Weathering the Price Storm

Weathering the Price Storm
by Hana Shams Ahmed
[DAILY STAR, April 11, 2008]


The queues at the BDR fair price shops are long. Mostly women carrying babies on their lap are seen standing outside the shops for hours. The rain comes and goes but they still stand and wait. They are waiting patiently to feed themselves and their families with the most staple form of diet — rice. But for the maache bhaat-e Bangali, rice has become the dearest product. And for the roughly 11 crore people living in the villages, who spend about 80 percent of their income on food, this could spell a disaster for the country.

According to the Trading Corporation of Bangladesh, prices of rice have gone up by 25-30 percent in the country over the last few months and 67 percent over the last year. Retailers and wholesalers across the country already raised the price of Indian coarse by Tk 70 to Tk 80 and fine rice by Tk 20 to Tk 50 per maund (37.32kg). The BDR fair price outlets in the capital and the Open Market Sale (OMS) centres have been swarming with people from middle to low income groups ever since prices started soaring. But stocks keep running out at many outlets and many people who wait in queue for hours return empty-handed.

In the past whenever there had been a rice shortage the country could rely on imports from India. But this year because of international scarcity there were no cheap imports to fall back on. The rice market got a big shock when India, the biggest exporter of rice to Bangladesh suddenly raised its prices from $300 per tonne to $1000 per tonne, finally bringing it down to $430 per tonne at the end of the last month.

Bangladesh faced two of the biggest natural disasters last year. Two back-to-back floods during the monsoon season and the devastating cyclone Sidr at the end of the year destroyed much of the Amon crops of the country. Things are expected to get better though. The Boro crops are set to be harvested in a few days’ time. Although 28,000 hectares of Hybrid Boro have been turning yellow, affected with the pata pora disease most of the harvest is expected to do well and if the target of 175,00,00 tonnes of rice is met it will fulfil more than 50 percent of the country’s total requirement of about 275,00,000 tonnes.

But the increase in the price of rice is not an isolated incident. The rising trend in food prices is now an international phenomenon as world grain supplies are at record low levels. Global food prices registered an unprecedented 40 percent increase during 2007. In 2007, rice price in Bangladesh rose by 42.6 percent on average whilst wheat price posted a rise of 55.4 percent. Bangladesh’s international sources of rice import are limited to India, Thailand and Vietnam. But Vietnam has stopped exporting and Thailand and India has limited the amount of export. Increasing global population, soaring demand for bio-fuels and animal feed, and unfavourable weather conditions are some of the principal factors that has had a negative impact on global demand for agricultural products.

The rise in use of bio-fuels like ethanol lead to the destruction of forests and use up the land that could otherwise have been used for food farming. According to Time magazine, the grain it takes to fill an SUV tank with ethanol could feed a person for a whole year. Indonesia and Malaysia are following the world trend by converting increasing amount of forestland to palm oil farms. A 30 per cent jump in international rice prices did have an impact on China’s food prices but the country is largely self-dependent for rice.

Economist Paul Krugman, wrote a detailed op-ed in the April 7 issue of the New York Times (“Grains Gone Wild”). He said that emerging economy populations are “starting to eat like Westerners”. It takes 700 calories’ of animal feed to produce a 100-calorie piece of beef, so a diet increases overall demand for grains. Krugman calls this phenomenon “March of the meat-eating Chinese”.


People from low-income groups had to stand in queue for hours to buy a few kilograms of rice, braving adverse weather conditions.

Chinese demand, and the Iraq war, have pushed oil prices to breaking point. With oil at $110 per barrel, energy costs have driven up agricultural costs. Global governments and private grain dealers became complacent over last few years and stopped keeping precautionary large inventories. Thus when global grain markets were hit by systemic shock, global food inventories were far less that what was needed.

Shykh Seraj, the Director of Channel-i and producer of the agricultural programme ‘Ridoye Mati O Manush’ says that the current scarcity of rice was predicted as far back as December 2006 when a World Rice Report was published which forecasted that there would be a worldwide scarcity of rice from mid or end of December 2007. From 2006 the effects of global warming started to be felt to the most extent. “That’s when the crop damage happened in Australia,” says Seraj, “Before that Australia used to dump food grain into the ocean after they had kept enough for their consumption and distributed the necessary amount to other countries. After that countries like Australia and the United States completely stopped exporting maize and started stocking on food.”


Shykh Seraj

Seraj is hopeful about the Boro crop though. “There is a 15-lakh tonne food deficit,” he says, “but the boro crop is expected to do well this year. We expect to have a bumper harvest this year. So if that happens the 15-lakh tonne food deficit can be recovered.”

Seraj thinks that it was a bad idea that we only depended on the Indian market. He thinks that the government should have looked at alternate markets, instead of looking just to India. Also the problem seems to have been intensified to an artificial extent by hoarding practices carried out by a group of dishonest businessmen. “If you go to the shops today and ask for 10 tonnes of rice then they will be able to provide you with it,” says Seraj, “that means there is a no scarcity, the problem is with the price. Some businessmen are hoarding up on rice taking advantage of the fact that prices have gone up in the international market. The increase of price in the local market seems to be a few times more than in the international market.”

Seraj blames irresponsible journalism for giving the businessmen this opportunity. “When they read in the newspapers that the price of rice is increasing, it gave them the opportunity to hoard.”

Seraj found further evidence of this when he visited various rice mills across the country. There are thousands of rice mills all over the country, two of the biggest being in Kushtia and Natore. “I found that many such rice mills were drying rice,” says Seraj, “When I asked him what rice it was, they said it was Boro, but Boro is yet to be cut, when I enquired further, they said it was the Amon from the last season. So these rice are stored in their own places. It is true that because of global warming there is a decrease in food production, but clearly the market is being controlled by the businessmen.”

The weather conditions have been quite extreme in the country and the behaviour of all kinds of crops are dependent directly on the seasons of the year, where certain expected weather conditions yield the crops of that season. “In the villages there is still some amount of dew in the morning, it is not supposed to be there now. There is an intense increase of insect attack because of that. This is happening all over the world. We’ve already had two floods last year. There is no guarantee that there won’t be three floods this year,” adds Seraj.

Unfortunately poor countries like Bangladesh are the hardest hit by this rice scarcity. In developed countries food prices have gone up with a corresponding rise in people’s purchasing power. “Unfortunately in Bangladesh, there has not been an increase in the income of the people corresponding to the increase in the prices of food.”


Many families have to survive on one meal a day ever since the
price of rice spiralled beyond the reach of the common people.

Seraj says that it is a bad social practice in our country that once the price goes up, it doesn’t come down. “There is the army and BDR but the businessmen are still increasing prices at their own free will.”

BBC news gave a very pessimistic view of the current food crisis in Bangladesh, calling it the “worst food shortage since 1974”. WFP fears that rising prices of essentials may cause political instability in the country. The good news is that the Boro harvesting season is here and already the price of rice in many of the wholesale or retails stores is starting to come down. But crises in Bangladesh have a strange way of repeating themselves, and they usually come back fiercer than the last one. The local economy needs to be strengthened to face such any such future crises. Rice is the staple food of the Bangalis. The domestically acquired portion of the country’s food stock needs to be increased, instead of looking to other countries for help in times of crisis. The media also needs to pay more attention to the agriculture of the country, instead of going into an analysis of its dynamics only when such disasters take place. We cannot allow a repeat of 1974.

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