Market mismanagement of agricultural products and the impact of syndicates

Over the past few months in Bangladesh, prices of almost all agricultural commodities have been on an upward trend. Among these agricultural products, prices of rice, pulses, vegetables, potatoes, and onions continue to rise and fall and there is instability in the market. As a result, all classes of people (producers, middlemen, consumers) are suffering financially. The main reason for this is the imbalance of demand and supply of agricultural products.

The supply of agricultural products comes mainly from domestic production. The supply of some products is also dependent on imports (such as onions, pulses). But is the supply of goods being controlled by the market economy? The situation seems to be that the agricultural market is sometimes being affected by unseen forces. Although there is disagreement. In a nutshell, there are some middlemen in the agricultural market who create short-term supply crises or shortages in the lure of huge profits.

However, this year the situation is a bit different. Because the weather is different. Many crops/vegetable fields have been destroyed due to the effects of floods in Haore, floods in the northeast of the country, heavy rains, unseasonal rains, etc. Even though seedbeds were made due to untimely floods and repeated sowing of seeds on the same land, the expected yield was not achieved. Separately, the rise in rice market prices is mainly due to emergency stocks of farmers and manipulation of mill owners.

According to the Bangladesh Bureau of Statistics, the total production of rice in the country this year is 36 million tonnes. No rice has been officially imported till November 10 in the current financial year. At the same time, 60 tons of rice has been imported privately. The amount of rice stocks in the country at the same time is 6 lakh 25 thousand tons which is less than the previous financial year. And the demand for rice in the country is 3.5 crore tons. This means there is no shortage of rice supply in the market. However, it is unquestionable whether there is an uninterrupted supply of rice in the market.

So why the upward trend in rice prices at this time? Of course, market management is responsible here. Many of us say that in a free market economy the market will be controlled by its demand and supply. But are we really in the free market economy? We are talking about a free-market economy only in case of a price rise. But when the price of the product is supposed to be low, that is, the supply/production is high, why not lower the price? What can the free market economy answer?

Even when the rice season is full, not reducing the price means that the price is being influenced by someone. Even though most of the agricultural products are being produced in a competitive market structure, there are some regulators in the market that make the commodity market upward. We must find out who they are in the market. Mill owners are blamed for such rice. Mill owners are controlling the rice market by syndicating. Again there are some big wholesalers in every market whose influence cannot be denied. And small retailers are controlled by these wholesalers. Although retailers cannot influence the product market. But if they buy at a higher price, they have to sell at a higher price.

In Bangladesh, the Ministry of Agriculture and Commerce sometimes fixes the prices of some agricultural products. But wholesalers or retailers never sell at that price. This is mainly due to a lack of market supervision and rule of law. The country has a stock law but it is not enforced. Because most of those for whom the law will be applied go through the political circle. The market must be under control only if the monitoring committee formed by the law enforcement agencies and the ministry goes to monitor the market without any political influence. The biggest thing is to constantly monitor the market and take the necessary steps beforehand.

The main reason for the rise in prices in the vegetable market is floods and heavy rains which cause severe damage to crops. Most of the vegetable orchards have been destroyed this year due to early floods, late floods, and heavy rains. Farmers could not plant seeds in time. This has created a short-term supply crisis in the market. Since there has been no change in demand or in some areas demand has increased (due to corona), there has been a shortage of supply due to shortage of production. That is why the prices of most vegetables have also gone up.

But the rise in potato market prices is different. If we look at the production and demand of potatoes, we can see that the production of potatoes has been declining over the last few years. The main reason for this is that farmers have received relatively low prices of potatoes in recent years and in many cases could not even raise the cost of production. Since the cost of production of potatoes is higher than the cost of production of other vegetables, farmers also expect better prices. Again, it is seen that the competitive prices of potatoes, such as maize, are fairly good in the market, which is why farmers are rushing to produce other crops instead of potatoes. This year (2019-2020) the total amount of potatoes produced in the country was 1.09 crore tons. 16.8 thousand tons have been exported abroad. There are about 6 lakh tonnes of seeds and the demand for potatoes is about 6 million tonnes. There has also been an increase in the diversified use of potatoes, such as the use of potato chips, french fries, potato parota, etc. The demand for potatoes has also increased.

Moreover, during the floods, many people donated potatoes as a commodity and the supply of potatoes to Rohiksga camp caused a shortage of potatoes in the market. The use of potatoes as a vegetable has increased due to low production and supply of other vegetables due to floods and corona. Here we must keep in mind that the amount of potatoes stored in cold storage is not only for eating but also a large part of it is used as seeds. If there were more stocks of potatoes in cold storage, they would have come to the market. Because new potatoes will come in a few days. Then the price will go down. So no farmer/trader will take the risk. In this case, it must be said that the price is going up due to the shortage of supply.

We must increase production to curb this upward trend in the prices of agricultural products. Before that, we have to see how much demand there is in the country. The information we get from the Bureau of Statistics does not match the actual number. Therefore, it is necessary to conduct a survey through a reliable organization to determine the amount of demand. If we know the amount of demand, we will be able to decide how much additional land we will bring under certain crops. We hope that both the farmers and the consumers will benefit if there is an accurate flow of information on the demand and supply of agricultural products in the market.

Author: Professor Department of Agribusiness and Marketing, Bangladesh Agricultural University, Mymensingh.