Food reserve under pressure
The country's food reserve dropped to 8.8 lakh tonnes on Sunday, despite bumper grain production in the last fiscal year.
The reasons include the government's failure to attain its boro procurement target and increased distribution of cereal among the people affected by the pandemic and recurring floods.
On July 1 last year, the food stock under the government's disposal stood at 16.74 lakh tonnes, which came down to 11.88 lakh tonnes within exactly a year.
Two days ago, it fell to 8.8 lakh tonnes, nearly half way down from the comfortable level of 15-16 lakh tonnes, according to data from the Food Planning and Monitoring Unit of the food ministry.
The reserves in government warehouses lowered despite record food production.
Rice and wheat production stood at 3.76 crore tonnes in the fiscal year ending in June, 0.45 percent higher than the 3.74 crore tonnes year-on-year, according to the final estimate of the Bangladesh Bureau of Statistics (BBS).
The food procurement goal flopped mainly because the government had fixed prices for boro paddy and rice lower than the production cost at the farm level and also at a time when the price of paddy was high.
The food ministry had aimed to buy 8 lakh tonnes of boro paddy during the procurement period from April 26 to September 15. But it could manage to purchase only 2.2 lakh tonnes, falling short of the target by 72.5 percent.
It had targeted to purchase 10 lakh tonnes parboiled rice but managed to purchase 6.8 lakh tonnes. Similarly, it bought 99,000 tonnes sun-burnt (atap) rice against the target of 1.5 lakh tonnes.
The food ministry had decided to buy two lakh tonnes of paddy from growers at Tk 26 per kg and six lakh tonnes of rice from millers at Tk 37 per kg.
The prices are lower than the agriculture ministry's estimate of the production cost of Tk 27.29 a kg for paddy and Tk 40.36 per kg for rice.
An increase in the rice distribution to provide food relief for the poor struck by the coronavirus pandemic and natural calamities, such as repeated floods, also contributed to bringing down the grain storage to the current level.
The government distributed 27.77 lakh tonnes of rice in the FY20, up from 25.94 lakh tonnes a year ago.
It is now facing a dilemma on how it would build up its food reserves.
On the one hand, it wants to see higher prices of paddy so that farmers get a fair return. On the other, it does not want the consumers to pay too much to buy food, said Agriculture Minister Muhammad Abdur Razzaque last month.
Consumers are already in trouble because of job and income losses in the fallout from the pandemic. The recent rise in general inflation, notably the food inflation, added to their woes.
Inflation rose to 6.44 percent in October, the highest in at least five years, driven by a hike in the food prices.
The food inflation rose sharply, climbing by 84 basis points to 7.34 percent, primarily due to the increase in the price of rice. It was 6.50 percent in September this year and 5.49 percent in October 2019, BBS data showed.
The average retail price of coarse rice was Tk 45 per kg in October, which was 32 percent higher than in last year, mentioned the Bangladesh part of a report published by the US Department of Agriculture on Thursday.
"Retail prices of milled rice are increasing irrespective of the category. Analysts attribute the increase in domestic prices to market speculation as a result of the Covid-19 pandemic," said the USDA.
The situation leaves the government with only one option: imports.
On October 28, a meeting of the Food Planning and Monitoring Committee (FPMC) chaired by Food Minister Sadhan Chandra Majumder instructed the ministry to take steps to import 2 lakh tonnes of rice immediately, said a source.
The agriculture minister said the government might need to import 5-6 lakh tonnes of rice, and a decision would be taken after the aman harvest, which is underway.
"Initially, an initiative has been taken to import 2 lakh tonnes of rice," he said.
The procurement would be done at the state level, and the government would not reduce the duty on rice imports as the cut would boost imports.
Private importers have not brought in any rice in the last one year. There is 62 percent duty on rice imports, said Chitta Majumder, managing director of Mazumder Group of Industries.
The total import of food grains was 6.44 lakhtonnes in FY2019-20, out of which rice was only 4,000 tonnes.
The government would have to strengthen its reserves to carry out its food-based relief programme as well. It is, however, cautious about the relief programmes and is looking to sell more rice at subsidised rates through open market sales operations to support the poor.
The government may not be successful in its aman procurement target as well because it is again offering a rate that is lower than the production cost.
On October 28, the FMPC decided to retain the price of aman paddy at Tk 26 each kg, unchanged from last year.
Yesterday, Chitta Majumder said farmers have started to bring their just-harvested paddy to local markets.
The yield of aman paddy was lower this year than the previous years, and the prices of the grain are higher, he said.
The coarse grains called Gutiswarna were selling at around Tk 1,080 per maund in Sherpur area of Bogura, up more than 50 percent from Tk 700 for the same category of the grain last year, he said.
The prices of medium and fine grains are also higher, said Chitta Majumder.
The government decided to raise the aman rice purchase target to 6 lakh tonnes, up from 3.8 lakh tonnes in the previous season and raised the price of rice to Tk 37 per kg from the previous year's Tk 36.
Last week, Food Secretary Mosammat Nazmanara Khanum, upon field visits, said there has been bumper aman production.
She had already visited four districts to take the stock of the production scenario.
"If the production is good, then we would not buy from abroad."
The secretary said the reserves came down as the food ministry could not achieve the procurement target. "We offered lower prices, whereas the market prices are higher."
The USDA report noted falling stocks of food grains in government warehouses, stating that replenishment of rice stocks through procurement was critical in stabilising the domestic market and ensuring the availability of food.