Rice price doubles from farm to retail market, green chilli records 116pc hike

Protracted, inefficient food-supply chains are amplifying the gap between farm-gate and retail prices of essentials, contributing to persistent food inflation and weakening consumers' purchasing power.

A new study by the Centre for Policy Dialogue (CPD) digs out this main hiker of inflation, as government interventions like elevated interest rate and tightfisted public spending fail to dent wayward inflation.

The study, titled 'The Food Price Chain: Markets, Margins and Intermediaries in Bangladesh', was rolled out Thursday at the Brac Centre Inn during a dialogue organised by the CPD.

Commerce Minister Khandaker Abdul Muktadir attended the programme as the chief guest and explained government measures.

The event was also attended by Consumers Association of Bangladesh (CAB) President AHM Shafiquzzaman, BIDS Professorial Fellow Professor Dr M A Sattar Mandal, former BIDS Research Director Dr M Asaduzzaman and Bangladesh Garment Sramik Sanghati President Taslima Akter Lima, among others.

Executive Director of the CPD Dr Fahmida Khatun chaired the session, while Senior Research Associate Foqoruddin Al Kabir presented the findings.

The study has found that retail prices of medium-quality rice increase by around 100 per cent from the farm gate to consumers.

Green chilli records the highest price escalation at 116 percent, followed by onions 87 per cent, lentils 78 percent, brinjal 72 percent and potatoes 50 percent.

In contrast, commodities with relatively shorter supply chains experience lower price increases, including eggs (25 per cent), chickens 22 per cent, beef 13 per cent) and rui fish 10 per cent.

According to the report, longer supply chains generally result in larger price rises, underscoring the need to streamline marketing channels.

The CPD has found that retailers rely heavily on urban Aratdars (wholesalers and commission agents) to source six out of ten essential commodities, increasing market concentration, bargaining-power imbalances and price volatility.

The think-tank has identified supply shortages, trader collusion and hoarding as the most frequently cited reasons behind high food prices, although it cautioned that the study does not establish that intermediaries or market concentration alone are responsible for exorbitant prices.

Its report also focused on the growing impact of food inflation on household welfare.

The CPD has noted that despite increases in nominal wages, inflation has eroded real earnings, reducing workers' purchasing power and forcing many families to cut consumption, exhaust savings or borrow to meet daily expenses.

"Food remains largest component of household expenditure, accounting for 59 per cent of the consumer price-index basket, while more than 60 per cent of households spend at least half of their income on food," the report reads.

The burden is greatest on low-income families, with the poorest five per cent of households spending nearly 60 per cent of their total expenditure on food compared to 28.9 per cent among the richest five per cent.

To improve market efficiency, the CPD has recommended reducing unnecessary layers in food-supply chains, strengthening competition in wholesale markets, improving price transparency, expanding storage- and cold-chain facilities, lowering production costs for farmers and taking stricter action against proven cases of hoarding, collusion and other anti-competitive practices. The minister said since the 1974 famines, every government in Bangladesh has remained committed to increasing food production and keeping food prices stable.

However, he notes that the country's agriculture has yet to be mechanized, on a large scale, which could significantly boost production and reduce production costs.

He said lowering input costs is essential to increasing farmers' profitability.

Referring to potato cultivation, he said farmers continue to grow the crop in large volumes despite suffering severe price crashes in previous years.

"This indicates that market information is not reaching farmers properly. We have to ensure that information asymmetry is addressed so that farmers can make informed production decisions."

The minister said the government is giving top priority to ensuring food security while also guaranteeing fair prices for farmers.

He added that the study would help the government formulate appropriate policies and initiatives.

He also stressed the need for expanding the country's food-storage capacity in the coming years to strengthen food security.

Dr M. Asaduzzaman, former Research Director of Bangladesh Institute of Development Studies (BIDS), told the meet that Bangladesh's agricultural-and food-value chains suffer from structural inefficiencies that drive retail prices far above farmgate levels.

He noted that logistics bottlenecks, the presence of multiple intermediaries and weak market linkages increase consumer prices while limiting fair returns for producers.