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Marketing Share and Profit Margins of Rice Growers and Intermidiaries: a Case Study

Z. U. Zaman
South Asia Enterprise Development Facility (SEDF) 10, Gulshan Avenue, Dhaka-1212, Bangladesh.

Abstract/ Executive Summary:

In this paper analysis of marketing share and profit margins of rice growers and intermediaries were examined. Both secondary and primary data were used for the study. The study identified that the rice millers and wholesaler-cum-aratdar were benefiting from rice trading. In terms of profit earning, these two parties are in better position than the growers. Considering the importance of these sectors in the distribution system, the study suggested for paddy credit program for growers. The study also suggested that the credit should be made available only to those who are forced to sell produce because of cash need and storage problems.

Keywords: Profit margin, Growers,Rice millers, Wholesalers, Macro and Micro data

Location: Dinajpur and Sherpur districts.

Start Date: 00-00-2001

End Date: 00-00-2002

Program Area: Socio-economic and Policy

Non-commodity: Market analysis

Objectives:

i) To identify marketing margin and farmers share from the macro and micro data.

ii) To identify profitability of rice millers.

iii) To identify profitability wholesalers.

iv) To identify the potentiality to increase farmers' income for storing rice.

v) To suggest recommendation on the basis of findings.

Methodology:

Both primary and secondary data were considered for this study. Primary data were collected from the intermediaries of rice marketing channel involving growers, rice milIers, wholesalers and oth assemblers. A total sample of 63 growers, and 27 rice millers were chosen purposively from Dinajpur and Sherpur districts. The collection of data relates to the year 2001-02. Because of inadequate information of millers in the Dinajpur district, analysis on the role and profit margins of these member has largely been done on the in format ion collected from the Sherpur district. Three types of rice mills are available in Bangladesh: husky, major and automatic. The per-hour milling capacity of these mills is <1 ton, >= 1 but <2 ton and >= 2 ton, respectively. This paper hereafter refers to them as small, medium and large mills, respectively. Medium-type mills were not found in the stud area; therefore, this analysis was confined to small and large rice mills. Three hundred and five (30 small and 2 large rice mills operate in the Sherpur district. for this investigation, 27 mill owners we interviewed in the year 2000 during February and March, and 25 small mills were chosen randomly. The two large mills operating in the research area were interviewed. Analyses on the role of wholesaler-cum-aratdar and their profit margins were made on the basis or the, information collected from three wholesale markets of Dhaka City. Data were collected two times. The wholesaler-cum-aratdars are scattered all over the country. Dhaka was chosen for sampling for study since it is the center of rice distribution to all over the country. There are several wholesale markets in the Dhaka City and nearby areas. Major portions of processed rice come to Dhaka for distribution to different wholesale markets and retailers. Twenty seven sample respondents we interviewed from three wholesale markets of Dhaka for this study. Secondary data were collected fro different official sources and published materials.

Source of Information: Bangladesh J. Agric. and Environ. 1 (1): 75-86, June 2005, ISSN: 1816-0808

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

Rice millers and wholesalers are important functionaries of the marketing channel. Not only do they bridge the gap from growers to consumers, they also provide a lot of employment to rural population. Rice miIlers and wholesaler-cum-aratder were benefiting from rice trading. In terms of profit earning, these two intermediaries are in better position than the growers. Even though the per unit profit margins decline, they are able to profit reasonably from the rice by trading in bulk. However, considering the importance of rice miIlers, wholesalers and other paddy assemblers in the marketing channel, it wouldn't be worthwhile to go for bulk change of the channel or to eliminate some of the groups from the channel in this context. Considering the importance of the growers in the paddy/rice marketing channel, it is suggested that credit for paddy will allow the growers to buy other necessities. or to repay loans. The cash flow could curtail the need to sell paddy immediately after the harvest. However, the credit should be made available only to those who are forced to sell produce because of cash need and storage problems. It is important to note that the informal credit facilities in this regard will not bring benefits to growers because of the very high interest rates of the credit and the harsh repayment conditions. furthermore, the analysis showed that the growers potential for profit of storing paddy increases when the rate of interest of credit is less. Profit declines when the rate of interest of credit increases. Though the interest of informal credit was not considered in sensitivity analysis, it is obvious that the growers' potential for profit by holding paddy must decline if they received credit from the informal sources. The reality is that a significant number of growers are compelled to accept the informal credit because of the inefficient management and distribution of institutional credit to those who need it. So, to give benefits to the growers, and to encourage them to reject and break the vicious circle of the informal credit, it is suggested that the specialized or commercial government bank, cooperatives, and NGOs must come forward and work efficiently to give benefit to the growers and thus helping them to improve their socio- economic conditions.

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