The problem of plenty
Friday, 15 June 2012
Nilratan Halder
Yet another bumper harvest -three in a row -should have been a cause for celebration but for the abnormal price slump. There is however a dichotomy in the matter particularly when it concerns the finer varieties of rice and the price tags at the consumer level. Right now, a maund (40 kilograms) of paddy of coarse varieties is priced at Tk 320-340 and finer varieties sell at Tk 350-380 in most rice-producing agricultural belts. Paddy is not perishable in the sense most vegetables are but then unless the cereal is stored in favourable condition, it does not take long to rot or otherwise deteriorate in food value. Because few farmers have enough barn capacity for storing the bumper harvest or are solvent enough to save their crop for sale later when prices go up, disposal of paddy during or immediately after harvest becomes urgent for them.
It is this compulsion that pushes the price down at the growers' level. The demand-supply theory is certainly at work in the domestic food market. But not quite! A kilogram of rice sold at Tk 26-28 in a village market has a price difference of Tk 10-12 or even more the moment it comes to a market in a large city. What happens in the process is that the growers of paddy are incurring losses on their primary crop. The same is true for growing potato and many other vegetables. The pattern of price rise of such crops is intriguing enough. For example, potato was selling at Tk 10-15 for the past five months but then suddenly prices have shot up to TK 20 -22. The reason for such a spurt in potato price is too obvious to escape notice. Small and mid-level potato farmers have long disposed of their produce; now the stockists and middlemen are bent on maximising their profits.
All this brings us to the unpleasant fact of market manipulation by the middlemen. And so long as fresh air cannot be breathed in the market system of this country, both the growers of agriculture produces and the food security of the country with the dichotomy will continue to remain vulnerable. It is against this backdrop, there is a need for assessing the impact the reduced subsidies as proposed in the national budget 2012-13 will have on the country's food production. The government has an express aim to attain food-sufficiency by 2013. If the trend of agricultural production can be maintained, there is no reason why it will remain unattainable.
However, farmers everywhere are disgruntled and given choices they would rather go for production of cash or exotic crops that fetch them better returns on their investment. Now the combined effect of low price of rice at the growers' level and reduced subsidy for agriculture may work as a disincentive for farmers to produce paddy on all cultivable lands. They would rather look for other option of putting the land to uses that make economic sense. Even they would be better off if some agricultural plots are left fallow rather than producing paddy the prices of which fall far short of the cultivation cost. Even the costlier agriculture inputs this season compared to last year is largely to blame for the escalation of production cost. Clearly, ensuring prices of agricultural produces with reasonable profit margins for growers is crucial for maintaining the production momentum.
Credit disbursement for agriculture against this year's target of Tk 138 billion with 73.9 per cent achieved by April last has been quite satisfactory; so the budget just placed in parliament proposes to raise the amount to Tk 141 billion. So far so good! The catch-22 though is, if farmers will feel prompted to take agricultural loans for cultivation of paddy. If the price remains below the production cost, farmers will be in no position to repay their loans. Not a bright prospect either for farmers or for the banks for which credit disbursement at a level has been made mandatory.
Remarkably, the country is yet to attain food-sufficiency meaning enough food grains to feed its people. The issue of health or nutritious food in adequate quantity in daily dishes of each family still remains a far cry. And it is in such a situation, justice in price for their produces remains uncertain. What if production of cereals drops drastically and international food market also turns volatile? Only then will all concerned know how to appreciate their fruits of toil.
In the proposed budget mention has been made of the formation of 490 'Farmers Marketing Group' and 18,000 'Farmers Club' and building of growers' market in 60 upazilas and wholesale markets in 21 districts. Little is known about their role in reversing the price decline. Direct participation of farmers in marketing of produces has the potential of elbowing out the vested interest groups who manipulate market.
But to make the move successful, there is a need for developing a network of transportation, preferably cheaper types like goods train and cargo vessels, of farm produces. Here is an area where the government should make investment generously. A move like this will yield double benefits: first it will ensure fair price for both producers and consumers and second, will keep inflation within manageable limit. Let the government do this small favour for farmers and consumers.
