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Price Behaviour of Major Cereal Crops in Bangladesh

Shakila Salam
Department of Agribusiness and Marketing, Bangladesh Agricultural University, Mymensingh, PO:2202, Bangladesh

Shamsul Alam
Department of Agribusiness and Marketing, Bangladesh Agricultural University, Mymensingh, PO:2202, Bangladesh

Md. Moniruzzaman
Department of Agribusiness and Marketing, Bangladesh Agricultural University, Mymensingh, PO:2202, Bangladesh

Abstract/ Executive Summary:

The key concern of this research is to analyze the extent of the seasonal price fluctuation and spatial price relationship of major cereal crops viz., Boro paddy and wheat in different markets in Bangladesh. This study was entirely based on secondary data fro m the period of 1986-87 to 2009-10 from different sources. In estimating seasonal price fluctuation of selected crops it was found that crops prices fluctuated in different months within the year. The difference between peak and trough prices was higher for Boro paddy than wheat. Coefficient of variation was also higher for Boro paddy than wheat but these figures are decreasing gradually. The results of empirical evaluation of spatial price linkage through Engle-Granger co-integration method among regional selected markets of Bangladesh using harvest price of Boro paddy and wheat indicate that these markets were well integrated. That means, information about price changes are fully and instantaneously delivered to the other markets in Bangladesh. Price analysis and formation of policy at the aggregate level will be pertinent for policy implementation.

Keywords: Price behaviour, Cereal crops, Market integration, Unit root, Engle-Granger

Location:

Start Date:

End Date:

Program Area: Socio-economic and Policy

Non-commodity: Market analysis

Objectives:

To analyze the extent of the seasonal price fluctuation of major cereal crops in Bangladesh.
To study the spatial price relationships of major cereal crops in different markets with the aim to assess extent of market integration.

Methodology:

For this study leading cereal crops, Boro paddy and wheat have been selected according to their ascendancy in agriculture in terms of production and area coverage. These crops occupy largest cultivated area (33.12 percent) together out of total cultivated area in Bangladesh (BBS, 2006 p.33). As Boro covers the major part in case of production among different rice varieties, only Boro has been selected in the study. According to the BBS, Boro production was 56.67 percent of total rice production in 2008-09. Harvest prices of selected crops have been taken into consideration for the reason that wholesale and retail prices may not reflect what the farmers actually receive, because they are set at a considerably higher level (covering cost of storage, transportation and risk). Moreover, bulk of the agricultural produces is marketed during the harvest or immediately post harvest period. So, harvest prices are the most relevant prices for the producer farmer. Unavailability of required data is one of a major limitation of this research work. For calculating monthly prices of selected crops four weeks prices were averaged which were available in DAM weekly price bulletin. The study makes an extensive use of secondary data on prices and quantity available of selected crops in Bangladesh for the period of 24 years from 1986-87 to 2009-10 (as the latest data available). Agricultural sector prior to eighties was highly subsidized by the Government. Withdrawal of subsidies and handing over fertilizer and irrigation equipment marketing to private sector started from the eighties. For Boro paddy five and for wheat six district markets have been selected due to their leading growing areas. Due to unavailability of the Boro paddy price for Dhaka, Boro clean rice price was used in the analysis of market integration measurement. As the research was solely based on secondary data, these data were obtained from various publications of Ministry of Finance, Bangladesh Bureau of Statistics, FAO statistical report, various books, journals, newspapers and internet. Furthermore, district wise market prices of different crops were collected from the weekly wholesale price bulletin of Department of Agricultural Marketing (DAM).

Analytical Techniques The seasonal pattern is analyzed by construction of seasonal index numbers by applying ratio to moving average method. To avoid the problem of spurious correlation between time series variables especially price variable co-integration method which was developed by Engle and Granger (1987) for making firm decisions on market integration has been used.

Source of Information: Journal of Biology, Agriculture and Healthcare, Vol 2, No.2, 2012, Page: 57-69, ISSN 2224-3208 (Paper) ISSN 2225-093X (Online),

Article Link (Online Journal): http://iiste.org/Journals/index.php/JBAH/article/view/1395/1318

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

The result of the present study revealed that price variations of selected crops show distinct features within a year. The difference between peak and trough prices and coefficient of variation were higher for Boro paddy than wheat. In addition, sharply falling prices during harvest season can undermine the confidence in markets of producers. Again, extreme high prices throughout the period also unable to gain consumer satisfaction. Thus, it is necessary to make price stable for helping both producer and consumer. From this study, it was found that, price variations are decreasing gradually which is encouraging for producers. That means, price volatility of studied crops has been decreasing gradually. Thus, policy decisions (paddy procurement, open market sale, provides massive importance on agricultural research, supply of quality seed etc.) which have recently taken should be continued. Floor/ procurement price fixation (for both paddy and wheat) by the government during high price volatility should also be continued. The results further reveals that, the markets of Boro paddy and wheat across the location were integrated as the market price information in regional markets were transferred to other markets. This is mainly attributed to close proxy, good communication facilities especially of cell phone technology and good infrastructural availability among the markets in Bangladesh. Thus, it implies that, price analysis and formation of policies at the aggregate level is valid and will be pertinent for policy implementation. Since integration of markets implies that a scarcity in one market will be transmitted to other markets, it is redundant to undertake the same programme such as procurement or open market sale of rice and wheat, in all markets. Thus national price policy should be developed rather than regional price policy in case of well integration of the markets.

Knowledge Management: Journal