CHAPTER - ONE
1.1 INTRODUCTION
The crop sector is of strategic importance to Bangladesh, as in most other low-income countries. It is the source of staple food for 130 million people and the major means of livelihood of 13 million farm households in the country. The impact of paddy market on overall standard of living is significant. So, the price of paddy should be stabilized. But ironically, since independence, the price of paddy is increasing at a high rate. Seasonal fluctuation is one of the reasons for the elasticity of the price of paddy. Farmers often bear their production cost of paddy in credit. So, in the harvesting season farmers sell the paddy with comparatively lower price for the payment of credit. More over natural calamity, instability of international fuel market, fertilizer and electricity crisis are also very important causes in the raise of the price of paddy.
The poor often compare their income with the price of rice. If the paddy market can be controlled then rice market can be controlled automatically. The increasing rate of price of paddy causes a huge number of miseries. The first need of man is to satisfy the hunger. After spending money for food then the poor think about the fulfillment of other requirements. And the staple food in Bangladesh is rice. The price of paddy is directly related with the paddy market. The price of paddy is increasing more rapidly than the income of the poor. Moreover, farmers do not earn huge profit by cultivating paddy. This is because the production cost of cultivation paddy is increasing rapidly. Some time it also happened that farmers purchase paddy in a high rate in the off season of paddy.
Since Independence, the Government of Bangladesh has attempted to reduce variability of paddy prices, and especially to prevent sharp increases in price. For ensuring food security for all households the government of Bangladesh undertakes several activities, including open market sales of food grain to limit food grain price increases, targeting food distribution to poor households, providing emergency relief after natural disasters, and procuring food grain to support producer prices and incomes.
1.2 PROBLEM DEFINITION OF THE STUDY
This report has been prepared to fulfill as a partial requirement of the MBA program as an Internship research study project held by the department of marketing, University of Rajshahi. This course is the internship program, which is designed to equip the students with knowledge about the real life-working environment and to develop their work-related skills. At the end of the course, students need to submit a written report.
The supervisors help the students to choose a topic to work with, with the help of the supervisor the student finds out the various problems of the. field of research. These help them in defining problem areas and ascertain a report topic. I am doing my internship program on price escalation of rice in Bangladesh. The title of my report is “An analysis of price escalation of paddy in Bangladesh’’
Paddy price is increasing day by day. But it should not increase in rapidly. So, what is the trend of price escalation of paddy over year to year it should be known so that the policy maker can make food policy appropriately? More over in harvesting season the supply of paddy is higher than any time. So, is there any seasonal variation in price of paddy? If yes, then what is the impact of it?
Profit form cultivation of paddy is differ from place to place due to the cost of factors of production is also differ form place to place. But it also be keep balance. So, what is the factors influencing in the cost of production it also be known and the difference cost in various places be determined. In this study I tried to solve the above mention problem.
1.3 JUSTIFICATION OF THE STUDY
Bangladesh is the fourth largest country in producing paddy in all over the world. In 2000-2001 Bangladesh was the second largest country in producing paddy. The total cultivable land area of Bangladesh is 2 cores 1 lack 57 thousand acres from which the average flood affected area is 1 core acre. But the above mention information shows that Bangladesh has got the very fertile land to cultivate paddy.
Moreover rice is the staple food in Bangladesh. But the paddy market is not stable in Bangladesh. Now a days cost of production in cultivation of paddy is very high than that of before. So, the price of rice is also high. But the poor farmers do not get high margin as they bound to sell their paddy just after harvesting.
This paper is discussed about the trend of price escalation of paddy and also discussed about the seasonal variation of price of paddy. If the impact of seasonal variation of the price of paddy can be reduced then it will be ensured that the poor farmers will be benefited. This paper also identified the factors of cultivation of paddy and their impact on cost of cultivation. By identifying the factors and their impact on cost of cultivation this paper recommended a guideline to prepare a food policy. For keeping the price level at a tolerate level and determining the subsidiary sector factor of production should be analyzed properly. If the If the year-to-year price changes and the impact seasonal variation are reduced then government can ensure food for every household and the stability of price of paddy will be ensured. This study will help to how to make the stable price of paddy.
1.4 LIMITATIONS OF THE STUDY
Research study is a continuing process and it is also complicated one. This is my first research project. So it is very much easy that obviously I have some lack of experience which can be said as the limitations of this study. After all, I have tried my level best to do better performance. But despite of employing all the possible sort of efforts in making this study a better one, there are some limitations is inescapable. They may be:
· Lack of knowledge and skill: For conducting the research project there need vast knowledge and experience about the research. As this is my first research definitely I have no experience and less skill. So, there is a possibility error occurrence in the research.
· Lack of time: Preparing a research involves huge works such as reading research papers and finding the lacks, preparing research proposal, data collection, data analysis, research writing etc it need huge time. But I prepared this paper besides the academic classes and examinations and thus I got very few time for the research. So, there is a possibility of error occurrence here.
