Rice Production in Bangladesh: Procurement Policies Must Focus on Farmers

Bangladesh is the third largest rice producing country in the world after China and India. Despite extreme conditions such as COVID-19, cyclones (Amphan as well as Yaas) and frequent floods, the rice production in Bangladesh has increased to 37.8 million tonnes in 2021 from 37.4 million tonnes in 2020 and 36.5 million tonnes in 2019. In addition to steady growths in production, famers in Bangladesh are experiencing comparatively better prices for their produce across markets. Interestingly, the fact that rice mills in the country are offering strong pricing schemes to farmers is cause for concern from the government’s perspective. It affects their public procurement programme, presenting new complexities and challenges when it comes to regulating the market price of rice.

The government of Bangladesh procures paddy[1] (unhusked rice) from farmers and rice from millers to keep food prices low for poorer consumers while ensuring remunerative prices to farmers. It also builds rice stocks for the Public Food Distribution System (PFDS) which provides support to targeted individuals who cannot afford or acquire food. But for some time now, the government has been experiencing difficulties with maintaining rice stocks.

Increasing Production Despite Extreme Conditions

A year ago, in August 2020, 36 out of 64 districts were flooded and more than 176,000 hectares (435,000 acres) of cropland were affected by the cyclone Amphan. Despite these difficult circumstances, the Boro[2] rice production in 2020 increased by 3.1 percent as compared to 2019. This year as well, Bangladesh has had to brave extreme weather in the form of droughts, floods, storms, and heat stress. A report claims that almost 68,000 hectares of rice was partially or completely destroyed over two days of heat stress in Bangladesh affecting more than 300,000 farmers.

The frequency of extreme events has increased with every year - despite which, farmers in Bangladesh are able to maintain continuous growth in their rice production. The country’s annual consumption requirement of rice is 35 million tonnes - it is easily achieved through domestic production alone. So, as far as rice is concerned Bangladesh is self-sufficient.

What is important to note however is that regardless of surplus in production, public stocks of rice are declining.

Declining Public Stock Despite Surplus Production

The unprecedented fall in the government's public rice stock is now estimated at 0.39 million tonnes as compared to a comfortable minimum stock of 1.25 million tonnes. The food directorate has decided therefore, to procure at least 0.6 million tonnes of rice by June 2021 for its safety-net programme.

In 2020, the public procurement of rice was a big disappointment. Only 47 percent and 12 percent of its targeted procurements were met during the Boro (January-May) and Aman (June-October) seasons respectively. Procurement drives were criticized for focusing far too much on millers instead of farmers. In fact, last year – millers largely did not come forward to sell their rice to the government. Selling directly to an open market was more profitable. It is argued that millers frequently create an artificial shortage of rice in markets in order to increase prices. The government failed to regulate millers. As a result, public stock was easily depleted and the government was forced to import rice despite surplus production. This year the government plans to import 1.8 million tonnes of rice – the highest amount in the last four years. This runs contrary to the recommendations of the International Food Policy Research Institute (IFPRI) and the International Rice Research Institute (IRRI). Their advice was for Bangladesh to adopt a cautious approach while importing rice from the perspective of food security. These agencies also strongly recommended focusing on farmers (and not millers) while procuring both rice and paddy.

Public Procurement of Rice – Issues and Concerns

The procurement of paddy from farmers is accomplished by first making a list of those who are eligible to sell paddy. The number of farmers interested in selling paddy to the government is exceptionally high. Eligible farmers are therefore often selected at random through a system that resembles a lottery of sorts. Listed farmers bring their paddy to local supply depots (LSD). The purchasing officers acquire paddy that meets certain specifications and factors in moisture content, the presence of dead, damaged grains and of foreign materials, etc. A target is fixed for each procurement center based on the center’s capacity and overall national target. Once targets are reached the procurement stops. So essentially, whoever forces their way in early makes a sale while others go back empty handed.

During a rapid telephonic survey conducted by Research Initiatives, Bangladesh (RIB) with support from Rosa Luxemburg Stiftung (RLS), small farmers shared how they felt excluded from the public procurement processes. A total of 180 small-farmers were surveyed by RIB. Not one of them managed to sell their paddy at government centers. They found that rich businessmen and well connected persons with political clout influenced and manipulated the procurement process to extend benefits to their relatives or party members. Their findings further uncovered the fact that small farmers tend to get trapped by specification details such as moisture content (which should be less than 14 per cent). They seldom have the space nor capacity to dry their paddy to precision. Some respondents talked about finding it difficult to get farmer’s cards made. Should they find the means to access a card, their fate remains determined by a crushing lottery system. In fact, even after winning the lottery last year, three respondents shared that they were unable to successfully sell their paddy to the government.

Troubled by the levels of bureaucracy, nepotism and the layered technicalities at play, small farmers often find it more convenient and economical to sell their produce to local traders (Faria or Bepari.) who collect produce directly from their houses or their farms. We will spend more time on issues faced by local traders in the next section.

Government Rates Versus Price Available to Farmers

The government of Bangladesh planned to procure 0.65 million tonnes of paddy and 1.15 million tonnes of rice between May and August of 2021. This year the rate of paddy is fixed at 27 Taka per kg (approximately 0.28 €) which is 1 Taka higher than last year. The procurement price of rice is fixed at 40 Taka which is 4 Taka higher than the previous year.

