Virus-Induced Jute Bag Shortage Endangers Nigerian Cocoa Exports
(Bloomberg) -- Nigerian cocoa exporters, which rely on imported jute bags to package their beans, are facing a shortage after production in India and Bangladesh slowed due to a surge in coronavirus cases and factory closures.
International buyers insist on packaging in hydrocarbon-free jute bags to preserve the beans’ quality. Nigeria, which doesn’t produce bags locally, relies on imports from the two South Asian nations, which have been badly hit by the outbreak.
The West African nation, which has about $34 billion of foreign-exchange reserves, may lose as much as $700 million in cocoa bean export earnings because of the shortage, Mufutau Abolarinwa, president of the Cocoa Association of Nigeria, said in an interview. Surging virus cases in India, the world’s largest producer of the fiber, floods in Bangladesh and that nation’s decision to shut 25 state-owned mills last year severely curtailed output and led to a jump in prices.
“We’re afraid of taking the orders as production is slowing,” said Rezaul Karim, vice-chairman of Bangladesh Jute Goods Exporters Association. “Only private companies are now in business, which added to a supply squeeze.”
Flooding risk in Nigeria, which is the fifth-largest cocoa producer, could also cut the nation’s output of the bean by 25% to 225,000 metric tons, according to the cocoa association.
Read more: Nigeria’s Cocoa Growers Risk Output Loss to Excessive Late Rains
That harvest would require at least 3.6 million jute bags, which would cost about $9.5 million at current prices, according to a Bloomberg calculation.
A cyclone, amid a pandemic in South Asia last year, damaged crop and resulted in a surge in prices of jute, and that is also deterring buyers, said Raghavendra Gupta, chairman of the Indian Jute Mills Association.
“Since prices have gone up by almost 30% from the start of the jute year, international buyers are reluctant to book fresh quantities,” Gupta said in an interview.
Meanwhile, the Cocoa Association of Nigeria has put in a request with the Finance Ministry for an import-duty waiver and foreign exchange access to bring jute bags into the country, Abolarinwa said.
Ivory Coast, the world’s top cocoa grower, produces jute bags locally. Ghana, the second-highest producer, hasn’t reported a shortage of bags for cocoa packaging. Meanwhile, Cameroon, the fourth-biggest producer, stocked up in advance, according to Austin Kidzeru, a project manager at Olam Cameroon.
Temitope Eladiya, managing director of ZTI Farms Ltd., a jute bag importer based in the commercial capital, Lagos, said his Bangladeshi suppliers have said his order could take up to nine months to arrive.
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