Two decades ago farmers received about 65 per cent of the consumer price of rice. Over time the price of rice for consumers has risen considerably, but the farmer's share has shrunk. Farmers now get only 41 per cent of the consumer price; the remaining 59 per cent goes to intermediaries, most of it into the pockets of rice mill owners.

Several scientists of the Bangladesh Rice Research Institute (BRRI) recently studied the farmer's share of the consumer price of rice. Their findings were published in the Bangladesh Rice Journal in a paper titled "Doubling Rice Productivity in Bangladesh: A Way to Achieving SDG 2 and Moving Forward". It also sets out a fair division of the consumer price among each party in the rice supply chain: the farmer or producer should get at least 55 per cent, with paddy middlemen getting 7 per cent, millers 25 per cent and rice middlemen 13 per cent.

The study says farmers are losing out because of the rise of various intermediaries. Over the past two decades farmers' position has weakened while rice mill owners have grown stronger. In 2000 millers' share of the consumer price was 20 per cent; by 2019 it had passed 35 per cent.

Experts say that to grow paddy, farmers take various loans and buy inputs on credit at the start of the season. Lacking money and storage capacity, they are forced to sell paddy to local traders early in the season, and under pressure to repay debts they sell at low prices. Mill owners and middlemen take advantage of this. Millers' big advantage is their ability to buy paddy at the lowest market price; they then process it and sell it to the government or on the market. Hybrid paddy cultivation and production have grown over the past few decades, and because there are few buyers for it, millers can often buy it cheaply, process it and sell it to the government at high prices, making windfall profits. Farmers lose out, and ordinary consumers pay more.

People in the sector say effective steps are needed to keep rice and paddy markets stable. To ensure farmers get fair prices, they say, market management should be improved and paddy prices could be set at the start of the season. Farmers should be enabled to store paddy early in the season, and the Department of Agricultural Marketing, which oversees the market, must be strengthened. That could reduce one-sided influence over price setting.

Dr Md Shahjahan Kabir, one of the researchers and director general of BRRI, said prices become unstable even when there is no shortage in rice supply, mainly because of the unchecked rise of various intermediaries. Rather than traditional supply and demand, various government authorities need to play a role here, and there is no alternative to buying paddy directly from farmers. Moisture can be a problem when buying paddy; to overcome this, prices should be set according to moisture content and paddy bought from farmers themselves, and a process to reduce moisture needs to be developed.

Stressing the need to modernise paddy and rice procurement, he said many government activities have already been digitised, and this must be brought to public procurement. The interests of both farmers and consumers must be given weight and policy decisions made by balancing the two, while oversight must be stepped up to ensure intermediaries behave reasonably.

The need to increase government storage capacity has long been discussed, and people in the sector are also calling for paddy to be bought directly from farmers. They say the government should announce separate minimum support prices (MSP) for fine and coarse rice, and the Directorate General of Food needs the capacity to procure at least about 10 per cent of total production.

It is alleged that mill owners use a trick when showing their profits: they often sell by-products at good prices but leave these out of their accounts, and claim they are making no profit, using that claim to try to win extra benefits from the government. Experts say effective production costs and a reasonable profit margin should be set at the miller level too.

Abdul Latif Mondal, former secretary of the Ministry of Food, said the interests of farmers, consumers and intermediaries must all be protected in the marketing system. But in recent times intermediaries, especially rice mill owners, have become very powerful and adept at setting rice prices and marketing, because farmers have no organisational capacity to create or control markets, and the Directorate General of Food, as the government authority, lacks the skill and tools. As a result, efforts to ensure fair prices are not working. Government procurement is very small, and it cannot be said to have much influence on the market. A policy decision is therefore needed on how to strengthen farmers, with greater efficiency in the supply chain, more storage capacity for farmers and better information.

He said that for lack of the right policy, government channels buying rice are often influenced and controlled by traders. Because paddy is not bought from the market, control of the paddy market is handed to mill owners alone, so there is no alternative to procuring paddy from the market. It is not at all reasonable to leave such a large paddy market to mill owners alone. To give farmers a fair price, government procurement must become more efficient and the dignity of farmers must be given priority throughout the process, while consumers' interests must also be protected.

Source: Amader Shomoy. First published in Bengali on The Agro News.