Food price dilemma: Is it a problem of plenty?

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Shamsul Huq Zahid
The Awami League (AL)-led Mahajote (grand alliance) government must be happy to see the fulfillment of one of its many electoral promises-bringing down the prices of rice, the main staple, to an affordable level-- within a very short period after its coming to power.
At the same time, there are enough reasons for it to be worried. For, the prices of rice have gone well below the cost of production at the growers' level in some parts of the country.
In the northern districts, including Rangpur, Kushtia and Dinajpur, a kg of Aman rice being sold at Tk. 18 and TK. 20 at the retail level. But the cost of production of the same at the growers' level during the last Aman season was between Tk. 22 and Tk. 23 a kg.
The cost of production of one kg of Boro paddy this season, according to experts, would be around Tk. 16. Rice growers fear that if the current trend persists, the price of a kg of paddy might hit the rock bottom-Tk. 10 a kg, soon after the harvest of Boro rice, causing a substantial financial loss to them.
The cost of production of Boro rice has not gone down this year, despite the fact the government has heavily subsidized the fertilizers other than urea and provided subsidy at the rate of Tk. 2.0 per litre to diesel used for irrigation purposes. Rather, the cost of production has increased marginally because of the hike in labour wages and prices of seed, pesticides etc.
The farmers, according to a report published in the FE a couple of days back, have cultivated Boro rice in areas 0.2 million hectares more than the officially fixed target. The procurement prices-Tk. 18 and Tk. 28 for a kg of paddy and milled rice respectively-fixed by the government following the harvest of Boro crop last year, have encouraged the farmers to go for wider cultivation of Boro this season.
Indications are that the farmers would reap a good Boro harvest this time if the nature does not turn erratic. But the prospects for retrieving even their investment seems clouded because of the falling prices of rice, which could be exacerbated by the government's plan to start open market sale (OMS) of rice in six divisional headquarters, sale of rice at Tk. 18 per kg among nearly 3.0 million readymade garment workers and distribution of rice under various safety net programmes of the government from this week. Besides, the government has decided to distribute rice instead of cash under the 100-day nationwide employment programme.
Experts fear that farmers would switch over to other cash crops if they find it is uneconomic to grow rice. It has happened this year with potato cultivation. Last year, a bumper production of potato subjected the growers to heavy financial losses. As a consequence, the potato acreage shrank substantially this year and the consumers are paying more for the potatoes. The price of the item is likely to go up in the coming months.
No doubt, poor consumers, who suffered much in the recent past, like to see the prices of rice and other food items further down. But they are not oblivious of the predicaments of the rice growers.
What a turn of event! From the late 2007 to the middle part of 2008, the prices of rice like all other food and non-food commodities sky-rocketed both at home and abroad and, at one stage, the rice exporting countries declined to sell rice. There were food riots in many developing countries. All the chilling forecasts started coming from the UN Food and Agriculture Organisation (FAO) and the World Food Programme.
Bangladesh in early 2008 moved from one rice surplus country to another with the request to sell food to it but there was hardly any positive response. The developments over the India's commitment to export rice to Bangladesh are still fresh in the memory of the Bangladesh people.
But the situation has changed radically over the past few months. Most rice growing countries have harvested bumper crops in the past consecutive seasons and the demand for cereals from affluent as well as poor countries is now at its lowest level because of the effects of the global recession of on unprecedented nature. No country is in a hurry to build buffer food stocks.
However, the prevailing situation may not last too long. What has gone down must come up sooner or later. That is what the world has witnessed over and over again as far as the prices of most commodities, including fuel oils are concerned.
So, the government cannot allow the farmers to be discouraged from rice cultivation because of the mismatch between the cost of production and the market prices of the country's main staple.
It should immediately announce its procurement price for Boro paddy and rice taking into consideration the average cost of production of the same at the growers' level and launch the procurement drive as soon as the Boro rice starts arriving in the market.
The food storage capacity, estimated at 1.4 million tonnes, might pose a serious problem in this respect. However, the proposed distribution of 300,000 tonnes of rice from the existing food stock of 1.10 million tonnes under various programmes would help create some space for storage. Experts have suggested creation of additional space for food storage with the financial assistance from donors. The government should consider the suggestion rather seriously.