· Insufficient data: One of the prerequisite of a successful research is that its data must be relevant and sufficient. For preparing the secular trend it need as much yearly data as possible. But I got 14 years data. If I got more data then the research may be more fruitful.
· Lack of money: To operate this study, there was no available money. So, I could not able to collect sufficient data from the source.
1.5 OBJECTIVE OF THE STUDY
The main objective of this research paper is to describe the instability of paddy market and its solution. Moreover the objectives of this research are:
· Interpret and evaluate the changes occurring in the price of paddy.
· Isolate and measure the impact of seasonal pattern in the time series.
· Describe and evaluate the current market situation of paddy.
· Determining and evaluating the cost of paddy cultivation.
1.6 RESEARCH METHODOLOGY
This research paper is fully depends on the secondary data. For the purpose of conducting this research I collected secondary data from various secondary sources. The majority portion of the data is collected from Bangladesh Agriculture Marketing Department. Moreover, data are also collected from various agricultural magazine, newspaper, journal and internet. This research paper is a quantity research.
For determining the long term changes occurring in the price of paddy I used least square method. This method has got almost universal acceptance for fitting straight lines to numerical data. A straight line would provide a fair
description of the relation between two variables, we are encountered with the
problem of finding out a mathematical equation of the line which would provide the best possible fit to our observed data and would thereby best possible prediction. The basic assumption of the least square method is that the sum of the squares of the deviation or distance of individual points from the fitted line should be minimum.
For measuring the seasonal fluctuation of price of paddy I used the ratio-to-moving average method. The ratio-to-moving average method is the best of all method for measuring seasonal variation and also the most widely used method in practical work. This method allows more flexibility when the trend is non-linear. Under the method moving averages there turns to be little chance of confusing seasonal variation with trend. The ratio-to-moving average method is recommended for all practical purposes.
CHAPTER - TWO
2.1 PRESENT MARKET ANALYSIS
Right now the paddy market is very much characterized by instability. The table no 2.1 gives the national wholesale price of paddy in some important district in Bangladesh.
Table: 2.1
National wholesale price of paddy in 20/12/2006
tk/Qtl
Name of District | Price(tk) Aman Paddy (HYV) |
Narayangong | 965 |
Monshigong | 1078 |
Narshindi | 985 |
Gazipur | 950 |
Kishorgong | 925 |
Netrokona | 937 |
Mymensingh | 962 |
Tangail | 960 |
Jamalpur | 975 |
Sherpur | 1000 |
Faridpur | 975 |
Rajbari | 910 |
Madaripur | 950 |
Rajshahi | 1012 |
Nobabgong | 1055 |
Natore | 990 |
Naogaon | 1065 |
Dinajpur | 1020 |
Thakurgaon | 975 |
Panchagor | 962 |
Pabna | 975 |
Sirajgong | 975 |
Bogra | 990 |
Jaipurhat | 975 |
Gaibandha | 1010 |
Rangpur | 945 |
Nilphamari | 925 |
Lalmonirhat | 950 |
Khulna | 1037 |
Khustia | 1012 |
Meherpur | 1015 |
Source: Bangladesh Agriculture Marketing Department.
The standard deviation from the above mention data is 40.1776. It indicates that the price of paddy is highly differing from places to places. Though in most of the district the price of Paddy per quintal is around 960 tk. to 985tk. but in Kishorgong, Netrokona, Rajbari and Nilphamary the price is less than 940 tk. per quintal. On the other hand, Munshigong, Rajshahi, Nababgong, Naogain and khulna the price is more than 1000.00 tk.per quintal.
In Rajbari the price of paddy as on 20 December, 2006 is 910.00 tk. per quintal whereas on the same day the price of paddy in Monshigong is 1078.00 tk. per quintal. The ultimate result is per kilogram price of in Monshigong is 1.68 tk. higher than that of in Rajbari on a certain day.
2.2 PRICE STABILIZATION THROUGH
INTERNATIONAL TRADE
Stock modeling exercises have shown that using private sector trade and setting bands close to import and export parity is most efficient in terms of fiscal costs relative to degree of stabilization achieved. With trade liberalization, import parity provides a ceiling, though in years of high world prices, this ceiling may be unacceptably high, requiring the government to subsidize imports and draw down its stocks. Figure 2.1 illustrates how
openness to import trade adds to price stability in the case of a production shortfall. With a normal harvest, short-run supply in the months just after the harvest is indicated by S0. With this level of production, the market price is P0, determined by the intersection of the supply and demand curves. A production shortfall shifts the short-run supply curve back to S1. In the absence of international trade, the market price would rise to P1. However, with free trade and an import parity price of Pm below P1, domestic demand is Q2 and the difference between Q2 and Q1 is the sum of private imports, changes in private stocks and net market injections by the government. Note that in this case, if there is no change in private stocks, 11 net market injections less than or equal to M1 have no effect on the price, but only reduce the quantity of imports.
