Rice economy | The Daily Star


Rice, a four-letter word, is not the only staple food; It is central to the overall life of Bengalis, be it culture, politics or economy. Though many things have changed over time in Bengali life, rice remains resplendent in all its glory.

There are some powerful statistics to back up this claim. Rice contributes to two-thirds of the country’s total caloric requirement and is the source of half the country’s protein intake.

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According to the Bangladesh Bureau of Statistics, crops and horticulture account for about 10 percent of GDP, half of which comes from rice.

This is 48 percent of the total rural employment. If rice trading, transportation and processing activities are considered, the employment percentage will increase.

Obviously, rice remains at the center of many stakeholder discussions. However, there is one specific issue which, for some strange reason, comes to the fore every year and attracts the attention of policy makers, think tanks and the media. It is discussed a lot. But, unfortunately, at the end of the day, it remains unresolved.

The issue is the price, which farmers get by selling paddy or rice, and the consumers pay to buy the rice for consumption. Year after year, the point of discussion remains the same: Consumers pay more, but farmers who produce them at the cost of their labor are often paid less.

One would argue that if consumers are paying more, why are farmers not getting their share? Similarly, if farmers sell their produce at a lower price, why do consumers pay more? It is a vicious cycle. We need to understand the complex issue to find the root cause.

In a so-called open market economy, the equation of demand and supply should ideally determine the price.

According to Bangladesh Rice Research Institute, the country’s annual consumption requirement of rice is 35 million tonnes. In its report, India’s Mordor Intelligence says that consumption is expected to be 39.7 million tonnes in 2021. Therefore, we can safely estimate that the annual demand for rice is around 37 million tonnes.

From a production standpoint, we are almost there to meet the demand. Bangladesh has done wonders in increasing its rice production. In 1971, we produced 10.59 million tonnes of rice, and this reached 37.4 million tonnes in 2020 according to an official figure. However, the United States Department of Agriculture (USDA) has estimated rice production at 35.8 million tonnes in 2020.

In 2021, production is estimated to exceed 37 million tonnes. According to a USDA report, Bangladesh will produce 19 million tonnes in the current borough season, which is 55 percent of the country’s total rice production. However, the agriculture ministry expects to harvest 20.5 million tonnes.

In short, we have almost balanced demand and supply position. Then why is the price of rice continuously increasing at the consumer level? Increased cost of production or inflation alone cannot justify a rise in prices.

The average price of coarse rice is Rs 48-50 per kg, while that of fine rice is around Rs 62-65 per kg. This is the highest price since 2017.

The price of coarse rice went up to Rs 50 per kg in 2008 as there was a reduction in production due to Cyclone Sidr, and the government could not meet the deficit by importing it in time due to a crisis in global supply.

In 2020, the average price of coarse rice was Rs 48 per kg, which was 20 per cent higher than in 2019.

Experts are pointing to two main reasons behind this unusual price hike – shortage of rice in government storage and the trend of over-storage in different quarters in the backdrop of the coronavirus pandemic. A contained quarter stole more grain to drive away customers during the pandemic by creating artificial distress.

According to the food ministry, the government’s rice stock has fallen to a 13-year low of 300,000 tonnes, while experts suggest keeping at least 1.25 million tonnes of grain in stock.

The main reason for the stock drying up was the government’s failure to meet its target last year as the market price was high. In the last peace season, only 83,000 tonnes of rice was procured against the target of 800,000 tonnes.

When prices rise, the government usually initiates programs such as open market selling (OMS), vulnerable group feeding (VGF) and food for work to intervene in the local market to control food prices. .

To understand the price mechanism as a whole, we need to consider the effects of intermediaries. Before rice reaches a consumer from a farmer, it passes through four more stages: traders, mill owners, wholesalers and retailers.

At each stage, a markup is added, which ultimately affects the consumer price. In some cases, especially for small and marginal farmers, more middlemen are involved. Small and marginal farmers are in a hurry to sell their produce immediately after the harvest as they do not have the storage capacity. As a result, they are often forced to sell it at a lower price.

According to a study by the International Food Policy Research Institute (IFPRI), 83 per cent of the farmers belong to the marginal and small category, with land holdings of less than 1.5 acres.

Therefore, the government should buy paddy directly from the farmers, and buy more. Total rice equivalent procurement was only 7.25 per cent of total production in 2018-2019, and the outlook in 2020 was gloomy. An IFPRI study shows that the government procures at least 19 per cent of paddy to ensure minimum price support.

The government’s storage facility is not enough and it is going to be 24 lakh tonnes. The country should have the capacity to store 5 million tonnes of rice to facilitate more procurement. If the government has enough stock, it can run more programs like OMS, VGF and Food for Work, which ultimately contribute to stabilizing the price as and when required and help the low-income group. .

There should be transparent and real-time information about stocks at both the public and private levels so that import decisions can be taken in advance in case of an emergency, or in case of surplus, the authorities may consider exports or other programmes.

Any dishonest attempt to manipulate the price should be dealt with strictly. Hence, monitoring the market dynamics requires a cautious approach.

Rice plays the most important role in ensuring the food security of Bangladesh. Hence, it should be addressed with utmost seriousness, proper policy, comprehensive planning and intense attention to protect the interest of farmers and consumers.

The author is the Chairman and Managing Director of BASF Bangladesh Limited. Thoughts are personal.





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