Food inflation jumped to a 12-year high of 12.54% in August from well below 10% in the previous month as prices of the most commonly consumed items in any meal with rice such as eggs, potatoes, onions and green chillies rose. The index fell slightly in September, but not enough to bring relief to consumers.
The prices of eggs, potatoes and onions defied all government measures – fixed prices, market forces and import decisions. Prices of items such as sugar and soya oil also remained high.
In the midst of this, farmers once again emerged as saviours, as they did during the pandemic by continuing to produce. Rice remains the only exception, as good harvests in successive paddy seasons, supported by a smooth supply of inputs, helped the government build a secure buffer stock of rice and continue its subsidised rice scheme for one crore family card holders every month.
Good policies and their proper implementation also helped in times of crisis. The strict anti-hoarding law passed in April and pre-emptive import decisions helped the market by keeping the curve flat, economists and traders say.
All these factors played a crucial role in keeping the rice market surprisingly stable at a time when global rice prices surged to a 12-year high amid supply constraints in Asia for a variety of reasons – India’s rice export ban, adverse weather conditions and rice farmers in Thailand and Indonesia switching to other crops.
To curb food inflation, the Philippines capped rice prices last month to protect consumers from rice-driven food inflation. Bangladesh, however, remains insulated from any immediate import pressure amid the ongoing dollar crisis.
Agricultural economist Dr Jahangir Alam Khan told the Business Standard: “Global food grain production is declining due to a number of reasons, including rising temperatures. India has stopped exporting rice, while Vietnam has restricted its exports. Rice prices in the international market have gone up by 15-20%. But we have not felt the heat because of bumper production in the last Aman and Boro seasons.”
“This year’s Aman paddy is now in the field and the prospects are good. Also, the government has passed a law to prevent illegal hoarding, with penalties of up to life imprisonment for hoarders. All in all, we are now in a much better position in terms of rice production and prices,” adds Jahangir Alam.
Why the price of rice matters
The weight of food items in the consumption basket has fallen to 48%, with rice’s share falling to 26% in rural areas and 16% in urban areas due to changes in people’s consumption patterns, according to the latest methodology of the Bangladesh Bureau of Statistics.
Dr Zahid Hussain, former chief economist of the World Bank’s Dhaka office, told TBS: “Inflation could have been much higher if the price of rice had increased in line with other commodities. Because of the weight of rice in the consumer basket, an increase in the price of rice will have a greater impact on inflation. And even if the price of rice remains constant, 12% inflation means that the prices of other commodities have increased at a much higher rate”.
Government initiatives to control the market
In the midst of a global crisis, prices of all varieties of rice have fallen slightly in Bangladesh. In addition to good harvests and a tougher anti-hoarding law, the government’s initiative to sell five kilograms of rice at a subsidised price to one crore families every month also played a role, traders said.
According to Trading Corporation of Bangladesh (TCB) and Dhaka market data, the price of coarse rice is now Tk48-50 per kg, medium Tk55-60 and fine varieties Tk60-72, lower by an average of Tk5 per kg and even more for fine varieties compared to June last year, when rice prices had skyrocketed.
Speaking at a function on October 2, Agriculture Minister Abdur Razzaque said rice prices remained under control despite the trend in the commodity market. “We will not need to import rice this year because our production is good,” he said.
Last year, Boro production was affected by floods and storms during the Boro season, which affected the market price. The government reduced the import duty, allowing the private sector to import 15 lakh tonnes of rice at that time.
However, the rice market started to turn around late last year after the Aman crop hit the market.
Despite low rainfall, farmers had a better Aman crop last season as the government ensured power and fuel supply to more than six lakh irrigation pumps. Rice prices began to stabilise with the addition of this year’s Boro crop.
According to the Department of Agricultural Extension (DAE), farmers planted Aman rice in more than the targeted area this year.
Dr Md Shahjahan Kabir, Director General of the Bangladesh Rice Research Institute, said: “Food grain production has declined all over the world due to the impact of the Russia-Ukraine war. But our production was not affected. With the application of agricultural technology and the support of our farmers, we now have surplus rice production. There is no shortage.
The government also has about 16.22 lakh tonnes of rice and more than 1.5 lakh tonnes of wheat in stock this year.
A tougher anti-hoarding law
In April this year, parliament passed the Production, Storage, Transfer, Transportation, Supply, Distribution and Marketing of Food Products (Prevention of Prejudicial Activity) Bill, 2023, which provides for a maximum life sentence for illegal hoarding of food.
Shahidur Rahman Patwari, vice-president of the Bangladesh Auto Major and Husking Mill Owners’ Association, told TBS: “Boro paddy production was very good this year. Also, due to the government’s stricter hoarding law, many people are now moving away from hoarding paddy, which is playing a major role in increasing market supply.”
“Earlier, many traders in the village used to stock various products, including rice, wheat and mustard, to sell at high prices at a convenient time. But now, not only rice prices but also wheat and mustard prices are coming down due to this new law,” he added.
