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Dhaka Tribune

Stop harassment of poultry sector to reduce egg prices

Why are poultry market prices higher than the government’s set price?

Update : 27 May 2024, 02:05 AM

On May 12, 2024, the Financial Express published a report headlined “Egg prices at ten-month high of Tk165 a dozen,” and several other newspapers and TV news channels published similar stories. In March, the government’s Department of Agricultural Marketing announced ceiling prices at which farmers, wholesale traders and retailers would be allowed to sell many commodities, including eggs. Some egg producers and wholesellers (like Kazi Farms) have complied with this rule, but most traders are selling at much higher prices.

The table below shows wholesale egg price during 10 days in May. The first column shows Kazi Farms’ egg price, which is the government-declared wholesale price. The second column shows the higher wholesale price at which other traders have sold eggs, according to records by Kazi Farms’ sales staff at our egg wholesale centres.

 

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From the last row, it is apparent that each egg was being sold by wholesale traders at prices which were on average Tk0.79 higher than the government-declared ceiling price. This means that most retailers are forced to buy eggs at a high price from traders; the consequence is high egg prices in shops.

Why are poultry market prices higher than the government’s set price? The answer is simple; there is currently a shortage. Part of the shortage is due to the short-term effect of the recent heat wave; any farmer will tell you that hens eat less and lay fewer eggs in hot weather. But another part of the shortage is the long-term effect of continuous harassment of the poultry industry over the past two years by the Directorate of Consumer Rights and the Competition Commission. This harassment has decreased confidence in the long-term viability of Bangladesh’s poultry industry, resulting in less investment in new farms and hatcheries. A number of mid-sized, and one of the largest, local poultry companies have recently liquidated their poultry farms and hatcheries. Closing down of existing farms and hatcheries as well as reduced investment over the last two years reduced supply. Combined with the steadily increasing demand which comes from economic growth, this results in a shortage and higher prices. If the government wants increased production of poultry, it should stop harassing the poultry industry and restore an environment conducive to investment.

How will the shortage of eggs be alleviated and high prices be reduced? Normally, this would happen when egg farmers, seeing good profit from sales of their eggs, invest in more poultry sheds and layer flocks. That will increase the production of eggs over a few months, thus reducing price. But unfortunately, that is not being allowed to happen, because law-abiding egg producers like Kazi Farms are being forced to sell at the government dictated maximum price. The profits which should have been realized by farmers have been transferred to egg traders. Since farmers are not allowed to sell at a higher price, they will have fewer funds to invest in increasing production and reducing the shortage. So, the government’s declared ceiling prices are likely to make the shortage persist, and to prolong high egg prices. Therefore, the government’s Department of Agricultural Marketing should immediately revise its maximum egg prices upwards. That will make farming more profitable and increase the supply of eggs, which will ultimately reduce market prices.

The Competition Commission previously declared Kazi Farms and other poultry companies guilty of forming a syndicate and manipulating the market price of eggs, and ordered the industry to pay crores of Takas in fines. It should be mentioned that the High Court has stayed the Competition Commission verdict against Kazi Farms, and has asked the Competition Commission to show why their verdict should not be considered illegal. Setting aside the High Court stay order, let’s consider the information in the egg price table; the data make it quite clear that all egg wholesellers do not follow Kazi Farms’ prices. Even though Kazi Farms adhered to the government’s declared ceiling price, the market price increased due to an egg shortage.

That is exactly what one would expect in a competitive market with hundreds of traders buying eggs from thousands of farmers. Prices in such a market are determined by demand and supply, not by the price of any particular seller. The data proves that the egg market is competitive, and that the market price is determined by supply and demand rather than by an imaginary syndicate. Therefore, the Competition Commission cases against poultry companies should be withdrawn, and harassment of the poultry industry should stop.

 

 

Zeeshan Hasan is a director of Kazi Farms Group and Kazi Media, the company behind Deepto TV. He is also the managing director of Sysnova.

 

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