Supply shortages arising from erratic weather, crop failure or global price shocks fall largely outside government control, no matter how much blame it attracts when prices spike. Inefficiency within the supply chain, however, is an entirely different matter. It persists whether harvests are abundant or poor and keeps prices artificially high even when supplies are more than sufficient. This is a problem of human making. As produce passes through too many intermediaries before reaching consumers, each one adds a margin that bears little relation to the actual value of the crop. The result is that the price of everyday essentials can sometimes double or even triple without any corresponding increase in value. The Centre for Policy Dialogue (CPD) examined this dimension in a recent study titled "The Food Price Chain: Markets, Margins and Intermediaries in Bangladesh," tracing the extent retail prices deviate from what farmers actually receive.
The study shows that long and inefficient supply chains substantially widen the gap between farm gate and retail prices. The price of medium quality rice, for instance, doubles before reaching consumers, while green chilli becomes 116 per cent more expensive. Eggs and chicken, which move through shorter and more direct marketing channels, see relatively modest increases of 25 and 22 per cent respectively. The importance of these findings is not limited to inflation, as they expose marketing practices that serve neither farmers nor consumers particularly well. Farmers often receive prices that barely cover their production costs while consumers pay far more than what producers actually earn. There is no denying that intermediaries perform essential functions in moving perishable goods from rural areas to urban markets, and no modern agricultural economy can function without them. The problem arises when the marketing chain becomes unnecessarily long and increasingly concentrated, allowing costs and commissions to pile up at each link. The CPD study also found that retailers depend heavily on a small number of urban wholesalers for most essential commodities, leaving them with limited bargaining power and making prices more vulnerable to sudden fluctuations.
The consequences are particularly severe because food accounts for a disproportionately large share of household expenditure in Bangladesh. It makes up 59 per cent of the consumer price index basket while more than 60 per cent of households spend at least half their income simply on feeding themselves. Under such circumstances, even modest increases in food prices cause significant hardship. Admittedly, nominal wages have risen in recent years. But inflation has eroded those gains faster than workers could save them, forcing many families to cut consumption, deplete savings or borrow against future earnings to cover everyday expenses. Government efforts to contain this inflation, through tighter public spending and costlier borrowing, do nothing to stop the price gouging occurring in local markets.
Government promises regarding food security and agricultural support will remain empty assertions unless the entrenched web of middlemen and logistical inefficiencies is tackled. The CPD's recommendations rightly point towards supply-side reforms including eliminating unnecessary layers in the distribution chain, improving price transparency and competition among wholesalers, and expanding cold storage capacity so that farmers can hold on to their produce until prices recover rather than being forced into distress sales. Another priority is the rigorous enforcement of laws against hoarding, collusion and other anti-competitive practices that distort prices without benefiting either producers or consumers. The government should also ensure that farmers have timely access to market prices across the country so they can better negotiate with buyers and are less vulnerable to being underpaid by intermediaries.