Changing trends in marketing agricultural crops

Abdul Bayes     | Published: October 02, 2018 21:12:33 | Updated: October 04, 2018 21:11:32

History tells us that agriculture in this part of the sub-continent was based on meeting the needs of households, rather than of the market. The villages were self-sufficient; people exchanged goods and services within the village mainly on barter basis. However, with the dawn of development in infrastructure and storage facilities, commercialisation of crops and marketing strategies gained a respectable space in academic discourse. Two of the many drivers can be mentioned in this respect. First, rapid spread of modern technology in paddy cultivation led to more production per unit of land and a surplus over consumption. The technology also helped release land for non-paddy crops. Second, the agriculture-industry or rural-urban linkages gained strength over time leading to growing exchange of goods and services.

Then why is an efficient marketing system necessary? This is because a good marketing network helps both producers and consumers in many ways as the system: (a) enables primary producers to get a better return or raises the farm gate price; (b)  provides facilities for selling crops at an incentive price; (c) reduces the price-spread between the primary producers and the ultimate consumers; (d) makes all farm products available to consumers at reasonable price and (e) reduces the role of middlemen who steals a significant slice on the value chain.

Agriculture of Bangladesh is generally termed as 'mono-crop' agriculture as a single crop, paddy, occupies more than two-thirds of all cultivated land. The reasons behind mono-cropping system are also well-known. Majority of the rural people want to ensure food security by growing staple crops in the meagre amount of land that they own. Thus, the land use pattern is dominated by growing food crops only. Food insecurity is always instrumental in the allocation of resources. Staple crops are grown largely for home consumption and roughly around one-third are marketed. Farmers also grow cash crops to meet cash needs. Nearly 75-80 per cent of these crops are marketed.

The trends in marketing of paddy - the staple crop - show that it has increased over time despite squeezed farm size. For example, in the eighties, a quarter of the total paddy output produced by the households found way to markets. In recent years, the share has risen to roughly 40-45 per cent. The reasons behind these are: (a) an increase in land productivity due to the adoption of modern varieties. This is helping  households reap a better harvest from the same amount of land than earlier; (b) improvements in communications, including telecommunications, and media has widened the base of  market information and (c) a reduction in household size has decreased home consumption leaving some outputs for the market.

The most recent trend shows the expansion of mobile coverage and on-line marketing of products, especially in big towns. However, marketing of crops has been increasing over time. This is not unusual, given that most of these are perishable products and traded for cash income. Farmers usually meet their non-rice demands by selling these commodities. Potato particularly is a case where substantial expansion of marketing has taken place because (a) cold storage facilities expanded, (b) modern varieties were introduced and (c) cultivation of potato spread from a few regions to all over the country.

Paddy can be considered as a crop for analysis, as it occupies two-thirds to three-fourths of cultivated area in the country.

In Bangladesh, marketing of paddy is mostly done by medium and large land-owning households. Nearly half of the total marketed paddy comes from a small proportion of rural households owning land more than 1.0 hectares and more. Against this, about one-thirds of the marketed output comes from about three-fourths of rural households owning up to 0.40 hectares of land.  From an economic angle, it can be observed that solvent households comprise 15 per cent of rural households, supplying 41 per cent of the marketed paddy. On the other hand, 42 per cent 'self-sufficient' households supply 47 per cent of marketed paddy. Over time, shares of both groups have increased. The 'poor' segment of rural households constitutes about half of the total households. Still they supply only a little over one-tenth of the total marketed output. The policy implication of this is that the price of paddy needs to be kept at a remunerative level to encourage actors in the market. At the same time, the impact of this on the poor households should not be ignored. The smiling face of farmers in recent times when the price of paddy was high is a pointer to this effect.

It is being hypothesised that, harvest/distress sales are signs of economic dependency of households who attempt to dispose of produce as quickly as possible to pay for debt or meet other exigencies. Close to this is the hypothesis that, their inability to hold harvested crops deprives them of a better price in future when supply in the market decreases. It has been observed that sales increase within one month of harvest. Interestingly, poor farms (up to 0.40ha) have reduced distress sales over time. Though in absolute terms, they still sell roughly two-thirds of output immediately after the harvest compared to about 50 per cent of the large and the medium farms. By and large, the medium and large farms sell a smaller proportion of their crops at harvest than small and marginal farms because the former has higher economic capacity to hold stocks. Or, it may be that the former can wait till the market swings. Second, the proportion of output sold at harvest - and for all classes of farmers - has increased over time. This is particularly true for recent years as the price margin for sales declined later. However, during periods of increasing prices, big farmers can hold more stocks hoping for better prices.

The important question is: have farmers faced economic losses due to early sales? It appears that, as a result of growing market integration, information dissemination and storage costs, sales immediately after harvest has become less harmful these days than possibly what they were before. The round-the-year average price of paddy and the smaller differences between harvest and peak sales possibly bears this out. By and large, growing market orientation is helping both large and small farms as well as producers and consumers. The government and the private sector need to invest quite a lot on storage and infrastructure to develop the value chain. This will reduce the price spread between grower and retail levels.

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




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