Development, Economics and finance, Trade and industry, Food & water | South Asia

22 September 2021

Despite record rice production, healthy public stock, and even the government controversially importing rice, rice prices in Bangladesh remain at their highest point ever, Md Roushon Jamal writes.

Recording its highest ever production of Boro (dry season) rice – 20.7 million tonnes – in 2021, Bangladesh’s government expected to rely on rice for food security throughout the COVID-19 pandemic.

However, rice prices are still at a historical peak in the country, even though global rice prices are falling. The trading price of rice in India, Pakistan, Vietnam, and Thailand is between $373 and $525 per tonne, while in Bangladesh, it’s between $480 and $660.

Low-income and disadvantaged quarters of the country are hit hardest by these rice prices. Historically, they start to fall with the commencement of harvest season, but the rice market has shown abnormal behaviour throughout two consecutive harvest seasons, offering no relief in Bangladesh.

Rice security has always been a big strategic issue for the densely populated South Asian country. With food security concerns escalating due to the outbreak of COVID-19 in March 2020, Prime Minister Sheikh Hasina called on the country to utilise every inch of cultivatable land to increase production.

Bangladesh is uniquely successful in the region as a very productive agricultural country despite having limited cultivatable land and enormous climate risks. Braving environmental and COVID-19 risks, rice farmers continued their efforts throughout the pandemic to supply sufficient rice, vegetables, egg, meat, and fish to 165 million stomachs.

But, despite their efforts, consumers are grappling with the soaring retail price of food items, particularly rice.

More on this: From the rice basket to retail

The rice price anarchy in Bangladesh comes down to the market, which has allowed big farmers and millers to speculatively build up large stocks of rice and paddy, and not done enough to prevent middlemen hiking prices amid the desperation of a pandemic.

This is because in Bangladesh, the government is predominantly influenced by the business community, who occupy a significant share of the parliament, so policy action against business power is difficult for the government. Still, decisive policy intervention is necessary to control the influence of middlemen in the rice market.

Still, as rice is a staple crop in Bangladesh, the government does attempt to implement policy and legal instruments to ensure a steady domestic supply. But to make consumers happy, the government sometimes applies risky and controversial mechanisms, which potentially deprive rice farmers of fair prices for their paddy.

In this case, importing rice was considered to an effective cure for the disease of high prices. The government has used this weapon to curb retail prices before and, each time, it was rice farmers who suffered.

More on this: Fuelling food prices

To avoid any unexpected price spiral in the domestic rice market, the government imported 1.35 million tonnes of rice in the 2020-21 financial year at a reduced import tariff, but even this failed to control retail prices.

Ultimately, this approach failed because it did not address the deeper problem. Rice traders are creating market distortion but have been allowed to operate uninterrupted for years.

In the face of the pandemic, the government did try many policy instruments to ensure rice affordability.

With that policy support, community participation, and subsidies, 13 million rice farmers produced huge harvests of Boro rice in the rice seasons of 2020 and 2021.

It was hoped that two consecutive bumper harvests of Boro rice would pacify rice security concerns in the face of these issues, and a very good domestic supply of rice created optimism for a resilient rice market in Bangladesh. But, unfortunately, ‘market forces’ had other ideas.

On top of its issues procuring rice from millers, the government faces a daunting task coordinating policy to balance rice availability, affordability, and prices. In the meantime, the Ministry of Food approved the import of a further 1.7 million tonnes of rice, but the deeper questions remain: How can they reduce the retail price of rice without this? And what will save rice farmers and consumers from this apparent pricing chaos?

The government cannot expect long-suffering rice farmers to continue on these terms forever, and the climate will not always be as favourable for harvest in the last two seasons.

At the moment, economists, policymakers, and the government haven’t turned a domestic rice surplus into a falling domestic market price. The key agencies – Trading Corporation of Bangladesh, Department of Agricultural Marketing, Directorate General of Food, and the public administration – seem unable to address this.

Given the disrupted value chain, a global economic downturn, and rising hunger due to the pandemic, the government must make rational, empathetic, and cooperative decisions to overcome the country’s prevailing food security crisis. Farmers, millers, traders, and policymakers need to be brought together under one framework to ensure rice security and price justice, both for the rest of the COVID-19 pandemic and the years to come.

This article is part of Policy Forum’s In Focus: Developing Asia section, which brings you analysis from experts on the policy challenges facing its least developed members.

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