Low paddy prices dent demand for farm machinery | The Daily Star
12:00 AM, October 10, 2019 / LAST MODIFIED: 01:54 AM, October 10, 2019

Low paddy prices dent demand for farm machinery

Prolonged low prices of paddy and floods have dampened the demand for agricultural machinery among farmers who are losing interest in making new investments, according to marketers. 

“It seems that low prices of paddy have created a gloom among farmers,” said Subrata Ranjan Das, executive director of ACI Motors Ltd, one of the major marketers of farm machinery. 

Overall sales of farm machinery have dropped by 12-13 percent year-on-year in the January-September period, according to Das. The flood in July and sporadic rainfall have also affected the demand, he added.  

Industry insiders said the farm machinery market expanded steadily over the last couple of years thanks to the subsidy provided by the government to enable growers to buy the equipment. 

The government hoped that the machinery for mechanised cultivation, particularly land preparation, transplantation and harvesting and threshing, would ensure that cultivation went ahead on time, crop yields increased and costs reduced. 

In 2010, the government took up a Tk 150 crore project to provide 25 percent subsidy on prices of farm machinery. The allocation and ratio of subsidy have since been gradually raised. 

Another six-year project involving Tk 339 crore ended in June this year, in which the subsidy was increased to 50 percent so that farmers could buy combine harvester, reaper, rice transplanter, power thresher and seeder by paying half the price.  

Industry operators said though the project’s expiry might have had an impact on the machinery sales, falling paddy prices was the chief reason. 

“Farmers are frustrated by very low prices of paddy,” said Alimul Ahsan Chowdhury, managing director of Alim Industries, which makes farm machinery.  

Prices of the grain, a staple grown on 70 percent of the total cropped area of 1.54 crore hectares, started declining in the middle of aman harvest in 2018 because of good yields, including the principal rice crop boro. 

And the downturn continued after this year’s boro harvest in April-May. 

Prices of coarse boro paddy fell by 11 percent to Tk 1,394 per quintal (meaning 1 kilogramme cost Tk 13.94) in the first week of September from Tk 1,563 in April, according to the Department of Agricultural Marketing (DAM). 

September’s market price of paddy was almost half the government production cost estimate of around Tk 24 per kilogramme and procurement rate of Tk 26 a kilogramme, according to the DAM. 

As a result, tractor sales dropped 13 percent year-on year to around 2,900 units in the January-September period, according to a leading company’s estimates. 

Sales of power tillers, diesel engines and combine harvester have also dropped, according to the estimate. 

Prof Md Monjurul Alam of the Department of Farm Power and Machinery of Bangladesh Agricultural University said farmers suffer from a dearth of cash and incurred losses by selling paddy. 

M Asaduzzaman, former research director of the Bangladesh Institute of Development Studies (BIDS), said uncertainty over getting fair prices was another factor affecting farmers’ interest to purchase agri-machinery. 

Sadid Jamil, managing director of The Metal (Pvt) Ltd, expected the market to recover during the coming aman harvests as the government plans to launch a Tk 400 crore scheme to provide subsidy to farmers. 

Prof Alam too said demand for the machinery would eventually increase. “The sluggishness is temporary. Demand for machines for harvesting, transplanting, drying and storing will grow,” he said. 

Currently, farmers use machines to prepare 90 percent of their land. Significant progress has also been made in irrigation, pesticide spraying and threshing. Yet, less than 1 percent of rice crop is transplanted and harvested by machines, according to a paper by Alam. 

Sheikh Md Nazim Uddin, former director of a farm mechanisation project under the agriculture ministry, said the government plans to allocate Tk 415 crore this fiscal year to provide subsidy to farmers to buy farm machinery. 

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