Rising rice price ‘triggers food inflation’

TCB coarse rice was selling for Tk 45–46/kg on June 11 as against Tk 30–34 on this day last year

A drastic rise in the price of rice is driving the food inflation in Bangladesh. As rice accounts for a lion’s share in the commodity basket of the consumer price index (CPI), the current situation is hitting the livelihood of low-income people, according to a recently released review of the country's economy in FY2016-17 by the Centre for Policy Dialogue (CPD).
The CPD says coarse rice is currently being traded at Tk 45–46 per kg (in May 2017) as against last year's Tk 30–38, showing a 42.2 per cent price hike.
As per daily market prices of the Trading Corporation of Bangladesh (TCB), coarse rice was being sold at Tk 45–Tk 46 per kg on Sunday, while it was Tk 30– 34 last year, registering a hike of 42.19 per cent over a period of one year.
TCB data indicates that coarse grains were sold at Tk 42 per kg last month.
According to the CPD, the prices of other varieties of rice are also about 15–18 per cent higher this year. The CPD report says the trend of food inflation shows that poorer consumers are the worst affected since (coarse) rice is the single-most important commodity in their consumption basket.
In FY2017, the target of Boro rice production had been set at about 19 million metric tonnes (MT). The possibility of meeting this target is unlikely, as production suffered due to early flash-floods in the Haor wetlands and ‘blast’ pest attacks on paddy crops.
In a June 2 post-budget press conference, agriculture minister Matia Chowdhury acknowledged that the price of rice had increased substantially over the past two months. She, however, said the government was trying its best to bring the prices down within a short time and that international tenders had been floated to import rice. “Besides, we are corresponding with Vietnam to import rice on a G-to-G basis,” she added.
The consumer price index (CPI) inflation in Bangladesh has been showing a declining trend this year. The general (annual average) inflation rate was 5.39 per cent in March 2017, which was within the Bangladesh Bank’s Monetary Policy Statement (MPS) target of 5.3–5.6 per cent.
A declining trend in non-food inflation primarily contributed to this decreasing inflation rate. All components of non-food inflation have experienced a slow down, though the inflation rate of ‘national recreation, entertainment, education and cultural services’ has been on the rise.
In contrast to this scenario, food inflation has been on the rise since January 2017 and was 5.2 per cent in March 2017, up by 0.3 per cent compared to the previous month.
A gradual convergence of food and non-food inflation is indeed visible. In fact, there is no scope for complacency regarding the current inflationary trends, and it is important to put under scrutiny the rising trend in food inflation.
The CPD review says 57 unions of nine districts (Sunamganj, Sylhet, Moulvibazar, Habiganj, Brahmanbaria, Kishoreganj,  Netrakona, Comilla and Natore) have suffered due to early flash-floods.
According to the Department of Agricultural Extension (DAE), about 433,000 hectares of Boro fields were submerged in the latest flash-floods in these districts.  In those nine districts, the three-year (FY2014–FY2016) average of cultivated land under Boro crop was about 1,086 thousand hectares. It has been revealed that about 40 per cent of the total cultivated land under Boro crop suffered in these areas. Besides, in these districts, the three-year average yield rate was 3.8 MT per hectare, which was marginally lower than the national average yield rate of 4.0 MT per hectare.
 Assuming that the yield rate remains the same in FY2017, it is estimated that owing to the flash flood in the Haor wetlands, the production loss could be to the tune of 1.6 million MT of Boro rice or about 8.5 per cent of the national Boro rice production.  The CPD says the fall in Boro rice production may be aggravated by a ‘blast’ pest attack over 2,500 to 3,000 hectares in 34 districts, including the highly productive regions such as Rangpur, Bogra, Rajshahi, Naogaon, Joypurhat, Kushtia and Jessore.
Assuming an yield rate of 4 MT per hectare yield rate and 50 per cent of rice production loss per hectare due to the ‘blast’ pest attack, an additional 6,000 MT loss is expected in Boro rice production.
The rising rice price in recent months against a backdrop of declining public stock appears to be a major factor pushing up the food inflation, says the CPD.
The public food grains stock was estimated to be 561.5 thousand MT, of which only 245.6 thousand MT consisted of rice during the month of May (FPMU, 2017). In addition, Aman procurement fell short of its target by 56 thousand MT.
Boro procurement started from the beginning of May this year and is expected to continue till the end of August. The procurement targets of paddy, parboiled rice and white rice has been set at 700 thousand MT, 700 thousand MT, and 100 thousand MT respectively. The procurement prices have been set at Tk 24 per kg for paddy, Tk 34 per kg for parboiled rice, and Tk 33 per kg for white rice from domestic markets.
Traders say the price of rice has increases by at least Tk 300 per maund during the past two months. They feel the price may remain at this level for the rest of the year—if it does not rise further—because of the production shortfall and stock depletion.
The lead economist of the World Bank Zahid Hussain said rice imports by both public and private sectors was the only means of tackling the situation.
He said low-income people, who spend major parts of their income on food, particularly rice, were facing an inflationary pressure. He also said the price hike of rice would trigger inflation, as rice was the biggest item in the food basket of Bangladesh.
Meanwhile, the government has decided to initially import 100,000 MT of rice, something it has not done in the past six years, to replenish reserves. This figure could eventually go up to 600,000MT.
According to some estimates, the government needs at least 483,000 tonnes of rice by June 30 to meet the demands of its various social safety net programmes, including Vulnerable Group Feeding (VGF) and Open Market Sale (OMS), especially in the haor areas.

