A short-term supply interruption, due to unavailability of trucks, was behind the recent increase in egg prices in Bangladesh. But once trucks became available again, egg transport resumed, and the prices fell.
Initially, corporate poultry companies were blamed for the egg price hike, but looking at the situation, it is clear that collusion was not the reason for the sudden price hike.
The Directorate of National Consumers Right Protection (DNCRP) will submit a probe report to the Ministry of Commerce by next week in this regard.
"Corporate poultry companies preliminarily were blamed, but we should not inspect the issue considering a single angle as there are various factors behind the price hike. We never want the disruption of business. But corporate companies have some responsibilities that should be incorporated in our report along with some recommendations,” said AHM Shafiquzzaman, director general of DNCRP.
The retail price of eggs in most of Bangladesh increased from Tk10 to more than Tk13 in retail markets between August 6 to 16. The retail price of a dozen eggs exceeded Tk160 in the capital Dhaka, an increase of over Tk40 or roughly 33%.
What actually happened?
According to the Breeders Association of Bangladesh (BAB), egg traders were facing some difficulties in hiring trucks. Trucks were not available for hire as their owners were busy re-negotiating rates showing the recent fuel price adjustment as a pretext.
Kazi Zahin Hasan, president of BAB and director of Kazi Farms, said: “Traders normally carry eggs from rural farms to urban warehouses every day. When trucking was interrupted, the supply of eggs to urban warehouses was interrupted, creating a supply shortage. The shortage led to a sharp but short-lived increase in the market price of eggs in urban markets. A few days later, when trucks became available, the supply of eggs resumed, and the market price in urban markets fell.”
Kazi Zahin Hasan denies that there is an egg syndicate: “Some have claimed that the price of eggs was increased by a price-fixing syndicate, and that the price fell after government officers inspected wholesale egg markets and fined traders who were selling at a high price. This is not correct.”
Egg bidding process
Some have alleged that the egg price is fixed by Kazi Farms in collusion with the egg trading association in Tejgaon, or in collusion with other poultry companies. However, no evidence has been provided to support this allegation.
Kazi Zahin Hasan denied the allegation. He said that Kazi Farms sells 1 to 1.2 million eggs every day at warehouses in different districts, and he explained how eggs are auctioned at each warehouse.
“Suppose on a particular day, we have 600,000 eggs to sell at our Ashulia warehouse. Our salesmen talk to customers, egg traders, to try to find out what price will be acceptable to them. We then communicate our initial offer price, which is lower than the selling price we expect that day, because if our initial offer price is too high, no one will bid. Suppose our initial price offer is Tk 10 per egg. After receiving our initial offer price, each customer makes their price offer, indicating how many eggs they want.”
He said: “Suppose we receive the following bids:
A offers Tk11.00 per egg for 100,000 eggs.
B offers Tk10.30 per egg for 200,000 eggs.
C offers Tk10.25 per egg for 100,000 eggs.
D offers Tk10.20 per egg for 200,000 eggs.
E offers Tk10.15 per egg for 200,000 eggs.
F offers Tk10.10 per egg for 200,000 eggs.”
“As we need to sell 600,000 eggs, we will set our selling price for that day at Tk10.20 per egg. At that price, the four highest bidders, A, B, C, and D, will all buy the number of eggs they asked for. All of them will pay Tk10.20 per egg, and our 600,000 eggs will all be sold. The two low bidders, E and F, will get no eggs from us that day,” he explained.
According to Kazi Farms, at each warehouse, their selling price is determined by the bids received from customers. There is no scope to collude with any other seller to decide on the selling price.
Meanwhile, Mahbub Rahman, managing director of Peoples Poultry and Hatchery, makes the same point: “We offer a base price to sell eggs. Then, traders bid to buy. As there is competition, manipulation is never possible.”
Contribution of corporates to the market
According to the Ministry of Commerce, Paragon Poultry, Aftab Bahumukhi Farms, Bangladesh Hatchery Limited, Ferdowsi Poultry Complex, Khandkar Poultry Complex, and United Agro Complex are comparatively big companies in Bangladesh.
The large poultry companies sell roughly 4 million eggs per day. However, this is only about 10% of the 40 million eggs sold every day.
Kazi Zahin Hasan points out: “There is no way that the poultry companies could collude to raise the price of eggs, even if we wanted to.”
He says that the Tejgaon egg traders’ association cannot collude to raise the price of eggs either, as they are probably also selling only about 10% of the total eggs sold.
Zahin Hasan added: “If the government wants to prevent a similar sudden price increase in the future, it should ensure that the transportation of eggs is not interrupted.”