2.3 UNIT COST OF PRODUCTION AND PRICES
In the cost estimation we have computed only variables costs of production (all material inputs, irrigation charges and machine rental) and imputed value of family labor and family supplied animal power. We have also considered the rental value of land and the interest rate of current capital. But depreciation of other fixed assets because of the problem of comparing these values across countries. For Bangladesh the cost of production is higher in the cultivation of Boro rice than in Aman rice. However, the cost for Bangladesh is lower than that in the neighboring Indian state of West Bengal. Compared to Thailand, which is the largest rice exporter in the world market, the cost of production in Bangladesh is 62% higher for the dry season crop (Boro) and 18% higher for the wet season (Aman). The farm-gate price as well as the margin for the farmer (price over variable cost) is however substantially higher in Bangladesh and India compared to Thailand and Vietnam. Thai farmers can offer rice at a lower margin to consumers because of the substantially larger size of farm compared to other rice growing countries in Asia. The average farm size in Thailand is over 5 ha, compared to 0.68 ha in Bangladesh. Thus, even with lower margin per unit of output Thai farms could have substantially higher household incomes than Bangladeshi farmers. The farm-gate price is 50% higher in Bangladesh compared to Vietnam and Thailand, and 15 to 20% higher than the Indian States of Punjab and Andhra Pradesh. The domestic price of oil is determined more by the world market price and the rate of import duty, than by the domestic cost of production. The above information indicates that Bangladesh will not be able to compete in the world market for rice and
other crops at the prevailing costs and market prices. Considering the transport
cost and trade margin, Bangladesh may be able to withstand competition in rice from imports from India, but may not be able to do so from rice imports from Thailand and Vietnam.
2.4 FACTORS BEHIND THE DIFFERENCE IN UNIT
COSTS
What are the reasons for the relatively high unit cost of production in Bangladesh for most of the crops? The most important factor is obviously the agro-ecological conditions and the development of irrigation infrastructure that determine the suitability of land for growing a particular crop. The other is the extent of adoption of improved production technologies. These two factors determine the level of crop yield. For HYV rice, the yield in Bangladesh is comparable to other countries in the region. But there is potential for increasing the yield in the aman season and thereby further reducing the unit cost. For all other crops, Bangladesh has lower yield compared to that for the highest yielding state in India. The difference is large for Wheat and Sugarcane.
The other source of the difference in cost is the prices of inputs. The price of urea is about one-third lower in India, but are comparable in Thailand and Vietnam compared to Bangladesh. The difference in the price of fertilizer would not however make a large difference in unit cost of production, since chemical fertilizers account for only 15% of the total variable costs. There is a
large difference in the cost of labor across countries. The wage rate varies from US $5.2 in Thailand to about US $1.2in Bangladesh. The higher wage rate however does not necessarily lead to higher cost of production since the farmer adopts mechanization in response to the scarcity of labor. The Thai farmers now utilize only 6 to 8 days of labor per ha in rice cultivation, compared to about 140 days in Bangladesh, and 80 days in Vietnam. Indeed, the substitution of agricultural machinery for human labor and animal draft power contributes to a reduction in unit cost of production. In Thailand and Indian Punjab where
the extent of mechanization is high the cost of production on account of power is the lowest.
The cost of irrigation is the major contributing factor behind the
high-cost of rice cultivation in Bangladesh, particularly for Boro rice. Irrigation accounts for 28% of the variable costs of rice cultivation, compared to 13% in Punjab, eight percent in Thailand, and six per cent in Vietnam. The low cost of irrigation in other countries is mostly due to the subsidized supply of electricity
(India) and the subsidized public sector investment in the construction and the operation and maintenance of large-scale irrigation projects. In Indian Punjab electricity is provided free for tube well irrigation and the farmer is also provided free water from irrigation canals. In Bangladesh the major source of irrigation is the privately owned shallow tube wells and power pumps, mostly run by diesel. The diesel has now become a major agricultural input in the cultivation of Boro rice, and the cost of Boro cultivation is very sensitive to the price of diesel.
A major factor behind the high unit cost of production of the HYV rice in Bangladesh is the cost of irrigation compared to the other countries in the region. Bangladeshi farmers have to spend about 51 US dollars in irrigating one hectare land whereas the irrigation cost is about 32 dollars in Punjab, India and 18 dollars in Thailand and 26 dollars in Vietnam. India provides heavy subsidy on electricity that lowers the cost of irrigation. In other countries, the government subsidies the large scale public sector irrigation project. Recent (January 2003) price hike of diesel increase the cost of irrigation. Considering these realities, Bangladesh should provide subsidy on diesel to reduce the cost of ground water irrigation and pursue a stable price of diesel. If the international price is up, the price should remain as it is and the government should take back the bucks during a slump in the international market. Bangladesh should also pursue a policy of rapid expansion of rural electrification to facilitate electricity connection to irrigation and thereby reduce the cost of irrigation.