As soon as rates were announced both government agencies as well as millers raced to start procuring paddy from farmers. The market price of rice was already on the rise over the last 11 months. Speculating that market prices would continue to increase, millers bought paddy from farmers in large volumes. Mill owners and wholesalers have also been taking advantage of low stocks of food grains in state silos. Wholesale traders, as well as consumers are stocking larger than average amounts of rice against the backdrop of the COVID-19 pandemic. This artificial demand for paddy has directly impacted its market price. This is a huge source of concern for the government. If farmers have access to better prices in an open market they will not be likely to participate in public procurement processes. This is not occurring for the first time, though. It would appear that the government has not learned from its previous experiences.

Meanwhile, farmers remain reluctant to sell to the government and are interested in selling their produce to a market where prices are stronger. Almost 83 percent are small and marginal farmers who have land smaller than 1.5 acres. They are invested in selling their produce soon after their harvests, since they do not have easy access to appropriate storage capacities. Sometimes, they are compelled to sell their produce at a lower price to local traders or middleman.

Dependencies on Local Traders or Middlemen

Local traders or middlemen – Faria or Bepari – tend to dissuade farmers from selling their produce directly to the government. Sometimes they go so far as to create obstacles to doing so. They are often experienced as agents of millers. Faria are non-licensed small traders who buy comparatively lower quantities of paddy from farmers. They do so, at their houses, at their farms or in local markets. In turn, they sell to Bepari or mill owners. Bepari are comparatively well established traders who mostly have permanent shops in the local market. They purchase paddy from farmers as well as Faria and sell them to mill owners.

Local traders procure paddy from local farmers at rates which are almost 5-7 Taka per kg lower than the government price. But this year, farmers received 5-8 Taka per kg higher than last year from local traders. Surprisingly it either equals or surpasses the government’s prices, according to the rapid survey conducted by RIB-RLS.

Relationships with Faria or Bepari are not always exploitative; at times they are mutually beneficial to the parties involved. As mentioned earlier, farmers often do not have the space to store or dry their produce in a manner that meets the criteria of moisture content. Local traders often have this facility in place. Locally known as ‘Chala’, it is used to store and prepare the paddy as per government specifications. Sometimes farmers permit local traders to use their farmer’s cards or lottery for a payment of 3,000 to 4,000 Taka. The idea is that they can then sell paddy to the government. There are cases where local traders are vying to exploit vulnerable conditions in the context of farmers. A respondent from Joychondi, Nilphamari district shared the following during the survey conducted,

“I do not have space for drying paddy to reduce its moisture content, neither do I have space to store it for long time. So, I had to sell my paddy to the local Faria who offered me only 1150 TK (11.76 €) for 75 kg whereas as per government’s rate it should be 2,025 Taka (20.71 €). He paid me only half till now. I have to run after him to get the remaining payment. He already earned substantially by selling my paddy to a mill at 2,000 Taka.”

For a small farmer, selling directly to the government is a distant reality. Even during a good year, they manage to earn little, as for the most part - profit is deftly appropriated by local traders. On an average to bad year, they inevitably incur losses. Market structures and agricultural policies currently do not place small farmers at their core and are not geared towards a just outcome for them.

Policies Ought to Focus on Farmers Instead of Millers

The public procurement of rice in Bangladesh employs a target based approach where the main focus is on millers instead of farmers. Farmers in general and small farmers in particular are seldom able to benefit from their government’s price support schemes. The processes in place do not guarantee that a farmer’s produce will be procured even if it fulfils all the specifications. The over-reliance on millers without any adequate legislative control over them has proven to be counter-productive. Millers often do not honor their agreement to supply rice through procurement programmes, arguing that the set price is too low. It can be concluded that the present procurement policy is neither able to regulate the market price, not is it able to ensure better remuneration for farmers. It is both ironic and disheartening that even after surplus in the production of rice, the government finds itself relying on rice imports to ensure minimum public stocks.

The policy should prioritize providing fair prices to farmers and to protecting their incomes. Small and marginal farmers need to have special provisions in place so that they are not effectively excluded from the process. Legislative measures should be invested in, that ensure accountability in the context of rice millers and traders. Many national and international agencies have strongly recommended focusing on procurement from farmers and not millers. Public stock should ideally be maintained using domestic rice production. Importing rice is wasteful and uneconomical when the country already has a surplus production.

The process should evolve to ensure that the government purchases entire procurement quantities as paddy to benefit farmers. The paddy thus procured can be processed by offering a milling charge to rice millers. In actualizing this, farmers will find well-deserved price support, millers will receive service charges and the government will be able to maintain a strong reserve of food.

Producer cooperatives are other viable alternatives. Cooperatives could be formed to procure paddy from farmers, almost at their door step. Small and marginal farmers could benefit profusely from organizing themselves into cooperatives. Government and civil society should create conducive environment for the cooperatives to flourish.

Food sovereignty is as important as food security. The procurement of food grain and its distribution to the resource poor is a strong component of food systems in Bangladesh. It needs to be further strengthen by protecting and promoting the interests of the primary producers – especially the small farmers.

[1] Rice is cultivated as paddy. The husk of the paddy is removed in a mill and it is further processed to convert it to rice.

[2] In Bangladesh, rice is cultivated in all the three main crop-growing seasons – (i) Aus rice is grown during March to June; (ii) Aman rice during June/July to October/November and (iii) irrigated Boro rice during January to April/May.