Food prices: problems are not yet over
Sunday, 23 November 2008
This paper last Saturday carried a couple of news items on its front page that would surely evoke mixed reactions among the consumers. The first news items explained how the government buoyed by higher output of two consecutive rice crops after the last year's floods and the super-cyclone, Sidr, is planning to reap another good harvest in the coming Boro season. The second report, quoting a World Bank (WB) expert, said the prices of cereals, specially those of rice and wheat, that soared to record highs some months back are unlikely to fall noticeably in the near future despite bumper harvests across the globe this year. What is worse is that the WB expert maintained higher food prices would continue to remain as a potential threat to the balance of payments (BoP) and poverty reduction efforts of the South Asian countries, including Bangladesh.
Bangladesh farmers produced a record rice output during the last Boro season when chances of natural calamities striking are fairly low, mainly to recoup their crop losses due to two consecutive floods and the cyclone Sidr. The country is expected to reap a bumper Aman this season which has also not seen any major natural calamity. The flash flood that came early in the season did not cause much damage to the crop. The basic reason for the farmers being very much interested in reaping higher yields of their rice crops this time has been the higher food prices in the market. However, high cereal prices do not mean any windfall profits for the farmers since high costs of inputs, including fertilizers, diesel and pesticides, do not leave any profit margin for them. High prices and non-availability of fertilizers in time have been causing much trouble to the farmers for quite sometime. Though the government has, repeatedly, dismissed allegations about high prices and scarcity of fertilizers at the farmers' level, the reality is that the problems are still troubling the farmers. The prices of urea and other fertilizers are still high as the distribution system that has been put in place by the government has some built-in flaws. The government does need to examine the problems being encountered by the farmers very closely and try to remove those.
Both in domestic and international markets, the prices of cereals have not recorded any mentionable fall despite their bumper harvests in the major producing countries in contrast to what has happened in case of other commodities. But for a country like Bangladesh, which is a net importer of food grains, a decline in food prices at a reasonable level is highly desirable because of the very poor purchasing capacity of a large chunk of its population and the pressure the high food prices exert on the country's balance of payments. Signs are very ominous in the horizon. It would not be wise to rule out a decline in the inflow of remittance and aid money and export earnings in the coming months since most developed economies have entered a recessionary phase following the ongoing global financial crisis. In such a situation, import of food grains at higher prices would create additional pressure on the BoP. It has thus become imperative for the government to ensure better rice yields in the next Boro season at any cost. But, under the prevailing circumstances, better rice yields are unlikely to bring down the domestic prices of the same at prices that can be afforded by the people living below the poverty line. So, the government will have to continue selling rice at subsidized prices for some more time, it seems.
Bangladesh farmers produced a record rice output during the last Boro season when chances of natural calamities striking are fairly low, mainly to recoup their crop losses due to two consecutive floods and the cyclone Sidr. The country is expected to reap a bumper Aman this season which has also not seen any major natural calamity. The flash flood that came early in the season did not cause much damage to the crop. The basic reason for the farmers being very much interested in reaping higher yields of their rice crops this time has been the higher food prices in the market. However, high cereal prices do not mean any windfall profits for the farmers since high costs of inputs, including fertilizers, diesel and pesticides, do not leave any profit margin for them. High prices and non-availability of fertilizers in time have been causing much trouble to the farmers for quite sometime. Though the government has, repeatedly, dismissed allegations about high prices and scarcity of fertilizers at the farmers' level, the reality is that the problems are still troubling the farmers. The prices of urea and other fertilizers are still high as the distribution system that has been put in place by the government has some built-in flaws. The government does need to examine the problems being encountered by the farmers very closely and try to remove those.
Both in domestic and international markets, the prices of cereals have not recorded any mentionable fall despite their bumper harvests in the major producing countries in contrast to what has happened in case of other commodities. But for a country like Bangladesh, which is a net importer of food grains, a decline in food prices at a reasonable level is highly desirable because of the very poor purchasing capacity of a large chunk of its population and the pressure the high food prices exert on the country's balance of payments. Signs are very ominous in the horizon. It would not be wise to rule out a decline in the inflow of remittance and aid money and export earnings in the coming months since most developed economies have entered a recessionary phase following the ongoing global financial crisis. In such a situation, import of food grains at higher prices would create additional pressure on the BoP. It has thus become imperative for the government to ensure better rice yields in the next Boro season at any cost. But, under the prevailing circumstances, better rice yields are unlikely to bring down the domestic prices of the same at prices that can be afforded by the people living below the poverty line. So, the government will have to continue selling rice at subsidized prices for some more time, it seems.