2.5 COMPARATIVE ADVANTAGES IN CROP
PRODUCTION
Whether a country can take advantage of new trading opportunities under the World Trade Organization (WTO) would depend on its comparative advantage. In most developing countries, social or economic profitability deviates from private profitability because of distortions in the input and output markets, the import and export duties, and the valuation of the domestic currency. Comparative advantage in the production of a given crop is measured by imputing the value of production at the border price (world market price adjusted for transport cost and trade margins) and comparing it with the social and opportunity cost of producing, processing, transporting, handling and marketing an incremental unit of the commodity.
If the opportunity cost is less than the border price, then the country has a comparative advantage in producing that crop. The most recent study (Shahabuddin et al. 2002) estimated the comparative advantage of various crops in Bangladesh for different ecologies and irrigation systems using recent input-output prices, market distortions and production coefficients show that: At export parity price Bangladesh has comparative advantage in the production of Aman rice, jute and vegetables. Bangladesh can gain from the increase in production of these crops provided that the surplus production could be exported in the world market. At import parity price Bangladesh has
Comparative advantage in the production of Boro rice, potato, lentil and onion. Bangladesh will not be able to compete in the export market for these commodities. But because of the transport cost and trading margin, the cost of importing these commodities into Bangladesh would be higher than the opportunity cost of producing them within the country.
CHAPTER - THREE
3.1 TREND ANALYSIS OF PADDY PRICE IN
BANGLADESH
Since Independence, the Government of Bangladesh has attempted to reduce variability of rice prices, and especially to prevent sharp increases in price. This chapter analyzes historical price trends and variability in Bangladesh. First, inter-year (annual) and intra-year (seasonal) prices in Bangladesh are analyzed. In order to separate out price trends from seasonal or random elements, price fluctuations are measured as deviations from the moving average of prices and from a linear trend. Price changes relative to the price in the preceding period are also discussed.
Annual price fluctuations in Bangladesh arise mostly from fluctuation in production, which again can be attributed to the random effect of floods and drought. Prior to 1994, public imports, and to a lesser extent drawdown of stocks, were the main policy instruments to achieve year-to-year stability in prices. As will be discussed below, since the trade liberalization of 1994, the private sector import (rice) trade has been the dominant factor in keeping price rises within acceptable limits in case of a domestic production shortfall.. Year-to-year fluctuations in nominal prices of paddy in Bangladesh were very high Prices were especially unstable due to severe rice shortages caused by drought-related production shortfalls and shortage of foreign exchange for government rice imports. In table 3.1, 3.2 and 3.3 discussed about the trend value and Year to year change of price of of Aman , Ause and Boro respectively. In Aman Year-to-year fluctuations greater than 10 percent occurred in 3 out of 7 years during the 1994-2000 as compared with 1 out of 6 years during the 2000-2006.
Table: 3.1 : Trend value and Year to year change of price of Aman
Year | Price/Qtl | Changes from previous year | Estimated Trend Values |
1993 | 508 | 569.414 | |
1994 | 699 | 37.60% | 593.916 |
1995 | 666 | -4.95% | 618.418 |
1996 | 652 | -2.10% | 642.92 |
1997 | 604 | -7.36% | 667.422 |
1998 | 807 | 33.60% | 691.924 |
1999 | 790 | -2.10% | 716.426 |
2000 | 700 | -11.39% | 740.928 |
2001 | 683 | -2.42% | 765.43 |
2002 | 737 | 7.90% | 789.932 |
2003 | 788 | 6.91% | 814.434 |
2004 | 809 | 2.66% | 838.936 |
2005 | 932 | 15.20% | 863.438 |
2006 | 998 | 7.08% | 887.94 |
Source: Bangladesh Agriculture Marketing Department
Table: 3.2 : Trend value and Year to year change of price of Ause
Year | Price/Qtl | Changes from previous year | Estimated Trend Values |
1993 | 471 | 519.152 | |
1994 | 693 | 47.13% | 541.671 |
1995 | 668 | -3.60% | 564.19 |
1996 | 502 | -24.85% | 586.709 |
1997 | 517 | 2.99% | 609.228 |
1998 | 746 | 44.29% | 631.747 |
1999 | 640 | -14.20% | 654.266 |
2000 | 620 | -3.125% | 676.785 |
2001 | 623 | .48% | 699.304 |
2002 | 707 | 13.48% | 721.823 |
2003 | 734 | 3.68% | 744.342 |
2004 | 839 | 14.30% | 766.861 |
2005 | 873 | 4.05% | 789.38 |
2006 | 842 | -3.55% | 811.899 |
Source: Bangladesh Agriculture Marketing Department
Table: 3.3 : Trend value and Year to year change of price of Boro
Year | Price/Qtl | Changes from previous year | Estimated Trend Values |
1993 | 487 | 520.137 | |
1994 | 665 | 36.55% | 547.699 |
1995 | 741 | 11.42% | 575.261 |
1996 | 565 | -23.75% | 602.823 |
1997 | 543 | -3.89% | 630.385 |
1998 | 749 | 37.93% | 657.947 |
1999 | 680 | -9.21% | 685.509 |
2000 | 660 | -2.94% | 713.071 |
2001 | 657 | -.45% | 740.633 |
2002 | 721 | 9.74% | 768.195 |
2003 | 766 | 6.24% | 795.757 |
2004 | 830 | 8.35% | 823.319 |
2005 | 936 | 12.77% | 850.881 |
2006 | 983 | 5.02% | 878.443 |
Source: Bangladesh Agriculture Marketing Department
In case of Ause also the price changes from preceding year in 2000-2006 is more stable than it was in 1994-2000. Year-to-year fluctuations greater than 10 percent occurred in out of 7 years during the 1994-2000 as compared with 2 out of 6 years during the 2000-2006. Similarly in Boro Year-to-year fluctuations greater than 10 percent occurred in 4 out of 7 years during the 1994-2000 as compared with 2 out of 6 years during the 2000-2006. Comparing among Ause, Amon and Boro, the price of Boro was the most instable during 1994-2000. In 1994 the changes occurred in the price of paddy with a very high rate because of flood in 1993.
