Even a decade ago, subsistence agriculture was the order of the day in rural Bangladesh. 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, commercialization 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 demand. 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 exchanges of goods and services. But why is an efficient marketing system needed? 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 steals a significant slice of the value chain.
Turning to the empirics, the trends in marketing of paddy - the staple crop - show 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 its way to markets; by recent years the share almost doubled. A number of factors could be adduced for this market orientation on the part of the rural households, but we shall cite a few: (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 earlier times; (b) improvements in communications, including telecommunication and media have 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 proportion of marketing other crops has historically been high, but only 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 is a particular case where substantial expansion of marketing has taken place because of: (a) expanded cold storage facilities; (b) introduction of modern varieties; and (c) spreading of potato cultivation from a few regions to all over the country.
In Bangladesh, marketing of paddy is mostly done by medium and large land-owning households. Nearly half of the total marketed paddy comes from a small but relatively rich proportion of rural households owning land of 1.0 hectares and above. As opposed to this, about one-thirds of the marketed output comes from about three-fourths of rural households owning up to 0.40 hectares of land. Over time, the share of both groups 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 appease the actors in the market. At the same breadth, the impact of that on the poor households should not take a back-seat in our mind.
Based on household level information, 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 times and the proportion of output held in stocks varies directly with farm size, i.e. big farms have large stocks and vice versa. Field surveys show that output held in stock was 12 percent of the total output produced before Amon harvest (lean period) and about 22 percent 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 by the poor groups. By and large, it is not always true that farmers sell total output immediately after harvest; and how much stock they would keep depends on the expectation of prices.
It is being hypothesized that harvest/distress sales are signs of economic dependency of households, who attempt to dispose off their 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 0.40 hectares) have reduced distress sales over time, although in absolute terms, thy 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 time than small and marginal farms because the former has higher economic capacity for holding stocks. Or, it may be so that the former can wait for making fortune from market swings. Second, the proportion of output sold at harvest time - 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, during periods of rising prices, larger farmers would hold more in stocks with the expectation of getting better prices.
The important question is: have farmers faced 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 at earlier times.
Abdul Bayes is a Professor of Economics at Jahangirnagar University.
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