Millers, wholesalers to blame for rice price spiral: USDA

Millers and wholesalers have mainly pushed rice prices higher, cashing in on supply shortages owing to floods and blast attack on the recently harvested boro rice, according to the US Department of Agriculture.

But some of the millers and wholesalers admitted that many of them slowed down purchasing and milling operations to let prices climb, said the agency in its Bangladesh Grain and Feed Update that was released on July 19.

Flooding damaged over one million tonnes of boro rice crop across 400,000 hectares of wetlands, locally known as haor, in the northeastern regions and lowlands in nine districts, according to the USDA.

The loss was aggravated by a fungi or neck blast attack on a limited area of boro rice crop in several northern and southern districts of the country, it added.

Subsequently, the USDA lowered its boro rice production estimate to 17.8 million tonnes.

The damage from flooding reduced harvests enough to drive the farm gate prices of paddy up 29-60 percent last year.

The surge was further fuelled by some traders hoarding paddy to drive prices even higher. Despite the higher farm gate prices for paddy, farmers had small net margins after deducting losses caused by the flooding and disease.

“In the end, it was largely millers and wholesalers who pushed rice prices up.”

The USDA's report comes at a time when the prices of coarse rice, which is mostly consumed by the poor and lower middle-income people, dropped marginally from its historic high of Tk 47.30 each kilogram in June.

The retail prices of coarse rice were Tk 42-45 per kilogram yesterday thanks to increased imports after reduction of import duty by the government to 10 percent from previous 28 percent.

Despite the fall, coarse rice prices were 36 percent higher yesterday from a year earlier, according to data from the Trading Corporation of Bangladesh.

Besides, the massive cutback in open market sales of rice last fiscal year fuelled price speculation.

The USDA said rice prices have been increasing since August last year, and the recent aman and boro rice harvest did little to relieve the pressure: prices remain their highest in eight years.

Rice prices began creeping up last year after the government hiked import duty to ensure farmers get better prices for their crops. Later, depleting stocks, particularly in public warehouses, coupled with low import caused the rice prices to remain higher.

To contain the price spiral and raise stock in public warehouses, the government also started buying the staple from global market for the first time in five years.

The agency said Bangladesh's rice import would rise to 1.2 million tonnes in the current fiscal year thanks to robust consumer demand, expansion of the food safety net programme, lower public stocks, and relaxed trade and financial policy.

Rice imports slumped 48 percent year-on-year to 133,000 tonnes in fiscal 2016-17.  Since July 1, 102,800 tonnes of the grain were imported, according to food ministry data.