Though the prices is more stable of all three kinds of paddy in 2000-2006 but during this period prices are increasing only. But in the early of 2000 the prices of paddy was more instable but in this period the price was sometimes increases and sometimes decrease. The changes of price during 2000-2006 leads the overall change of price to the upward trend. Figure 3.1, 3.2 and 3.3 represent the trend of price escalation during the period of 1993-2006 for Aman, Ause and Boro respectively.
In order to distinguish between trend and random elements of fluctuation in
prices, trends are calculated using least square method (which provided a better fit to the data than did a simple linear trend, Figures 3.1,3.2 and 3.3.
3.2 SEASONAL FLUCTUATION ANALYSIS OF PADDY
PRICE IN BANGLADESH
Seasonal price variations are generated by seasonality in production. The policy instruments that are used to keep seasonal price spreads within acceptable limits are domestic procurement, which attempts to raise average prices (and farmer incomes), and Open Market Sales (OMS) and other sales channels, designed to moderate prices to consumers when there are severe upward pressure on prices.
The seasonal component is defined as the intra-year pattern of variation that is repeated from year to year. The seasonal index is calculated by taking the averages for each month, of the ratio of the price to a 12 month moving average. Table 3.4 shows the seasonality index for the year 2000 to 2006 for the price of Aman.
Table: 3.4 Seasonal Index of the price of Aman
Year | Month | Price/ Qtl | 12 Monthly Moving Avg | Centered 12 Monthly MovingAvg | Percentage of Original data to centered 12 monthly moving avg(SI) |
2000 | |||||
January | 684 | ||||
February | 726 | ||||
March | 781 | ||||
April | 760 | ||||
May | 720 | ||||
June | 715 | 700.833 | |||
July | 718 | 699.166 | 700 | 102.57 | |
August | 709 | 695.916 | 697.54 | 101.64 | |
September | 705 | 691.666 | 693.79 | 101.612 | |
October | 629 | 690.25 | 690.96 | 91.03 | |
November | 637 | 690.666 | 690.46 | 92.25 | |
December | 626 | 689.166 | 689.92 | 90.73 | |
2001 | January | 664 | 685.916 | 674.04 | 98.51 |
February | 687 | 681 | 683.46 | 100.51 | |
March | 730 | 675.916 | 678.46 | 107.59 | |
April | 743 | 678.416 | 677.17 | 109.72 | |
May | 725 | 680.75 | 679.58 | 106.68 | |
June | 697 | 683 | 681.88 | 102.21 | |
July | 679 | 687.333 | 685.17 | 99.10 | |
August | 650 | 687.25 | 687.29 | 94.57 | |
September | 644 | 691.416 | 689.33 | 93.42 | |
October | 659 | 693.41 | 692.41 | 95.17 | |
November | 665 | 690.416 | 688.71 | 96.55 | |
December | 653 | 687 | 688.71 | 94.81 | |
2002 | |||||
January | 716 | 687.1666 | 687.08 | 104.20 | |
February | 686 | 696.083 | 691.62 | 99.18 | |
March | 780 | 703.08 | 699.58 | 111.49 | |
April | 767 | 709.25 | 706.17 | 108.61 | |
May | 689 | 714.833 | 712.04 | 96.76 | |
June | 656 | 721.333 | 718.08 | 91.35 | |
July | 681 | 725.666 | 723.5 | 94.12 | |
August | 757 | 742.5 | 734.08 | 103.12 | |
September | 728 | 745 | 743.75 | 97.88 | |
October | 733 | 751.166 | 748.08 | 97.98 | |
November | 732 | 758.916 | 755.04 | 96.94 | |
December | 731 | 765.416 | 762.17 | 95.91 | |
2003 | |||||
January | 768 | 774.25 | 769.83 | 99.76 | |
February | 888 | 776.41 | 775.33 | 114.53 | |
March | 810 | 780.333 | 778.37 | 104.06 | |
April | 841 | 787.75 | 784.04 | 107.26 | |
May | 782 | 795.166 | 791.46 | 98.80 | |
June | 734 | 787.916 | 791.54 | 92.73 | |
July | 787 | 787.25 | 787.58 | 99.92 | |
August | 783 | 713.25 | 750.25 | 104.36 | |
September | 775 | 779.75 | 746.5 | 103.81 | |
October | 822 | 776.583 | 778.17 | 105.63 | |
November | 731 | 776.166 | 776.37 | 94.15 | |
December | 734 | 777.583 | 776.87 | 94.48 | |
2004 | |||||
January | 760 | 777.333 | 777.46 | 97.75 | |
February | 798 | 779 | 778.17 | 102.54 | |
March | 810 | 781.333 | 780.17 | 103.82 | |
