Global food prices have recently witnessed a significant decline, with a 13.7% drop in 2023 compared to the previous year, according to the United Nations Food and Agriculture Organization (FAO).
This decline is attributed to reductions in baby food and meat prices and marks the lowest prices observed in the past three years. The prices of wheat, corn, and oil have also decreased significantly, and the price of soybeans in the international market has decreased to the lowest in the last two years.
The reason for this decline is the ample rainfall that Brazil and Argentina, two of the world’s top producers, received this year, accelerating soybean cultivation in both countries.
However, the scenario is different in Bangladesh.
Despite the wholesale market in Bangladesh witnessing minimal price changes, this reduction did not cause any noticeable impact at the retail level.
The prices of edible oil and wheat in the international market have returned to pre-Ukraine-Russia war conditions, but the price of flour in Bangladesh remains the same.
This raises questions about the reasons behind the lack of effect of global trends on the local market and calls for further analysis of the factors that shape the food prices in Bangladesh.
Traders in Bangladesh indicate that food prices are unlikely to decrease soon, as the cost of imports amidst the dollar crisis and the Red Sea conflict has increased.
Bangladesh’s food market has been facing many challenges, ranging from high import costs to complex documentation procedures.
Private importers attribute the increase in food prices to several factors, including the high dollar price, freight charges, and the complexity of opening letters of credit (LC).
However, the global food market prices have yet to impact Bangladesh, as traders are paying Tk124 to buy dollars for imports, and LCs cannot be opened in the bank without paying 120% of the money in advance.
According to the Trading Corporation of Bangladesh (TCB), flour and edible oil prices it was increased in January.
The price of unpackaged flour increased by 3.16% last month, while packaged flour increased by 4.35%. The price of refined or all-purpose unpackaged flour increased by 3.85%, and the packaged ones increased by 3.57%.
Presently, in the market, a one-kg packet of flour ranges from Tk55 to Tk65, while a pack of all-purpose flour is priced between Tk70 and Tk75.
Moreover, Bangladesh’s annual demand for wheat is about 7.5 million metric tons, of which 85% is met through imports.
Wheat prices were $266 per ton in October last year, up from $378 in 2022, according to data from the Ministry of Commerce.
The price of wheat in the international market rose to $400 due to the impact of the Russia-Ukraine war.
Although Bangladesh can meet most of the demand for rice locally, it has to depend mainly on the global market to meet the demand for wheat.
Furthermore, the cost of imports has increased due to the ongoing Israeli occupation in Palestine, resulting in a war-like situation in the Middle East.
Due to the Yemeni rebel group Houthi attack on the sea, the charge per container for import-laden ships has already increased by $700 to $800.
Golam Mowla, president of the Moulvibazar Traders Association, said: “Bangladesh is not benefiting from dollar price reduction in the international market as it did not fall here.”
However, it may positively impact the market in the near future.
What do officials say?
Centre for Policy Dialogue (CPD) Fellow Professor Mustafizur Rahman has expressed concerns about the instability of Bangladesh’s market despite the fall in commodity prices in the international market.
He said, “Bangladesh may not benefit from the fall in commodity prices.”
He also mentioned that the middlemen take control of imports, which is why monitoring and market management are essential.
Economists say that it will take at least six months for inflation to come down. Gas, electricity, and diesel prices need to be decreased to reduce these costs.
Dr Zaid Bakht, researcher at Bangladesh Institute of Development Studies (BIDS) and chairman of Agrani Bank, said: “It takes some time for the impact of commodity prices to be reflected in the international market.”
Traders argue that imports are still higher than before, even if the price decreases in the international market.
They do not reduce the price and sell the goods at the previous price until the goods of reduced prices are imported. Even if they bring low prices, they try to store products for more profit.
Golam Rahman, president of the Consumers Association of Bangladesh (CAB), said: “Food prices in Bangladesh are not coming down due to imposing tariffs. Monetary policy and monetary management were not correct.”
However, he adds that practical steps are now being taken to reduce inflation, and the product price is expected to decrease gradually.
Biswajit Saha, director of City Group, one of the country’s leading consumer goods importers, expressed concern about the increase in import costs over the last year due to the devaluation of the taka against the dollar.
He also mentioned that a cash margin of 120-125% is required to open an LC, and the Red Sea crisis due to rising freight charges further affects commodity prices.
The government is making all-out efforts to control the price of commodities and tackle the dollar crisis.
In the first formal meeting of the new cabinet on January 15, Prime Minister Sheikh Hasina directed the ministers concerned to take immediate steps to reduce pressure on consumers by bringing the prices of essential commodities to a tolerable level.
On January 21, the Minister of Finance, Agriculture, Food and Fisheries, and Livestock held a meeting to find ways to control the prices of essential commodities quickly.
Furthermore, on January 17, Bangladesh Bank unveiled its monetary policy for the second half of the fiscal year 2023-24, primarily focusing on curbing inflation.
Governor Abdur Rouf Talukder said: “The contractionary monetary policy will persist until inflation reaches 6%, saying that a 1% reduction in growth to combat inflation is acceptable.”
