Unpredictability in the supply of the rice in proportion to market demand often creates price volatility, triggering unwanted criticism targeting the key traders especially millers, concerned players have complained.
They have cited the example of the most recent years that the peak Aman and Boro harvesting seasons had seen paddy being costlier unlike common trends of price fall as a result of supply glut, because new batch of traders joined the market to procure paddy while many farmers stocked paddy expecting higher price.
Regulatory restrictions on the millers in collecting and stocking paddy for crushing it into rice for a reasonably longer period limits their operational capacity to supply rice in keeping with current and future market demands. They are also often scared of receiving allegations of forming syndicate to manipulate rice price whereas they themselves have to depend on supply of paddy and price of rice beyond their control.
“Many mills cannot collect and stock paddy as per their needs during the harvesting season due to financing and supply crises. Burden of interests on bank loans forces many a millers especially small and medium players to close down their mills. Failing to run competitively, some mills have been rented out. Some millers are making profit by selling not rice but byproducts,” said Faridul Islam Faruk (33), manager of Talukder Auto Rice Mill in Shetabganj Muralipur in Bochaganj, Dinajpur, a major rice crushing hub.
The millers manage to procure paddy directly from farmers during harvesting and later on they have to depend on traders to procure paddy at a higher price, he told this author on July 19. On the rice price rise during the harvesting, he explained that rice changes seven hands between growers and consumers leading to price-hike in an under-developed market
Ideally, the millers are supposed to run mills with paddy harvested in one harvesting season till the next one but there are costs involved and restrictions that constrain business, according to Aktarul Islam (50), entrepreneur of Uttora Auto Rice Mill, a major player, in the rice crushing hub of Shetabganj. “Increase in market players at the beginning of the season and depletion in stocks of paddy in the market subsequently makes paddy costlier, thus raising price of rice. The government’s announcement of selling rice at subsidised rates or reduction in import duties and reports of imports of rice creates fluctuation in price,” he added.
So, he thinks, it is not feasible for more than 13000 rice millers to form a syndicate and manipulate the price. “How can millions of farmers and thousands of traders either form such price syndicate?”
Ruling out any possibility of cartel in rice trade, Ramchandra Gupta (42), owner of SP Auto Rice Mills and an heir of rice trading family for five decades in Bochaganj, expressed his conviction that shortfall in supply of paddy these days is created as a result of existing rules on stocking.
As per rules, millers cannot stock fine rice for not exceeding 180 days and coarse no more than 45 days. In such circumstances, once the stocks are depleted, the mills have to purchase paddy at much higher rates and thus production cost increases and so does market price of rice. “Thanks to enhanced capacity of farmers, roughly 30 per cent of them can now stock paddy for months to get higher price,” he said suggesting updating rules on stocking with provisions for different ceilings of stocking depending on capacity of millers.
A trader of paddy and maize, Tanzimul Haque (35) of Batason area in Shetabganj, alleged that sudden changes in the policy and decisions make rice market volatile. “This results in losses incurred by people ranging from marginal farmers to consumers. Thanks to solvency of farmers and introduction of modern technologies nowadays, old fashioned rice trading is no more there. Millers too have to buy rice directly from the farmers,” he observed.
Md .Raisul Alam (53), a farmer of Atgaon, Bochaganj, was yet to sell 360 maunds (one maund equivalent to 40 kilograms) of paddy he produced on four acres of land. “I could have sold each bag containing 75 kg paddy with higher moisture for Tk 1800 during harvesting. After stocking for a few months and drying it up, the cost can increase to Tk 2100 a bag but price will go up to Tk 2600 a bag or more. “All the farmers are no longer compelled to sell the entire quantity of their produces immediately after harvesting. Some new traders also joined the market forces to purchase and stock paddy for making profit. Thus, paddy price increases during the harvesting recently,” he mentioned.
On the rice market dynamics, Rushad Faridi, an assistant professor of economics at Dhaka University, said if many farmers stock paddy during the harvesting season speculating better price in the months ahead, that is better not only for production and growth but also for stability of the market. “Because, the farmers can supply the paddy they stock when there is shortfall or crisis of paddy or rice,” he added. Emphasising the critical need for competitive market for the benefit of all players, the expert recommended that the current laws and rules relating to stocking essential items should be amended or updated so that the market players are not punished on the wrong grounds and the market can function in a competitive manner.