April | 803 | 787.083 | 784.21 | 102.39 | |
May | 777 | 797.333 | 792.21 | 98.08 | |
June | 751 | 808.583 | 802.96 | 93.52 | |
July | 784 | 825.666 | 817.12 | 95.94 | |
August | 803 | 845.25 | 835.46 | 96.11 | |
September | 803 | 865.25 | 855.25 | 93.89 | |
October | 891 | 865.25 | 865.25 | 102.97 | |
November | 854 | 870.916 | 868.08 | 98.37 | |
December | 869 | 876.666 | 873.79 | 99.45 | |
2005 | |||||
January | 965 | 882.583 | 879.62 | 109.70 | |
February | 1033 | 894.833 | 888.71 | 116.23 | |
March | 1050 | 908.833 | 901.83 | 116.42 | |
April | 803 | 909.083 | 908.96 | 88.34 | |
May | 845 | 912 | 910.54 | 92.80 | |
June | 820 | 917.5 | 914.75 | 89.64 | |
July | 855 | 918.333 | 917.92 | 93.14 | |
August | 950 | 916.833 | 917.58 | 103.53 | |
September | 971 | 916 | 916.42 | 105.95 | |
October | 894 | 934.583 | 925.29 | 96.61 | |
November | 889 | 948.166 | 941.37 | 94.43 | |
December | 935 | 963.75 | 955.96 | 97.80 | |
2006 | |||||
January | 975 | 974.583 | 969.17 | 100.60 | |
February | 1015 | 977.083 | 975.83 | 104.01 | |
March | 1040 | 979.75 | 978.42 | 106.29 | |
April | 1026 | 989.916 | 984.83 | 104.18 | |
May | 1008 | 992.166 | 991.04 | 101.71 | |
June | 1007 | 998 | 995.08 | 101.19 | |
July | 985 | ||||
August | 980 | ||||
September | 1003 | ||||
October | 1016 | ||||
November | 916 | ||||
December | 1005 |
Source: Bangladesh Agricultural Marketing Department
To compute the seasonal fluctuation of price of paddy we compute 12- monthly centered moving averages since the seasonal pattern repeat year after year. In this process the seasonal and irregular variations are ironed out from the original price. On the basis of the 12- monthly centered moving averages figure 3.5, 3.6 and 3.7 show the de de-seasonalised data of Aman in 2004, 2005 and 2006. This de-seasonalised data give the idea about the other components of the time series such as trend, cyclic fluctuation, and irregular variation.
In 2004 and 2005 the price of Aman is more stable than that of 2006. In 2004 price prices have on average remained at the same level from January to August and in 2005 prices continued to rise after a small drop from April to May. Though April and May is the harvesting season for Aman but the price of Aman is suddenly raise very high in June and July. Because of huge flood in 2006 the production of Aman was very poor. As the demand is high and the supply is insufficient so the price increases automatically.
Monthly rice prices displayed a greater more stability now a days than early 1980s. Two major factors likely account for this change. First, the phenomenal growth of irrigated rice in the Boro season (which raised the share of Boro rice in total production from about 15 percent in the mid-1970s to about 30 percent in the late 1980s) increased stability of production and resulted in a more even distribution of market arrivals of rice due to multiplicity of harvests in each year. Second, improved infrastructure and enhanced capacity of the government and farmers to undertake effective rehabilitation activities may have reduced the magnitude of production shortfalls caused by natural disasters, thus contributing to improved supply stability
3.3 ANALYSIS OF PADDY PRODUCTION COST AND
PROFIT OF PADDY IN BANGLADESH
To generalize the cost of production of paddy in Bangladesh is very difficult because the production cost of one region is highly difference from another. There are some factors which’s per unit cost is almost same in all over the country such as chemical fertilizer, pesticide etc but the amount of utilization in various land is difference. Due to the change of the nature of the soil it need different amount of fertilizer. The numbers of irrigation also depend on the nature and location of soil. Low land needs less irrigation than that of higher land. Some land is very fertile so this land needs less fertilizer.
