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Agricultural Marketing, Price Stabilization, Value Chains and Global/Regional Trade


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Presentation by B. Minten, A.Z.M. Shafiqul Alam, Uttam K. Dev, A.Z.K. Kabir, D. Laborde, M. Hassanullah and K.A.S. Murshid
Bangladesh Food Security Investment Forum 2010
27 May 2010, Dhaka, Bangladesh

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Agricultural Marketing, Price Stabilization, Value Chains and Global/Regional Trade

  1. 1. BANGLADESH FOOD SECURITY INVESTMENT FORUM 2010<br />Agricultural marketing, price stabilization, value chains and global/regional trade<br />Bart Minten (IFPRI)<br />A.Z.M. ShafiqulAlam (Ministry of Agriculture)<br />Uttam K.Dev (Center for Policy Dialogue) <br />Aktaruz Z.K. Kabir (Ministry of Commerce) <br />David Laborde (IFPRI) <br />Mohammed Hassanullah (Independent Consultant)<br />K.A.S. Murshid (Bangladesh Institute for Development Studies)<br />26-27 May 2010 <br />
  2. 2. Stability in food consumption, on average, but changing domestic food marketing systems<br />
  3. 3. Change 1: Seasonality<br />
  4. 4. Change 2: Increase in marketed quantities<br />- Rice production has tripled since the 60s<br /><ul><li> Because of urbanization, food markets have developed even more
  5. 5. One-third of rural households are net rice sellers
  6. 6. Because of population increase and urbanization, the quantities marketed will increase further in future</li></li></ul><li>Change 3: Change of role of public sector <br />Imports of foodgrains by Bangladesh<br />
  7. 7. Change 4: Rise of high-value and perishable commodities<br />Per capita expenditures (100%=all)<br />
  8. 8. Change 5: Increase in demand for food quality<br />
  9. 9. Change 6: Rise of modern retail and processing sector<br /><ul><li>Agri-processing is starting from a low base but has been growing at 8% per year between 1985 and 2005
  10. 10. Rice milling is most important, generating 40% of the employment
  11. 11. Processing high-value products is limited
  12. 12. Modern retail is currently small but is growing rapidly (around 100 stores in country), as seen in other Asian countries</li></li></ul><li>Staple food marketing seems to be functioning well <br />In contrast with the situation earlier, foodgrain markets rather well integrated over space and time (because of transport investments; availability of mobile phones; competitive environment; low barriers to entry); information and physical flows from surplus to deficit areas<br />Share of producer in final retail price is rather good for well-connected areas (cost of bringing 100 kgs of paddy from rural producer to urban consumer is 30% more expensive in India)<br />
  13. 13. Price structure rice and potato<br />
  14. 14. Price stability<br />- Important political challenge for any government in a liberalized system<br />- Impact of government interventions have been limited <br />- Procurement prices is not floor price<br />- Open Market Sales (OMS) is not ceiling price<br />- OMS never higher than 2% of supply prior to 2010<br />- Reduce impact on poor through targeted subsidies of the Public Food Distribution System (PFDS) <br />
  15. 15. High-value food marketing <br />- Growing demands (projected at $8 billion in 2020).<br />- Important opportunities that might provide extra sources for employment (for example, 600.000 persons employed in shrimp and fish sector) and for rural income growth;<br />- Significant challenges, especially related to food safety and quality.<br />
  16. 16. Global and regional trade <br />1. Trade can be important tool towards achieving food security:<br /><ul><li>specialization;
  17. 17. import food when needed (trade assures a price ceiling as seen in floods of 1998 and 2004);
  18. 18. import farm inputs;
  19. 19. export high-value products </li></ul>2. In last 3 decades, important changes towards liberalization of agricultural trade<br />
  20. 20. Issues in international/regional trade<br />High degree of concentration: three most important trade partners represent 75% of market share for most products <br />Reliance on export subsidies might create problems of efficiency and sustainability <br />Preferential agreements not fully taken advantage of and might be eroded over time<br />Safta agreements bring little benefits to Bangladesh (changes in income small but negative)<br />
  21. 21. Why invest in an improved marketing environment?<br />A 1 Tk/kg savings in rice marketing margins would lead to 14 billion Tk benefits a year (200 million $) for consumers and producers <br />Benefits much higher (rice represents 30% (rural) to 40% of food consumer budget) if we include all types of food; <br />Important to do continuous interventions and investments to create a competitive environment where private trade can flourish; <br />However, there are no magic bullets<br />
  22. 22. Intervention 1: Policy changes towards an enabling environment conducive for private trade<br /><ul><li>Better regulatory framework for local markets (amendment of different market related Acts, rationalization of market charges, etc.)
  23. 23. Strengthening of capacity to deal with food safety and quality requirements: strengthening of DAM, Hortex Foundation and quality certification schemes</li></li></ul><li>Intervention 2: Marketing infrastructure development <br /><ul><li>Transportation and cargo handling (however, transportation costs is only tiny share of final rice price for well-connected areas; larger return of investments in less well-connected areas)
  24. 24. Assembly and wholesale market infrastructure development (better access to potable water, toilets, sewage systems, loading spaces and storage facilities)
  25. 25. Laboratory and testing infrastructure development and strengthening of Bangladesh Standards and Testing Institution</li></li></ul><li>Intervention 3: Credit <br /><ul><li>Improved access to credit for farmers (inventory credit) or through farmers’ credit cards
  26. 26. Investment credit for agro-processing development</li></li></ul><li>Intervention 4: Research and Development<br /><ul><li>Good investments in rice research in the past with notable successes; however, less investments have been done in high-value products
  27. 27. Research on input and output markets; lack of reliable data; exporters might miss markets because information not available
  28. 28. No good evaluation studies available on marketing investments; limits possibilities of priority settings; more investments in monitoring and evaluation
  29. 29. Better understand possibilities of marketing groups and of contract farming</li></li></ul><li>Intervention 5: Capacity building<br /><ul><li>Extension of farmers but also other stakeholders in value chain
  30. 30. Better market information systems could be developed, relying on ICT driven systems
  31. 31. Capacity building towards well-functioning commodity and industry organizations: need functional platform where private industry can interact with government</li></li></ul><li>Intervention 6: Take advantage of international trade<br /><ul><li>Encourage high-value exports but try to move up quality ladder
  32. 32. Assess use of export subsidies after initial stage
  33. 33. Diversify input and output markets
  34. 34. Use preferential agreements more efficiently
  35. 35. Further evaluate SAFTA benefits versus multilateral agreements</li>