Price of crops: Lack of Policy environment for small scale farmers

Agricultural product marketing

According to information from the government officials, the Agricultural Marketing Department was established in 1928 and still follows the old colonial laws. How an Agricultural marketing law 2018 was enacted by the government for price fixation of agricultural commodities. There is an option for price fixation at farmers’ level, retail level, in fact, in every level of marketing channel. This is a recent development, yet to be implemented at all levels.

The Department of Agricultural Marketing suffers from limited reach out to the farmers. This department does not have the strength and ability to involve the farmers.

An initiative known as Farmers Market was taken by the Agricultural Marketing Department to ensure remunerative prices for farmers’ products. About 40 such “Farmers Markets” have been organized in collaboration with the Department of Agriculture Extension (DAE) under the aegis of the Ministry of Agriculture. The farmers’ markets were used by farmers in those areas for selling their farm produce. However, this has very little impact on the vast demand for marketing farmers all over the country.

Agricultural product price fixation

In the absence of a Price fixation policy, the option for price fixation in the agricultural marketing law has not been implemented in the relevant steps. The prices of the farmers produce are determined mostly by the demand and supply situation at Dhaka wholesale market. The import of particular agricultural products also affects the price of the same products in the local market. The Existing agricultural product pricing policy is now in the process of upgrading. However, the participation of the farmers at the grass-root level was not duly ensured. The guidelines did not properly incorporate the issue.

The discrepancy of the price at the farmers level and the consumer level

One of the major problems that the small scale farmers face is the discrepancy of the price at farmers’ level of their products and city markets. The retail market price of agriculture products is very high but the price at the farmers’ level is very low. The farmers are deprived of their due share of the profit. For example, the price of tomatoes in Rangpur, Dinajpur is TK. 1.00-1.50/kg at farmers’ level. At the same time the price of tomatoes in the urban areas is TK 20-30/kg., i.e. while the farmers get a very low price, the retail market price is 20 times higher. This happens more when there is a bumper harvest of the crops. The pricing policy formulation failed to safeguard the interest of the farmers.

The agricultural marketing policy should be more inclusive involving the farmers. The flow of information about price, supply and demand should reach marginal farmers. So there is a need to aware of the farmers about the marketing policy of the government.

Agricultural product market

The agriculture product market is directed towards the needs and preferences of the consumers rather than the livelihood needs of small scale farmers. The prices are kept lower for consumer interest without recognizing the need of the farmers.

On the other hand, the farmers are not organized and are not market-oriented. They produce crops for meeting their subsistence needs and sell the surplus for cash income. They don’t plan their production from trade perspectives and for profit.

Commercial farming is encouraged for educated young men and women who produce market-oriented crops such as floriculture, commercial market-oriented vegetable crops such as tomato, cabbage, carrot, potato, cauliflower etc. using hybrid seeds (with pesticides, fertilizers). This is a new trend. Government plans to further encourage them through providing transport facilities for marketing their produce.

For small scale farmers, crop preservation and storage are very important. In general, the farmers have limited storage space for crops after harvest. So, the issue of storage is of prime importance. There is no institutional facility for the storage of vegetables.

The mango farmers are facing problems for marketing mango due to the COVID pandemic and the measures of lockdown. The DAE coordinated with the local administration, managed to provide transportation of mango from Satkhira and Chapai Nababganj to different marketing spots. The farmers were given movement cards for travels. The farmers were able to move to different places during the mango harvesting period (May-June).

Since the economy is a private and public mix, the government can take up initiatives involving private and public partnerships. The aim should be targeted to benefit the farmers to get the remunerative price of their produce.

At the farmers’ level

Cost of production

The cost of production of crops varies by crops, season, mechanization and by farmer type. The cost of producing rice is different from that of other crops. The main items of cost include seeds, labour, fertilizer, irrigation etc. The lease value of the land is also taken into account. Sometimes the net return is a loss and sometimes it is a small benefit. If we take the case of rice- it is profitable as per the rate offered by the government. In the case of vegetables, the scenario is quite different when the farmers take the early harvest of vegetables to market. The margin is quite remunerative and the farmers are happy.

Shortage of production, imports

There are shortages in the case of pulses, and oilseeds. Bangladesh imports soybean and palm oil. Mustard oil is locally produced. There is a huge shortage of pulses. Lentil, chickpea is imported. Mungbean is locally produced. Among spices, garlic and onion are imported. There is no need to import chilli and potatoes. Sometimes rice is also imported. Most of the farmers sell their crops just after harvest and don’t get remunerative prices. This is because of the lack of a proper storage facility. Consequently, the middlemen take the advantage of this situation.

Fair price

According to the Agricultural officials, usually, the farmers get a remunerative price for their crops. The farmers try to avail the early market and can fetch a higher price. But sometimes the farmers don’t get a fair price. However, this year (2021) the rice market price is favourable for the farmers. Last year also the farmers got good price of rice.

