Connecting farmers, raising income  

Abdul Bayes     | Published: August 03, 2018 22:14:45

Predominantly, rice has been influencing the Bangladeshi food plates. But that trend seems to have trimmed a little bit. The reasons are not far to seek. Urbanisation, with one-third of population living in the cities, sustained income growth. This was reflected by a rise of per capita income by 4.0 per cent or more and decline in poverty with poverty incidence at 20 per cent continuing to contribute to change consumption patterns. The changes so mentioned have triggered demand for a more diverse range of agricultural products.

More specifically, the demand for income-elastic goods such as fruits, vegetables, milk and meat increased. Consumers aside, the producers also have learnt to diversify their production portfolio with a view to maximising income and sustain that income. Consumers' concern for high prices and producers' cry for high prices need some convergence to reach an equilibrium point. This can only happen if producers could be connected with consumers through developing value chains.

Experts view that given the positive policy shifts, Bangladesh could become a hub of high-value agricultural products. It is because, ala Engle's Law, per capita income growth would push up the domestic demand for non-cereal high value products, particularly the horticultural produce such as vegetables and fruits. That would also raise the demand for animal produce such as fish, poultry, eggs, milk etc. Another source of growth could be external markets, including the Middle East countries.

By and large, non-cereal income-elastic crops are now poised to emerge as opportunities for farmers to raise their incomes. But pitifully, poorly developed market channels as well as traditional emphasis on infrastructure for rice-based economy hinder the prospect of seizing the opportunities. There has been little attempt to examine and analyse the non-cereal market both from production and consumption sides. There has also been little focus on the value chain - the process through which the perishable products find ways from farmers to consumers. Discussed below is an attempt in that direction and policymakers should note down the observations to frame their future policies.

The prelude to one of the World Bank's report regarding the agricultural and rural dynamics  is perhaps not far from the truth on the ground: "The rural economy of Bangladesh has powerfully advanced economic growth and substantially reduced poverty, especially since 2000, but the remarkable transformation and unprecedented dynamism in rural Bangladesh remain an unexplored, underappreciated, and largely untold story."

Needless to say that the document intends to fill that gap. It also attempts to suggest what specific actions Bangladesh might take - given the residual poverty and persistent malnutrition - to accelerate and channel rural dynamism. As mentioned before, the rare attempt for the first time might have generated some doubts in the present day context, but surely the observations need a closer look.

The document contains one chapter titled 'Connecting Farmers to Markets: Trading in High-Value Products' to record the steep growth in the demand for these products - meat, milk, fish, egg - consequent upon the increase per capita income, awareness and growth of demand in foreign markets. It argues that new demand dimensions offer unique opportunity to raise income of farmers and traders as well as to generate employment in non-farm sector. But it is easier said than done. To reap home that reward, the supply chains of these products are needed to be greased well so that farmers can be connected with consumers in an efficient way.

The survey conducted for the report on some selected vegetables (brinjal), fish (pangash), chicken and milk found encouraging signs in the production and marketing of these high-value products and provided some valuable insights. These are: (a) more educated and younger people are entering into farming and trading of high-value products, especially fish and poultry. While the average age of farmers is above 40 years, two-thirds of the traders engaged in supplying high-value products are below 40. Farmers engaged in fish trading, for example, have two more years in schooling. "The retention of human capital in the agricultural value chains studied here is a promising sign that the transformation and modernisation needed for meeting increased domestic and export demand will be realised." (b) Farmers seem to have good market access contributed by factors such as living within a short distance of at least one primary market and in many instances multiple markets. And one reason not cited may be the expansion of mobile network with four-fifths of rural households owning a mobile set.  "The close proximity of markets is reflected in farmers' nearly universal propensity to sell in the market instead of at the farm gate." (c) The agricultural value chain is well integrated with different layers - farmers to traders to consumers and to geographical coverage. "As a result, information about price flows smoothly and efficiently from traders to consumers. Smooth information flows ensure better prices for farmers and better geographical integration of markets", and (d) traders face no serious barriers to entry not only in primary markets, but also in more established markets.

In consequence, net margins are reported to be small signalling prevalence of competitive environment. "Overall, the liberalised marketing environment in Bangladesh appears to producers and consumers quite well," but leaves no room for complacency.

Drawing upon the research work, we can possibly pick up some weaknesses in the whole chain as perceived by traders. First, the transport costs. Congestion and transport delays cause much damages to the perishable products. Transport costs, inflated by interference of law-enforcers and toll collectors, accounts for a larger part of the transport costs.

For example, to counter the lack of refrigerated trucks, fish traders transport live fishes in water-filled drums, and thus pushing up costs. Second, there is limited access to formal finance. Most of the activities are done by own finance. Third, the unreliable electricity supply means that there is less incentive in processing and packaging equipment.

Bangladesh needs to change its gear on agriculture. Be it in research or policy, the emphasis needs to be on production and marketing of non-cereal income-elastic goods. The value chain needs to be improved without any loss of time.

Abdul Bayes is a former Professor of Economics at Jahangirnagar University.

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