How can Bangladesh manage its local rice market more efficiently, while retaining the interest of growers and consumers?
On the production side, rice is the backbone of Bangladesh's agriculture.
It accounts for 78% of the total gross cropped area, 50% of the agricultural gross domestic product, 50% of the rural employment, and 15% of the rural household income.
More than 60% of the total population lives in rural areas and most of them directly or indirectly depend on rice farming for livelihoods.
Thus, rice is an important source of employment, income, and livelihoods for millions of rice growers.
The price of rice is very important for farmers, consumers, and the government because it affects food security, poverty, and welfare.
High prices of rice increase income and livelihoods of farmers. On the other hand, high prices also increase food expenditure, food insecurity, and also hurt the low-income category people.
The profitability and income from rice farming is relatively low as compared to other high value agricultural commodities such as fruits and vegetables.
The average wholesale price of medium quality Boro rice in 2018-2019 was about Tk56 per kg while its production cost was Tk38 per kg.
If we consider a 20% price margin between farm gate and wholesale market (to account for transport cost and trader's profit), farmers get only about Tk45 per kg for their medium grain quality paddy such as Paijam.
This means farmers' get only Tk7 per kg profit in rice if the rice market is favourable.
This profit is very small when we count 4-5 months of hard work to produce rice. In most years, rice farmers incur negative profit.
In the past one decade, rice prices increased by about 50% while rice production cost increased by 80%.
A higher rate of increase in production cost as compared to the price makes rice farming less attractive to farmers and economically not viable.
Multi-pronged strategies are needed to manage rice markets.
To benefit rice growers, the government should implement suitable policies and programs to increase yield, decrease production cost, and improve the market systems.
The strategies to increase yield include development and dissemination of improved rice varieties, access to quality seeds and other inputs, and support to farmers to adopt improved varieties and other technologies.
The strategies to reduce cost include mechanization, farmers' training on the use of improved technologies, and smart subsidies on inputs.
The strategies to improve the market systems include development of market facilities, linking farmers to traders, providing market information to farmers, declaring minimum support price of rice in advance and purchasing paddy directly from farmers with no hassle to farmers.
To benefit consumers, the strategies include improving the rice supply chains, strong market monitoring mechanism, developing market infrastructure including storage facilities, and maintaining adequate stock of rice reserve for use during emergency time.
The ideal rice price should be at least 20% higher than the production cost.
The government should ensure this price to rice farmers through a minimum support price strategy.
Why are rice prices high during the harvesting period?
More than 80% farmers are smallholders owning less than 1 hectare in farm size.
Majority of them have small surplus rice production.
After harvest, they keep some for their own production and the rest they sell to manage cash to repay loans and manage household expenses. Also, they have limited space to store their rice.
As a result, 1-2 months before harvest (October-November and February-March), farm households run out of their stock and also food supply in the market is low.
Due to high demand and low supply in the market, rice prices are normally high just before the harvesting time.
But, rice prices start decreasing 1-2 months after harvest (November-December and April-May) due to large supply of rice in the market.
With the rise in earnings of the working classes, prices of fine rice have increased. How do you analyze the price of rice in Bangladesh?
Rice prices have been highly volatile within a year and across years in Bangladesh.
Within a year, rice prices follow seasonal characteristics.
During 2001-2019, prices of coarse, medium, and fine grain quality rice increased in the range of 250%-270%.
Rice prices increased significantly especially during 2007-2009 and 2017-2019.
This huge increase in rice prices have not benefited much to farmers because rice prices increased higher than the rice prices but it has hurt rice consumers especially the poor whose main diet is rice.
With a rapid increase in income and middle class population of Bangladesh, the rice consumption habit is gradually shifting from low grain quality rice to high grain quality rice.
Hence the consumption and demand of fine quality rice such as Chinigura, Banglamati and Basmati is rapidly increasing in Bangladesh.
Although Indian Basmati rice prices (Tk350 per kg) are 4-5 times higher than Bangladesh fine quality rice prices (Tk80 per kg), the import and consumption of Indian Basmati is rapidly increasing to meet the demand of higher income category Bangladesh.
Looking ahead, Bangladesh economy and middle income class population will continue to grow at a high rate, which will push up the demand for better quality rice (long grain, slender grain, aroma, nutrition, health, etc).
Rich consumers are willing to pay higher prices for fine quality rice.
To meet the future rice demand of the middle income class people and to reduce import, Bangladesh's rice research and development needs to give priority to develop rice varieties with not only high yield but also better quality, nutrition, and health.
How can Bangladesh reduce harvesting cost, while keeping interest in its growers?
The average cost of production of Boro rice is about Tk65,000 per acre.
Normally, the harvesting, carrying and threshing cost accounts for about 20% of the total production cost.
In most cases, rice harvesting and threshing is done manually and hence this cost is high.
Rice harvesting is a labour intensive activity and it requires many labourers.
Normally, rice production requires about 45 labourers per acre. About 40% of the total labour is used in harvesting and threshing.
Rice harvesting cost can be reduced by 30-40% and rice production cost can be reduced by 5%-10% through mechanization of rice harvesting using combined harvesters and reapers.
Reduction in rice production cost, increase in labour productivity, and increase in rice profitability requires mechanization of rice farming including land preparing, transplanting, harvesting and postharvest operations.
This requires policies and programs to develop and promote small-scale farm machines, provision of mechanization services, training on repair and use of farm machines, and subsidies on farm machines.
It can be effectively implemented through public-private partnership where the government can create conducive business environments for the private sector to promote farm machines.
How is IRRI helping Bangladesh in increasing rice production?
Bangladesh's rice sector faces many emerging challenges such as rising population, slow growth in rice yield, low replacement of mega varieties, scarcity of land and water resources, climate change, poor access to markets, low profit and income in rice production, disasters such as Covid-19, and many others.
The availability of land and water for rice production is declining.
Annual growth rate of rice production has dropped substantially in the last one decade. This is a very worrying situation and needs urgent attention from the planners and policymakers.
Future rice research and development priorities should focus not just on increasing rice production but also on nutrition, income, livelihoods, and resilience to climate change.
Overcoming these problems requires modern science, innovations, favorable policies, and partnerships among different organizations.
IRRI has more than 50 years of strong partnership with the government and it has been helping Bangladesh increase its rice production and improve food security through rice research and development.
About 80% of the improved rice varieties developed in Bangladesh have directly or indirectly used IRRI parental materials.
IRRI's current research-4-development activities in Bangladesh will help to increase the productivity, profitability, sustainability and resilience of the rice sector. This is important to reduce poverty and hunger and achieve SDGs.
Do you see any shortfall of rice production as Omicron has arrived?
There are fears that whether this new wave of Covid-19 will affect agriculture and overall livelihoods globally.
In major rice economies of Asia, a large population has been vaccinated against Covid-19.
Moreover, the governments, farmers, and other agriculture value chain actors have been adapting various measures to mitigate the impacts of Covid-19.
Therefore, I do not foresee a large negative impact of Omicron on rice production in the world.