Farmers problems

The farmers have two main problems: 1. Lack of cash capital to invest and 2. Lack of storage facility for saving crops

The lack of cash capital is linked to the issue of land ownership. Those farmers who own land and have money to invest, don’t cultivate the land. The expatriates living in London, the USA, or elsewhere buy agricultural land but do not cultivate. They are absentee landowners, who share out or give annual leases of land. Previously there was a well-defined sharecropping system. In this system, the landowners would give half of the cost of input and the farmers’ used to provide the rest half including their labour. Now the absentee owners don’t give any cost, they only want a share of the produce. This leads to other problems such as land remaining fallow. The landowners feel that investment in agriculture is a losing concern. They feel comfortable investing money in commerce or industry.

The fertilizer, pesticide and seed companies provide input to the farmers on credit. The farmers repay the loans after selling crops. The farmers are always indebted. So the farmers sell their crops just after harvest and repay the loans. They have no chance of bargaining.

Import of agricultural products: Quarantine Act

There is a quarantine act on the import of fruits and vegetables. The imports are funnelled through strict quarantine. There are quarantine checkpoints on the air and land ports.

The import of any product is restricted when there is a good harvest of such local crops. Such restrictions should be spelt out in the import policy.

The DAE officers in every Upazila keep record acreage and productions of each crop in every season. There should be close coordination among the concerned authority in case of importing any items. The imported onion, garlic and ginger are bigger. The imported ginger is also quite big. There is a need to enact a policy to control the timing of imports based on the harvest of local crops.

Analysis of KII information

The agricultural officials belonging to the Department of Agricultural Marketing, Department of Agricultural Extension (DAE), the Agricultural University, Bangladesh Agricultural Research Institute (BARI) and other officials in those Departments were cooperative in providing the relevant information. However, they have very little organizational focus on the small scale farmers as a policy. For them, farmers were a homogenized category.

Secondly, the policies or laws are very old and followed the colonial rules. The initiatives taken for the farmers were very limited and addressed the middle farmers who can access city elite markets.

It was clear from all discussions that there is no price policy for agricultural products. The officials are aware of such lackings and that it affects the farmers, but they did not have any policy focus on this very important issue. The farmers face the problems at two levels, one at the time of harvesting and the other when there a bumper crop. Institutional issues such as storage facilities, price support become very crucial.

Imports of agricultural products are not based on the crop production capacity and the import-substitution measures that could have been taken for protecting the small scale farmers.

Agricultural products and the small scale farmers

 The discussion was held with 30 farmers as individuals and in the group as Focus group Discussion (FGD) about the price of the crops they grow. In this research, few crops were selected for discussion which is also imported at the same time. These were Spice crops, which small farmers cultivate for subsistence and a cash crop. The spice crops are garlic, onion, ginger, turmeric and dry chilli. However, the issue of onion has been a national concern, therefore, a separate case study is provided in this research.

The discussions with the farmers reveal the following:

1. The government does not fix any price of crops. It depends entirely on the market supply and demand situation giving the traders and middlemen to fix the price of crops.

2. The government does not take any responsibility to manage in case of surplus production. Consequently, the farmers are compelled to sell their products at lower prices leading to lower total income at times of bumper production.

3. Farmers do not have any facility to store the surplus production and also cannot diversify the use of the crops they produce so that their income could be increased.

4. Farmers can produce seeds for marketing. But corporate seeds are sold at a higher price and are promoted through advertisements.

5. There is no system of transportation of agricultural produce to the wholesale and retail markets. These are controlled by private traders. There is no effort of the government in this regard.

6. Farmers are also deprived of the fair price of farm produce because of cheaper imports of certain crops particularly of spices (Onion, garlic, turmeric, ginger).

 Spice crops produced by the small scale farmers

 Four spice crops produced by small scale farmers were selected in this study. A study on productivity, profitability and resource use efficiency of four promising spices including garlic, turmeric, chilli and ginger indicated that production of all the crops was profitable in terms of net returns and benefit-cost ratio. Small farmers were more efficient for garlic production only, whereas the large farmers were more efficient for other spices crops. (Islam. M. Serajul; Rahman, K. M. Moztafiaur and Hasan, Md. Kamrul, 2011). Another study on selected spice crops indicated that ginger appeared to be highly profitable spice crops having return TK. 2, 82, 011 per hectare followed by chilli (Tk. 71,441 per hectare), turmeric (Tk. 65,423 per hectare), garlic (Tk. 50,281 per hectare) and onion (Tk. 38, 281 per hectare) (Huda, F.A; M.S.Islam, H. Biwas and M.S. Islam. 2008).

Small farmers (owning less than a hectare of land) are producing various spice crops (garlic, turmeric, chilli, and ginger) which are high value but labour intensive crops. Small farmers can afford to do that. Garlic is a rabi season crop , turmeric and ginger are Kharif season crops , and chilli is an all-seasons crop. These crops have the dynamic potential for extension in different agro-ecological zones matching diverse cropping patterns.