Rising rice price triggers food inflation

TCB coarse rice was selling for Tk 45–46/kg on June 11 as against Tk 30–34 on this day last year

A drastic rise in the price of rice is driving the food inflation in Bangladesh. As rice accounts for a lions share in the commodity basket of the consumer price index (CPI), the current situation is hitting the livelihood of low-income people, according to a recently released review of the countrys economy in FY2016-17 by the Centre for Policy Dialogue (CPD). The CPD says coarse rice is currently being traded at Tk 4546 per kg (in May 2017) as against last years Tk 3038, showing a 42.2 per cent price hike. As per daily market prices of the Trading Corporation of Bangladesh (TCB), coarse rice was being sold at Tk 45Tk 46 per kg on Sunday, while it was Tk 30 34 last year, registering a hike of 42.19 per cent over a period of one year. TCB data indicates that coarse grains were sold at Tk 42 per kg last month. According to the CPD, the prices of other varieties of rice are also about 1518 per cent higher this year. The CPD report says the trend of food inflation shows that poorer consumers are the worst affected since (coarse) rice is the single-most important commodity in their consumption basket. In FY2017, the target of Boro rice production had been set at about 19 million metric tonnes (MT). The possibility of meeting this target is unlikely, as production suffered due to early flash-floods in the Haor wetlands and blast pest attacks on paddy crops. In a June 2 post-budget press conference, agriculture minister Matia Chowdhury acknowledged that the price of rice had increased substantially over the past two months. She, however, said the government was trying its best to bring the prices down within a short time and that international tenders had been floated to import rice. Besides, we are corresponding with Vietnam to import rice on a G-to-G basis, she added. The consumer price index (CPI) inflation in Bangladesh has been showing a declining trend this year. The general (annual average) inflation rate was 5.39 per cent in March 2017, which was within the Bangladesh Banks Monetary Policy Statement (MPS) target of 5.35.6 per cent. A declining trend in non-food inflation primarily contributed to this decreasing inflation rate. All components of non-food inflation have experienced a slow down, though the inflation rate of national recreation, entertainment, education and cultural services has been on the rise. In contrast to this scenario, food inflation has been on the rise since January 2017 and was 5.2 per cent in March 2017, up by 0.3 per cent compared to the previous month. A gradual convergence of food and non-food inflation is indeed visible. In fact, there is no scope for complacency regarding the current inflationary trends, and it is important to put under scrutiny the rising trend in food inflation. The CPD review says 57 unions of nine districts (Sunamganj, Sylhet, Moulvibazar, Habiganj, Brahmanbaria, Kishoreganj, Netrakona, Comilla and Natore) have suffered due to early flash-floods. According to the Department of Agricultural Extension (DAE), about 433,000 hectares of Boro fields were submerged in the latest flash-floods in these districts. In those nine districts, the three-year (FY2014FY2016) average of cultivated land under Boro crop was about 1,086 thousand hectares. It has been revealed that about 40 per cent of the total cultivated land under Boro crop suffered in these areas. Besides, in these districts, the three-year average yield rate was 3.8 MT per hectare, which was marginally lower than the national average yield rate of 4.0 MT per hectare. Assuming that the yield rate remains the same in FY2017, it is estimated that owing to the flash flood in the Haor wetlands, the production loss could be to the tune of 1.6 million MT of Boro rice or about 8.5 per cent of the national Boro rice production. The CPD says the fall in Boro rice production may be aggravated by a blast pest attack over 2,500 to 3,000 hectares in 34 districts, including the highly productive regions such as Rangpur, Bogra, Rajshahi, Naogaon, Joypurhat, Kushtia and Jessore. Assuming an yield rate of 4 MT per hectare yield rate and 50 per cent of rice production loss per hectare due to the blast pest attack, an additional 6,000 MT loss is expected in Boro rice production. The rising rice price in recent months against a backdrop of declining public stock appears to be a major factor pushing up the food inflation, says the CPD. The public food grains stock was estimated to be 561.5 thousand MT, of which only 245.6 thousand MT consisted of rice during the month of May (FPMU, 2017). In addition, Aman procurement fell short of its target by 56 thousand MT. Boro procurement started from the beginning of May this year and is expected to continue till the end of August. The procurement targets of paddy, parboiled rice and white rice has been set at 700 thousand MT, 700 thousand MT, and 100 thousand MT respectively. The procurement prices have been set at Tk 24 per kg for paddy, Tk 34 per kg for parboiled rice, and Tk 33 per kg for white rice from domestic markets. Traders say the price of rice has increases by at least Tk 300 per maund during the past two months. They feel the price may remain at this level for the rest of the yearif it does not rise furtherbecause of the production shortfall and stock depletion. The lead economist of the World Bank Zahid Hussain said rice imports by both public and private sectors was the only means of tackling the situation. He said low-income people, who spend major parts of their income on food, particularly rice, were facing an inflationary pressure. He also said the price hike of rice would trigger inflation, as rice was the biggest item in the food basket of Bangladesh. Meanwhile, the government has decided to initially import 100,000 MT of rice, something it has not done in the past six years, to replenish reserves. This figure could eventually go up to 600,000MT. According to some estimates, the government needs at least 483,000 tonnes of rice by June 30 to meet the demands of its various social safety net programmes, including Vulnerable Group Feeding (VGF) and Open Market Sale (OMS), especially in the haor areas.