Cabinet committee asks food ministry to show restrain as the latter embarks on an import frenzy; USDA also cautions against a market glut of rice
Amidst a fast-depleting rice stock, the government continues to award private traders permits to import the grain, raising concern over a possible market glut dampening domestic rice price during the coming harvesting season.
Due to flood-induced production loss and the food department’s failure to replenish dwindling reserves on time, the government sought assistance from private traders last December for importing rice. It drastically reduced import duty too.
In the subsequent two months, the government itself imported 100,000 tons of rice and private importers over 250,000 tons more.
In a cabinet committee meeting on Wednesday, the food ministry also got endorsement of up to 550,000 tons of rice import.
In the meantime, between January 4 and March 3, the government issued permits to as many as 358 traders to import over 1.35 million tons of rice.
Amidst such an import spree, the Cabinet Committee on Economic Affairs instructed the food ministry to import rice on a limited scale so that domestic rice market is not impacted adversely.
After Wednesday’s meeting, Finance Minister AHM Mustafa Kamal told reporters that the food ministry was instructed to import rice with caution otherwise, it would impact the market.
The United States Department of Agriculture (USDA) has also cautioned against a market glut of rice.
In a recent “Grain and Feed Update” report, the USDA said, as Bangladesh pursues rice imports from abroad, it must carefully balance offsetting high rice prices and meeting food security thresholds on the one hand, and preventing a glut of cheaper, imported rice from hurting local farmers on the other.
In 2017, severe floods damaged nearly 10% of the Boro season crop (January-April) causing prices to greatly increase over the summer. In response to the high prices, the government in 2017 moved quickly to import over 3.8 million tons of rice from abroad, resulting in the price of rice sink to a level below the cost of production.
Food officials concerned noted that the government’s sense of urgency stemmed from a very low stock of rice it currently has in hand right now. Food Ministry statistics show on March 2 public granaries have a rice stock of only 530,000 tons, whereas it was over 1.5 million tons around this time last year.
Experts and officials, however, cautioned that too much of cheaper rice – imported very late into the season – may dampen domestic rice prices as farmers will reap the year’s first major rice crop (Boro) in two months’ time.
USDA expressed hope that Bangladesh would play greater caution in importing rice this year as a result of lessons learned in 2017.
Food Secretary Dr Nazmanara Khanum, however, said the government will make sure there is no glut of cheaper rice imported in the market since that will hurt local farmers.
A recent foodgrain outlook report of the government’s Food Planning and Monitoring Unit (FPMU) projected, “Bangladesh is expected to return to the global market as a significant rice importer in 2020/21. Reduced production due to unfavorable weather has resulted in higher domestic prices, spurring purchases from the global market.”
It said although Bangladesh is a major producer of rice globally, fluctuations in production and domestic prices cause it to enter and exit the international market in significant ways.
According to Bangladesh Bank’s provisional report, up until last week private traders have opened letters of credit for over 1 million ton of rice import.
On March 1, Directorate General of Food formed a three-strong monitoring cell to keep track on private sector rice imports.
Domestic prices shot up in recent months following flood-induced production loss in 2020. Government’s reserve fell fast as the food department declined to offer higher prices for procurement from farmers and millers.
Government replenished stock last year by procuring 800,000 tons of Aman rice but this time around it could procure less than 10% of that amount.
USDA noted, early this year the retail prices for low quality (coarse) rice stood at Tk46.7 per kg, up by 43% than the price during the same time last year.
“Limited supply because of relatively low harvests during the Aus and Aman rice seasons is the key factor pushing prices up. The price increase trend has been observed from March 2020 when the country started to go into lockdown to manage the Covid-19 pandemic,” stated USDA.
To replenish publicly held rice stocks and reduce domestic rice prices, the food department began floating tenders since last November seeking to procure rice from international markets. In December, the government also announced that it would issue import permits to private rice importers and lower import duties to only 25% from 62.5%.