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Bangladesh Agribusiness Report Q2 2010
Business Monitor International, Feb 2010, Pages: 52
Bangladesh Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Bangladesh's agribusiness service.
At the beginning of 2010, Bangladesh was again struggling with food price inflation. Of chief concern was the rapid rise in the price of rice, the country's staple grain. In December 2009 the retail price of coarse rice in the country's markets shot up by around 15%. Prices continued to edge up through January. With a large proportion of the population living in poverty, increases in the price of staple foods can have a large impact on food security, particularly for urban dwellers. The government has tried to bring down the price by releasing stocks onto the market and by imports. In January, the government began selling rice stocks in markets around the country at below the market price. With the price of rice rising on the international market, however, it will be hard to prevent domestic prices from following suit. Though the rise in the price of rice is bad news for urban consumers, it should give a boost to the country's farmers. Farmers suffered in 2009 as the bumper rice crop combined with low world prices served to depress the returns they received for their crop. In time, the rising retail prices should be matched with a rise in the amount received by farmers. Though the government's decision to extend an export ban on rice will prevent prices rising too high.
Wheat prices also rose rapidly through the end of 2009. The price of flour rose 15% in December, putting further pressure on consumers already struggling with high rice prices. The rise in retail prices was matched at the farmgate with wheat prices rising above the government procurement price meaning the government will struggle to meet its procurement target. As expected, the price of sugar remained stubbornly high following its rapid ascent in the middle of 2009. Again, the domestic price reflects the high world price for the commodity.
In the long term, the panic that hits the country when food prices begin to rise can only be stopped by improvement in the efficiency of the country's agricultural sector. While large rice harvests in the last couple of years may have brought Bangladesh close to self-sufficiency in that crop, the country is still a major importer of other staple foodstuffs including wheat, sugar and dairy products. Improving access to inputs such as improved seeds and fertilizer would go a long way to helping improve yields. The introduction of flood resistant rice is a promising development on this front which should help cushion farmers from the country's regular climatic disasters.
Policy also needs to be improved. Despite strong demand for the commodity, the country's state-run sugar sector is permanently loss-making and supplies only a fraction of demand. Cane farmers are discouraged from selling to government mills owing to low prices and late payment. The long-promised privatisation of the mills could go a long way in developing a profitable sugar production sector in the country. The pace of reform, however, is glacial.
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