTB(4.80) (3.95)

R - .91 S.E.E. - 0.034 D.W. - 1.97

(7) log JUYLD - 0.588 1- 0.141 log JRPRRAT 1 0.871 log FTDSTTB(2.54) (2.49) (2.42)

- 0.009 log ACDMBD(1.74)

-2 0.77 S.E.E. - 0.046 D.W. - 1.92

Period of Estimation: 1969/70-1982/83.

where:

JUYLD - Jute yield in Bangladesh. Superscripts MJ and BBS refer to

- 33 -

Ministry of Jute and Textiles and B.B.S. data, respectively:(bale/acre).

JUAHBA - Jute acreage in Bangladesh ('000 acres).

JRPRRAT = Ratio of jute to rice producer prices.

FTDS = Total fertilizer consumption in Bangladesh (long tons).

ACDMBD = Area completely damaged by flood ('000 acres).

50. Both results are satisfactory in terms of the overall fit, signifi-

cance of explanatory variables and magnitude and signs of the coefficients.

The obvious difference between equations (6) and (7) is that in the former,

the flood damage variable showed no significance while in the latter the

acreage variable showed no significance; these variables were removed from the

equations. However, the coefficients of the jute/rice price ratio and

fertilizer consumption variables were of similar magnitude in the two

equations. These results show that short-run jute yields respond strongly to

changes in jute prices and total fertilizer consumption. As the quantity of

fertilizer directly applied to jute is considered to vary with jute prices,

the results imply that it would be difficult to obtain high yields when jute

prices are low. The results also point to the stabilizing effects of yield on

jute supply. When acreage and production are low and jute prices high, yield

will increase to compensate to some extent and vice-versa.

51. Jute yields were also analyzed on a district basis (see Table 11).

These results were less satisfactory. One reason for this may be the quality

of the data. Estimation of yield is probably more subject to error than

estimation of acreage. The good results obtained at the national level could

reflect the fact that district-level errors get "washed-out". Observation of

the statistics in Table 11 lead to the following conclusions.

TABLE 11: ESTIMATED DISTRICT-WIDE JUTE YIELD EQUATIONS

Jute Yield Statistics Regression CoefficientsTrend 3-Year Movipg Avere Coefficient Jute Fertilizer Flood Price Elasticitz

District 1972/73 197 172- 1980781- of Acreage Consumption Damage Jute Rice1982/83 1973/74 1982/83 Variation(t p.a.) - (bales/acre)---

Jat AreaComilla 1.2 3.29 3.62 7.0 0.04 -0.03 -

Dhaka 1.8 3.14 3.50 8.0 -0.16 0.07 - 0.32 -0.32Mymersingh -0.23 - 0.05

Northern AreaDinajpur 5.5 2.06 3.39 8.0 - 0.35 - - -Rangpur 3.8 2.70 3.62 7.8 - 0.21 - - -0.18Bogra 4.1 2.51 3.51 8.8Rajshahi 2.8 2.55 3.52 7.0 -0.09 0.14 -0.02 - -0.13

District AreaPabna 3.9 2.65 3.59 8.9 0.18 - - -0.26Kushtia 2.1 2.55 3.23 7.9 - 0.14 -0.02 0.15 -Jessore 0.3 3.06 3.24 3.1 -0.06 0.04 0.07Faridpur 0.1 2.66 2.88 13.5 - - -0.14 0.24

Source: EPDCS

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(i) Jute yields have increased in the last 10 years in all the jute

growing districts although the growth rates vary substantially from

one district to another;

(ii) As in the country-wide analysis, district-based analyses also show

the significant impact of jute and rice prices and fertilizer

consumption on yields;

(iii) The impact of jute prices and fertilizer consumption are more

important in the districts in the Northern Area, Pabna and Kushtia;

(iv) The wide discrepancies in yield between districts which existed in

the early 1970s narrowed in the early 1980s. This was brought about

by low yield growth in districts which already had relatively high

yields in the early 1970s (Comilla, Dhaka, Jessore) and high yield

growth in districts which had relatively low yields in the early

1970s (Dinajpur, Rangpur, Bogra, Rajshahi, Pabna, Kushtia).

(v) Trends in district yields suggest that yield growth slows down once

yields of 3.5 - 3.7 bales/acre are attained. Statisticai analysis

shows that with the present technology, achieving yield levels of

over 4 bales/acre at district or national level is difficult even if

jute prices and fertilizer consumption increase.

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VII. IMPACT OF PRICE FLUCTUATIONS ON PRODUCTION

52. In the present investigation of jute production in Bangladesh, we

have not examined statistically the influence of price fluctuations on acreage

and/or yield. The major reason is that in the last 12-15 years, where we have

concentrated our analysis, there were no periods of price stability long

enough to compare or analyze. Some previous studies have assumed that if there

were periods of price stability of two or three years (which is about the

maximum duration of price stability during the last 15 years), farmers would

expect the next year-s price to be stable and risk-averse farmers would be

more inclined to increase acreage and yield. However, this assumption implies

fairly myopic behavior on the part of farmers, given the fairly regular

cyclical price behavior of the past.

53. Although very difficult to confirm empirically, there are reasons to

believe that price stability would lead to increased jute supply. They

include:

(i) The recent large production increases in wheat, HYV aman and HYV boro

rice are considered to be due, at least partly, to the Government's

price support/stabilization policies;

(ii) As mentioned in Section III, higher production growth of tossa

compared with white jute could be due to the relative price and

production stability of tossa jute;

(iii) The relatively slower growth of jute acreage and yield in Faridpur

district may well be due to the higher level of uncertainty of

eventual output on these farms because of the frequent flooding.

(Although this is more of a production instability problem, we could

expect farmers facing price uncertainties to react in a similar

way.);

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(iv) In order to obtain higher yields, preparations for seeding such as

deep ploughing and fertilizer application are necessary. If jute

farmers delay their decision as to whether to grow jute or rice

because of price uncertainty, the time available for good land

preparation is reduced; and

(v) A good knowledge of and experience with a particular plot of land

should lead to higher yields. Stable prices of jute and rice could

help farmers to develop an appropriate long-term crop rotation which

would enhance the farmer's knowledge and ability to increase yield.

54. It is also expected that given the high price responsiveness of jute

farmers, stability of jute and rice prices would contribute to jute supply

stability.

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REFERENCES

Ralph Clark, "The Economic Determinants of Jute Production," in FAO MonthlyBulletin of Agricultural Economics and Statistics, Vol. 3, September 1957.

L.R. Venkataramanan, "A Statistical Study of Indian Jute Production andMarketing with Special Reference to Foreign Demand," Ph.D. Dissertation,University of Chicago, 1958.

Robert M. Stern, "The Price Responsiveness of Primary Producers," in Review ofEconomics and Statistics, Vol. XLIV, May 1962.

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Mahabub Hossein and M.A. Quddus, "Some Economic Aspects of Jute Production inBangladesh--An Inter-District Study," in The Bangladesh Economic Review,Vol. I, No. 3, July 1973.

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Jock Anderson, Charles Blitzer, Tom Cauchois and Enzo R. Grilli, A DynamicSimulation Model of the World Jute Economy. World Bank Staff Working PaperNo. 391, Revised (Washington, December 1980).

The World Bank

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