Historically, agriculture used to be practised in the sub-continent on subsistence basis. The villages were self-sufficient; people exchanged goods and services within the village mainly on barter basis. However, with the development of infrastructure and storage facilities, commercialisation of crops crept into agricultural practices and marketing strategies began to claim a respectable berth in academic discourse. Two factors may be mentioned in this respect. First, rapid spread of modern technology in paddy cultivation led to more production per unit of land and a surplus over consumption. The technology also helped release land for non-paddy crops. Second, the agriculture-industry or rural-urban linkages got stronger over time leading to growing exchange of goods and services.
But why is an efficient marketing system called for? It is because a good marketing network helps both producers and consumers in many ways as the system: (a) enables primary producers to get a better return or raises the farm gate price; (b) provides facilities for selling crops at an incentive price; (c) reduces the price-spread between the primary producers and the ultimate consumers; (d) makes all farm products available to consumers at reasonable price and (e) reduces the role of middlemen who grab a significant slice of the value chain.
Agriculture of Bangladesh is generally termed as 'mono-crop' agriculture as a single crop, paddy, occupies more than two-thirds of all cultivated land. The reasons behind this are well-known. The majority of the rural people want to ensure food security through growing staple crops in their small amount of land. Thus, the land use pattern is dominated by growing food crops only. Food insecurity always remains instrumental in the allocation of resources. As most of the farms are of subsistence nature, staple crops are grown largely for home consumption and roughly one-third of the produce is marketed. Farmers also grow cash crops to meet cash needs and 75-80 per cent of these crops are marketed.
The trends in marketing of paddy - the staple crop - shows that it has increased over time despite farm size becoming smaller. For example, in the 1980s, a quarter of the total output produced by the households found way to markets; in recent years, the share has risen to roughly 40 per cent. A number of factors could be adduced to this market orientation on the part of the rural households: (a) an increase in land productivity due to the adoption of modern varieties helped households reap a better harvest from the same amount of land than previously; (b) improvement in communications, including telecommunications, and media has widened the base of market information and (c) a reduction in household size has reduced home consumption to leave some outputs for the market.
However, the proportions of marketing of other crops have historically been high and got higher over time. This is not unusual given that, most of these are perishable products and traded for cash income. Farmers usually meet their non-rice demands by selling these commodities. Potato, particularly, is a case where substantial expansion of marketing has taken place because (a) cold storage facilities have expanded, (b) modern varieties have been introduced and (c) cultivation of potato has spread from a few regions to all over the country.
In Bangladesh, marketing of paddy is mostly done by medium and large landowning households. Nearly half of the total marketed paddy comes from a small proportion of rural households owning 1.0 ha and above land. As opposed to this, about one-third of the marketed output comes from about 76 per cent of rural households owning up to 0.40 ha of land. From the angle of economic status, solvent households comprise 15 per cent of rural households and they supply 41 per cent of the marketed paddy; about 'self-sufficient' households comprising 42 per cent supply 47 per cent. Over time, the share of both groups has increased. Finally, the 'poor' segment of rural households constitutes about 45 per cent but they supply only 13 per cent of the total marketed output. The policy implication of this precarious position is that we need to keep the price of paddy at a remunerative level to encourage the actors in the market.
Unfortunately, there is little empirical data on the level of storage of staple food at household level. The issue of storage drew our attention during the food crisis in 2007 when, belying our belief, rice prices continued to rise even immediately after the harvest. The question that arose at that time was: have farmers been storing more rice on the heels of price hike? Based on household-level information, we observe the following behavioural dynamics as far as storage is concerned:
* We observe that farmers' have considerable stock holding capacity that is hardly taken into account by policy makers and researchers.
* We also notice that all classes of farmers keep stocks to tide over bad days and the proportion of output held in stocks varies directly with farm size: big farms have large stocks and vice versa.
* Field survey shows that output held in stock was 12 per cent of the output produced before amon harvest (lean period) and about 22 per cent of the output of one month after boro harvest.
* Quite expectedly, perhaps, the level of stock is related to farm size. For example, large and medium groups keep 22-30 per cent of total harvest as stock against 18-19 per cent of the poor groups.
* By and large, it is not always true that farmer's sell total output immediately after harvest and how much stock they would keep depends on the expectation of prices.
It is being hypothesised that, harvest/distress sales are signs of economic dependency of households who attempt to dispose off produce as quickly as possible to pay for debt or meet other exigencies. Close at heel is the hypothesis that, their inability to hold harvested crops deprives them of a better price in future when supply in the market decreases. We observe that sales within one month of the harvest increased over time. Interestingly, poor farms (up to 0.40ha) have reduced distress sales over time, although in absolute terms, they still sell roughly two-thirds of output immediately after the harvest compared to about 50 per cent of the large and the medium farms. By and large, the medium and large farms sell a smaller proportion of their crops at harvest than small and marginal farms because the former category of farms has higher economic capacity for holding stocks. Or, it may be so that the former could wait for fortune from market swings. Second, the proportion of output sold at harvest - and for all classes of farmers - has increased over time. This is particularly true for recent years because the price margin for sales later in the season has declined. However, at periods of rising prices, larger farmers would hold more in stocks in the expectation of getting better prices
The important question is: do farmers face economic losses due to early sales? It appears that, as a result of growing market integration, information dissemination and storage costs, harvest sales are less harmful these days than possibly they were before.
The writer is a Professor of Economics at Jahangirnagar University.
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