Labor cost is important factor influencing the cost of cultivation. Labor cost is about 25% of the total cost of production. Labor is needed in preparing the land, preparing the seed field, planting, harvesting, removing grass and so forth. But the labor wage highly differs from places to places. Though the price rate of chemical fertilizer is almost same in all over the country, but the fertilizer of various lands is difference. It also not possible to generalize the cost of fertilizer.
Some farmers do not use compose fertilizer in their field but some farmers use it. As for example the farmers of Pabna in an average do not use composed fertilizer on the other hand the farmers of Jessore in an average spend about 2000 tk for one acre. Some farmers lease the land on the other hand; some farmers cultivate their own land.
In the production cost of paddy irrigation cost has an important affect. Irrigation cost also differs from place to place. Some lands are under the
government irrigation project and definitely the cost of irrigation of that land is lower than the others. In Bangladesh there are some irrigation projects such as DND, Gonga- Kopotakkha project, Tista irrigation project, Dinajpur project, Gomoti project etc. Under these irrigation projects the authority of that project gives lease to a person for irrigating a certain area for one year by taking a very small amount of money here the variable cost is the electricity bill. That particular person is responsible for irrigation of certain land area. The farmers under that irrigation project also get advantages for irrigation under that project.
Comparatively rich farmers use their own irrigation machineries for irrigation of their land. The irrigation variable cost depends on the amount of fuel needed and the purchase rate of fuel and machineries of irrigation is the fixed cost. Considering the variable cost this is also cost effective. But most of the farmers do not get their own irrigation machineries. In this case they have to rent the irrigation facilities from the others. So, here the irrigation cost is high.
As the differences of cost of production are very high in paddy cultivation so the profit generated from paddy cultivation is also difference from places to places. Table 3.5 shows the average profit margins of Boro in some important districts in Bangladesh.
Table: 3.6 : Comparism of cost of production beyween Aman & Boro.
Area of Expenditure | Unit | Rate | Total Taka | |||
Aman | Boro | Aman | Boro | Aman | Boro | |
1. Preparation of Land | ||||||
a) Cleanness of the land | 8 | 18 | 60 | 60 | 480 | 1080 |
b) Plough (by Cow) | 3 | 9 | 30 | 100 | 90 | 1500 |
c) Plough by Power tiller | 9 | 6 | 90 | 70 | 810 | 420 |
d) Labor for plough | ||||||
2. Fertilizer | ||||||
a) Composed | 150mds | 66mds | 5 | 5 | 750 | 330 |
b) Urea | 48kg | 61 kg | 6.20 | 6.20 | 298 | 378 |
c) TSP | ||||||
d) MP | 30kg | 15kg | 11 | 12 | 330 | 180 |
e) Zink | 2 kg | 70 | 140 | |||
f) DAP | 31 kg | 45kg | 16.40 | 19 | 508 | 855 |
g) Zip sum | 30kg | 3.50 | 105 | |||
3. Labor Used in Fertilizer | 2 | 1 | 70 | 70 | 140 | 70 |
4. Expenditure for Seed | ||||||
a) Price of seed | 30 kg | 45 kg | 17 | 15 | 510 | 675 |
b)Preparing the seed field (Plough, Fertilizer, Irrigation, and Labor ) | 530 | 620 | ||||
c) Planting labor cost | 11 | 10 | 80 | 80 | 880 | 800 |
d) Removal of grass(Labor) | 6 | 13 | 70 | 60 | 420 | 780 |
5. Irrigation | ||||||
a) Irrigation by machine | ----- | ------ | ------ | 6000 | ||
b) Irrigation by labor | ----- | ------ | ------ | |||
6. Pesticide | ||||||
a) Price of pesticide | 3 Battle | 5 pack | 540 | 90 | 1620 | 450 |
b)Labor for pesticide | 1 | 1 | 75 | 75 | 75 | 75 |
8. Labor Cost for Harvesting | 2625 | 3000 | ||||
9. Lease(Seasonal) | ----- | ------ | ------ | ------- | ------ | |
10. Other Cost (If any): For Sake | ----- | ------ | ------ | ------- | ------ | |
10206 | 17318 | |||||
CHAPTER - FOUR
4.1 FINDINGS OF THE SRUDY
Now a day paddy price is more stable than before. Year-to-year fluctuations are less frequently occurs during 2000-2006 than is occur in 1993-2000.
If there is less production of paddy in any year than the government of Bangladesh import the rice from foreign country to stabilize the market. Though the international price of oil is increasing day by day but the government of Bangladesh subsides to in the oil sector to keep the production cost more stable.
Price stabilization is important politically. In spite of a quite different domestic and international environment, the memory of the famine of 1974 is still present. High rice prices in Bangladesh are treated as a crisis situation, and are often interpreted by critics as a failure of the government to ensure food security. If drought and flood arises in any year and if for that the production is less then the government takes appropriate steps.