However, these crops are facing competition with unplanned imports. At present Bangladesh imports a significant proportion of its total requirement of spices including garlic, turmeric, chilli and ginger. There is an enormous potentiality for improving domestic spice supply by improving the efficiency of local production. For example, the variety of the spice that is imported is not used by the household consumers, but for commercial consumption, such as hotels. Bangladesh can produce those varieties as per requirement and thus do not have to import.

Table 1: Domestic production Spice crops and imports (2018-19)

Source: Crop statistics 2018-19 in Bangladesh (BBS, 2020)

The production of the farmers is not planned. The DAE or the Agricultural Marketing Department do not give any production target to the farmers for specific crops. It is only after harvest, the actual production is known and the gap in the market demand is fulfilled by the private importers.

The traders are in between this domestic production and the imports as they have to meet the demand and supply situation in wholesale and the retail market.

Table 2: Price of domestic and imported products

The Wholesale market

The wholesalers in Dhaka, the capital city, assessed the domestic production and imports of the commonly used spice crops.

Garlic:

1. Two types of garlic are sold in Bangladesh. One is local and the other is imported (Chinese). The locally  produced kinds of garlic are called Deshi Rosun (local garlic). Domestic production is less than the demand. Commercially, garlic is produced only in Natore and Khagrachari districts. Garlic production of two districts is not enough to satisfy the demand of the entire country. The gap is filled by imports.

2. The price of domestic garlic is lower (BDT 70-80 per kg) than the imported (Chinese) garlic (BDT 100-105 per kg).

3. The imported bigger clove garlic has demand in the hotels, while smaller clove garlic is preferred by household consumers.

4. The garlic farmers are economically affected due to the import of garlic. The local garlic farmers would get a better market price of garlic if there was no import.

Dry chilli

1. 1 . Green chilli is not imported into Bangladesh. Dry chilli is imported only from India.

2. The price of local dry chilli is lower (BDT 180-190 per kg) than that of Indian dry chilli (BDT 220-230 per kg).

3. The consumers prefer local dry chilli, for lower prices and better taste.

4. Chilli from Bagura district is famous out of the chilli produced within Bangladesh.

5. There is a shortage of chilli production in Bangladesh. The price of chilli goes high if there is no import. The minimum price of chilli was BDT 350-400 per kg in 2020 due to lower imports.

Ginger

1. Ginger is imported from India and China.

2. In the wholesale market, domestic ginger has a higher price (BDT 140 per kg) compared to Indian ginger (BDT 70 per kg) and Chinese ginger (BDT 90-100 per kg).

3. The local ginger farmers are not so affected due to the import of ginger. This is because the cost of production and labour involvement is not so high compared to other crops. Moreover, the farmers get a good price for ginger. However, the price of ginger would go up to BDT 300-400 per kg. if there was no import.

4. Among the consumers, the demand for local ginger is higher even though the price is higher. Next is Chinese ginger, and then Indian ginger. Indian ginger has less demand for low quality. The Chinese big ginger is much on demand in hotels.

Turmeric

1. 1 . Only Indian turmeric is imported into Bangladesh. Previously turmeric from Myanmar was also imported. It is no more imported on the quality ground and less demand.

2. Local turmeric has a higher price (BDT 200-220 per kg) than the imported Indian turmeric (BDT 160 per kg)

3. Local turmeric has a higher price for better colour and high demand among the consumers.

4. Turmeric production can be increased to meet the gap in demand.

Analysis of the wholesaler’s perspectives on specific spice crops

The wholesalers have their perspectives about the situation of domestic and imported spice crops. They sell both domestically produced crops and the imported ones.

The important observations they have made in the research are the following:

1. For all the spice crops, the domestic production is less than the market demand. The farmers produce these spice crops in special agro-ecological zones for commercial purposes and also as subsistence production all over the country.

2. The gap in domestic production and demand is met by imports, but the types of the imported spice crops are not the same. For example, garlic, ginger and turmeric are bigger in size but lower in quality. So the imported spice crops do not always fetch a higher price.

3. There is also a difference among users. There are household users and commercial users. Commercial users, such as hotels, restaurants, prefer the bigger size and lower price imported spice products, while the household users prefer the taste and the smaller size of garlic, onion, ginger and turmeric.

4. India and China dominate the imports.

5. The wholesalers prefer to sell domestic spice crops and find the imported ones low quality.

Reference

Islam. M. Serajul; Rahman, K. M. Moztafiaur and Hasan, Md. Kamrul, 2011. Profitability and resource use efficiency of producing major spices in Bangladesh, Journal of Agricultural Economics, Bangladesh Agricultural University, 34 (1-2), 1-13, December

Huda, F.A; M.S.Islam, H. Biwas and M.S. Islam. 2008. Impact assessment study on selected spice under action plan in Bangladesh, Progress. Agri. 19 (2): 229. 241

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