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Farm-retail Price Spread of Rice in Some Selected Areas of Bangladesh

M A B Siddique
Scnior scientific officer
Agricultural Economics Division, BRRI, Gazipur-170I

M lbrahim
Senio r scientific officer
RFS Division, BRRI, Gazipur-170I

M H R Mukul
Scientific officer
Adaptive Research Division, BRRI, Gazipur-170I

Abstract/ Executive Summary:

The study was under taken to evaluate farm- retail price spread of rice and its effect on shift of demand and supply schedules in Northwestern Bangladesh and Greater Mymensingh region of Bangladesh. The results of the study indicates that there exists seasonal as well as spatial variabilities of price spread. The shift in the demand and supply of rice significantly influences the farm -retail price spread. The size of the consuming population is an important factor in shifting the price spread upwards. Unwanted increase of population size should be controlled to keep the price spread in a steady position. Per capita income and price of substitute grain was found to be less effective in determining the spread. Supply sched ule, which is determined by the volume of production, is inversely related with farm-retail price spread. Therefore, the magnitude and direction of these factors must be kept in observation while formulating a sound price policy that would take care of the farmers and the consumers' simultaneously.

Keywords: Farm-Retail Price Spread, Rice, Some Selected Areas, Bangladesh

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Objectives:

To explore those issues in rice markets of Bangladesh to examine the farm-retail price spread of rice in two selected regions of Bangladesh and observe the the effect of shifts in the demand and supply situation on the price spread.

Methodology:

Price data (farmgate, wholesale and retail prices of coarse rice from 1994 to 2004) were collected from the Department of Agricultural Marketing (DAM, 2004). The price spread was measured in terms of (a) the difference between the retail (PR) and farm (PF) harvest prices, PR- PF and (b) the percentage of gross marketing margin, (PR- PF)/(PF*100) The coefficient of variation was computed to measure its stability. Each year was divided into four quarters; February to April (Quarter I), May to July (Quarter II), August to October (Quarter III) and November to January (Quarter IV)) to study the seasonal variation in the price spread. To study the influence of shifts in the demand for and supply of rice on the price spread has been assumed that the transaction was taken places from the farmers to wholesalers, from wholesalers to retailers and finally from retailers to consumers. The main factors on the demand side shifting demand schedule arc (i) the size of the consuming population (N), (ii) its per capital income (I) and (iii) prices of substitute foodgrains (Ps). The volume of production of rice has been taken to be an important factor that causes shift in the farm supply side.

Source of Information: Bangladesh Rice J. 13 (1): 69-73, 2008

Article Link (Online Journal):

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Achievement/Findings:

Farm-retail price spread, which goes to the different trader's compartment, did not vary significantly from region to region and season to season. The spread was highest in August-October quarter. Because during this period the Aman crop, which is the main sources of marketable surplus stands in the field, traders take this opportunity of minimum market arrival of foodgrains and push up the market price. The price spread was the lowest in Feb-April quarter, which is the post harvest period of this crop. These disparities should be reduced by improving the marketing efficiency through governmental intervention providing remunerative price to the farmers during high production periods and effective ceiIing price and distribution on the retail side during shortage. In high production periods, government should operate or maintained temporary purchase or procurement center in high production areas. They should purchase rice directly from the farmers, so that the farmers could get the remunerative prices of their product. Government's distribution system should be directed to the consumers as much as avoiding the unnecessary middlemen in the distribution channel.

Knowledge Management: Journal