Moreover in case of high production the government of Bangladesh gives assurance that the farmers will get their appropriate profit. In the harvesting season the government purchases paddy from the market with the appropriate price to protect the heavy price fall in the harvesting season. On the other hand government sell theses collected paddy in the off season with appropriate price to protect the heavy price escalation in the off season. The collected paddy of government sometimes used to protect the natural calamity such as flood, cyclone, drought etc.
To keep the production cost more stable the government of Bangladesh subsides in the oil. Moreover in recent years there is a heavy crisis of chemical fertilizer. Bangladesh government takes laudable steps to protect the artificial crisis of chemical fertilizer. Bangladesh government gives a card to each farmer mentioning the land he has. By showing the card a farmer can purchase the amount of fertilizer at a time he needed to cultivate his land.
.
4.1 RECOMMENDATION
Rice is the staple food of about 140 million people in Bangladesh. So, the price of rice should be stabilized. For stabilizing the paddy market some recommendations are given below:
· Government Procurement: In harvesting season the supply of paddy is much higher than the other times. So, it is natural that the price of paddy in harvesting season will be decreased but the government must be protect this by procuring paddy with appropriate price.
· government Sales: Collected paddy in the harvesting season by government should be sale in the off season. In the off season the supply of paddy is decreased. So to prevent the price escalation in the off season the government has to sales paddy
· Monitoring the market: government authority of different location should be monitor the price of paddy regularly. So, that it can submit report of the higher authority. Then the higher authority can take decision accordingly.
· Import: Government should predict the production of paddy and compare it with the demand. If the demand is higher than the production then government must import paddy or rice to meet the excessive demand. Thus the price of paddy may be stabilized.
· Rules and regulation: Those who are responsible for creating the artificial crisis of paddy and they creating high price of paddy they should be punished according to the law. More over government should redesign the stock policy to prevent the artificial crisis.
· Supply of Fertilizer: Supply of fertilizer should be balanced. there is no fertilizer factory in North Bengal. So, the transportation cost is high. Moreover the fertilizer crisis is very intensive in recent year. So, new fertilizer factory should be estabilized in North Bengal.
· Government Subsidies: The international price of oil are increasing day by day. But most of the farmers of Bangladesh are poor. So, it is very difficult for them to adjust with it to keep the production cost low the government of Bangladesh has to subsidies in oil and fertilizer.
4.2 CONCLUSION
Price stabilization is an impartment, though somewhat ambiguous policy objective of the Government of Bangladesh. Paddy price stability remains a concern, especially since export parity does not provide an effective floor because Bangladesh traders have not established export contacts. Domestic procurement thus retains its importance. Production instability in the Aman season makes price forecasting difficult, though. In five of the last six years, the eventual average wholesale market price at harvest was above the procurement price, resulting in an average of only 8.9 percent of the procurement target actually being achieved. Moreover, the procurement price set in Boro season has been excessively high in 3 out of 4 recent years, resulting in extra costs to the government and windfall profits to those who are fortunate enough to sell at the procurement centers. In addition, procurement prices substantially above market prices increase the potential for rent-seeking behavior and corruption of public officials connected with procurement. Open
tendering has succeeded in enabling some domestic procurement following unexpected domestic production shortfalls in 1998 and 1999. Technical problems remain, but if these are overcome, costs could be reduced and reliability of procurement could be increased.
Paddy price sterilizations would have the greatest impact on the middle income group and his little impact on the average degree of poverty experience by the lowest income quartile in Bangladesh.
4.3 REFERENCE
Ahmed and Shams. March 1994. Demand Elasticities in Rural Bangladesh: An Application of the AIDS model. The Bangladesh Development Studies, Vol.XXII, No.1.
Ahmed, Raisuddin. (forthcoming). June 1999. Rice Production in Bangladesh: Constraints, Policies, and Prospects. International Food Policy Research Institute. Washington, D.C.. USA.
Baulch, et. al.. 1998. The Spatial Integration and Pricing Efficiency of the Private Sector Grain Trade in Bangladesh: Phase I and II Report.
Bangladesh Institute of Development Studies (BIDS), Bangladesh Agricultural University and University of Sussex.
Brennan, D.. 1995. Policies for Stabilizing Rice Prices in Bangladesh. Final Research Report of the Bangladesh Foodgrains Management Operations Project. Chemonics International. Mimeo.
Center for Monitoring Indian Economy (CMIE). 1998, 1999. Monthly Review of the Indian Economy. various issues.
Department of Agricultural Marketing (DAM), Ministry of Agriculture, Government of the People.s Republic of Bangladesh.
Dorosh, Paul A. and Haggblade, Steven. September 1997. Shifting sands: the Changing case for monetizing project food aid in Bangladesh. Cornell University, Ithaca, NY, USA.
Dorosh, Paul. 1998. The Determination of Rice Prices in Bangladesh: Supply Shocks, Trade Liberalization and Cross Border Trade, FMRSP Draft Report, Mimeo.
Goletti, F.. 1993. The Effects of Supply Shocks on Market Integration: An Application to Rice Markets in Bangladesh. International Food Policy Research: Washington, D.C.