Why rice prices keep rising even after a good harvest

Rice prices gaining Tk4-8 per kilogram just in a month that coincides with the arrival of the new Aman harvest come as a surprising shock to consumers, hard-pressed by soaring prices of everything but winter crops.

The price increase ranges from Tk4 to as high as Tk20 per kg, depending on varieties, compared to the same period last year. Usually, prices of the staple drop or at least stay flat during this period of the year when Aman paddy, the second largest source of rice after Boro, is harvested.

It was feared that massive August flooding in several districts would significantly cut into Aman output. But the official data tells the opposite. The Aman harvest this year is rather 5 lakh tonnes higher compared to the last season, the agriculture ministry claimed. Rice from the Aman season has already  reached the market. Then why the uptick in the rice market?

Market watchers cite poor stock, less procurement from the local market, and delays in import decisions created the scope for market manipulation amid lax monitoring of the market. The domestic market primarily offers three categories of rice – coarse, medium, and fine. Prices now range at Tk54-58, Tk62-64, and Tk82-86 per kg at the retail level, respectively.

According to the Trading Corporation of Bangladesh (TCB), during the same period last year, coarse rice was sold at Tk50-52 per kg, medium rice at Tk52-58, and fine rice at Tk62-75. Prices of coarse varieties—supposedly consumed mostly by low-income earners — have not risen much. But coarse rice is hard to find in the market. A visit to various markets in the capital reveals that coarse rice is not readily available in all shops. At Karwan Bazar in Dhaka, wholesalers said miniket gained the most – Tk10-14 per kg — just in one and a half months. "We are now buying Miniket from the mills at Tk80-82 per kg, whereas it was Tk66-68 earlier. Also, transportation costs have risen. Business is tough as customers are scarce when prices go up," said Mosharraf Hossain, a wholesale trader at the city's Karwan Bazar. This variety is popular in middle-income families, whose monthly rice budget has gone up.

Md Mohiuddin, an employee of a private company who came to buy rice at the capital's Karwan Bazar, told TBS, "Now they are asking for Tk4,100 per 50 kg sack of miniket rice, which was Tk3,500-3,600 just a few days ago. Prices of everything except vegetables have gone up. If rice prices were reasonable, middle- and lower-income families could manage, but it's getting out of control."

The government had sensed the urgency for a higher food grain stock and slashed 35% duties on rice import in October last year, hoping for a Tk14.50 fall in import price. But private importers did not take much interest as they calculated the import cost would still exceed Tk65 per kg, higher than the average local market price. Although the government is currently taking active measures to import rice, it is too late. Only 2.64 lakh tonnes have been brought in so far this fiscal year. In the 2022-23 fiscal year, Bangladesh imported 10.56 lakh tonnes of rice. Experts argue that had import initiatives been taken earlier, the current market volatility could have been avoided.

Import drive too late

Dr Jahangir Alam, a professor at the Department of Agribusiness and Marketing at Bangladesh Agricultural University, said, "The government's recent import drive should have been initiated two to three months earlier to stabilise prices. Since this is the peak season for rice, there is no logical reason for prices to rise now. Timing is crucial for imports, and stock levels serve as an important market indicator," he said. According to the Ministry of Agriculture, Aman rice production this year stands at 1.71 crore tonnes, compared to 1.66 crore tonnes last year. Despite flooding in several districts affecting the harvest, the government claims production has increased, raising questions among experts about the reliability of official production data.

Dr Alam added, "Accurate information is crucial for the market, but the production data provided often raises questions about its credibility. Our research frequently finds discrepancies in these figures, which is why production data should be prepared with greater accuracy."

In August 2023, when food inflation suddenly surged to a 12-year high of 12.54%, a good harvest from two consecutive paddy seasons, a higher stockpile of rice in the government's silos kept rice prices stable, giving consumers some relief. The buffer stock of rice facilitated the continuation of the subsidised rice scheme for one crore family card holders at that time.

But this is not the case this year. According to the Ministry of Food, the current government stock of rice and paddy combined stands at 9 lakh tonnes, the lowest January stock in four years. In January last year, the government was armed with a stock of 14.21 lakh tonnes of food grains.

Local procurement also low

Government stocks primarily come from procurement drives and imports. While import is low, procurement from rice farmers was far less than planned, leaving it with a poor stock. Failure in the government's rice procurement is not new, and it happened this time too. In the current Aman season, the target was set at 10 lakh tonnes, but in the past two months, only 3.62 lakh tonnes have been procured.

Analysts believe the stock situation has worsened due to the lack of rice imports in the previous fiscal year. The government's stock was never enough to feed the market, but it keeps traders under pressure and prevents sudden supply shocks. With the food stock declined, the government is left with little weapon to intervene. The declining government stockpile could contribute to the rising rice prices, said Professor Jahangir Alam. "When government stocks go down, millers increase rice prices," the agro-economist told TBS, while explaining possible reasons for the rice price hike in the peak harvest season.

Market players hiking price?

Consumer rights campaigners also find the role of market players in hiking rice prices. When prices go up, millers and corporate groups blame each other, though both parties sell at high prices, said SM Najer Hossain, vice president of the Consumers Association of Bangladesh. "The government is not monitoring the rice market effectively, allowing them to act as they please," he added. Rice prices are soaring even during the Aman season, and with Ramadan approaching, prices could increase further if the government does not intervene, Najer warned, predicting that the rice price rally might continue until the Boro harvest in May-June if there is no drive from the government. "The government must boost imports and expand its distribution efforts," he said.