[email protected]
Yet another bumper harvest -three in a row -should have been a cause for celebration but for the abnormal price slump. There is however a dichotomy in the matter particularly when it concerns the finer varieties of rice and the price tags at the consumer level. Right now, a maund (40 kilograms) of paddy of coarse varieties is priced at Tk 320-340 and finer varieties sell at Tk 350-380 in most rice-producing agricultural belts. Paddy is not perishable in the sense most vegetables are but then unless the cereal is stored in favourable condition, it does not take long to rot or otherwise deteriorate in food value. Because few farmers have enough barn capacity for storing the bumper harvest or are solvent enough to save their crop for sale later when prices go up, disposal of paddy during or immediately after harvest becomes urgent for them.
It is this compulsion that pushes the price down at the growers' level. The demand-supply theory is certainly at work in the domestic food market. But not quite! A kilogram of rice sold at Tk 26-28 in a village market has a price difference of Tk 10-12 or even more the moment it comes to a market in a large city. What happens in the process is that the growers of paddy are incurring losses on their primary crop. The same is true for growing potato and many other vegetables. The pattern of price rise of such crops is intriguing enough. For example, potato was selling at Tk 10-15 for the past five months but then suddenly prices have shot up to TK 20 -22. The reason for such a spurt in potato price is too obvious to escape notice. Small and mid-level potato farmers have long disposed of their produce; now the stockists and middlemen are bent on maximising their profits.
All this brings us to the unpleasant fact of market manipulation by the middlemen. And so long as fresh air cannot be breathed in the market system of this country, both the growers of agriculture produces and the food security of the country with the dichotomy will continue to remain vulnerable. It is against this backdrop, there is a need for assessing the impact the reduced subsidies as proposed in the national budget 2012-13 will have on the country's food production. The government has an express aim to attain food-sufficiency by 2013. If the trend of agricultural production can be maintained, there is no reason why it will remain unattainable.
However, farmers everywhere are disgruntled and given choices they would rather go for production of cash or exotic crops that fetch them better returns on their investment. Now the combined effect of low price of rice at the growers' level and reduced subsidy for agriculture may work as a disincentive for farmers to produce paddy on all cultivable lands. They would rather look for other option of putting the land to uses that make economic sense. Even they would be better off if some agricultural plots are left fallow rather than producing paddy the prices of which fall far short of the cultivation cost. Even the costlier agriculture inputs this season compared to last year is largely to blame for the escalation of production cost. Clearly, ensuring prices of agricultural produces with reasonable profit margins for growers is crucial for maintaining the production momentum.
Credit disbursement for agriculture against this year's target of Tk 138 billion with 73.9 per cent achieved by April last has been quite satisfactory; so the budget just placed in parliament proposes to raise the amount to Tk 141 billion. So far so good! The catch-22 though is, if farmers will feel prompted to take agricultural loans for cultivation of paddy. If the price remains below the production cost, farmers will be in no position to repay their loans. Not a bright prospect either for farmers or for the banks for which credit disbursement at a level has been made mandatory.
Remarkably, the country is yet to attain food-sufficiency meaning enough food grains to feed its people. The issue of health or nutritious food in adequate quantity in daily dishes of each family still remains a far cry. And it is in such a situation, justice in price for their produces remains uncertain. What if production of cereals drops drastically and international food market also turns volatile? Only then will all concerned know how to appreciate their fruits of toil.
In the proposed budget mention has been made of the formation of 490 'Farmers Marketing Group' and 18,000 'Farmers Club' and building of growers' market in 60 upazilas and wholesale markets in 21 districts. Little is known about their role in reversing the price decline. Direct participation of farmers in marketing of produces has the potential of elbowing out the vested interest groups who manipulate market.
But to make the move successful, there is a need for developing a network of transportation, preferably cheaper types like goods train and cargo vessels, of farm produces. Here is an area where the government should make investment generously. A move like this will yield double benefits: first it will ensure fair price for both producers and consumers and second, will keep inflation within manageable limit. Let the government do this small favour for farmers and consumers.
[email protected]