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Impact of Price and Price Variability on Acreage Allocation in Rice and Wheat Production in Bangladesh

Basanta Kumar Barmon*
Department of Economics, East West University, Aftabnagar, Dhaka, Bangladesh

Muntasir Chaudhury
Department of Economics, East West University, Aftabnagar, Dhaka, Bangladesh

Abstract/ Executive Summary:

The present study was conducted to estimate the impacts of price and price variability on the acreage allocation of rice and wheat production in Bangladesh. Time series data of price and acreage allocation of rice and wheat production during 1983-84 to 2007-08, collected from the Bangladesh Bureau of Statistics (BBS) were used in this study. Compound growth rate and Nerlovian models were used. The study indicated that the wholesale price of rice and wheat had a significant impact on the allocation of land for rice and wheat production. Significant price variability was found both in the case of rice and wheat crops in the short-run (SR) and long-run (LR). The values of Nerlovian coefficients of adjustment were found low, which means that although the farmers were adjusting to the changing levels of price, price variability, yield, etc the adjustment was not rapid. Therefore, it may be concluded that the price of rice and wheat should be adjusted rapidly along with the allocation of rice and wheat production in Bangladesh.

Keywords: Price variability, Acreage allocation, Rice production, Wheat production, Bangladesh

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Program Area: Socio-economic and Policy

Commodity: Rice

Objectives:

The present study was, therefore, undertaken to determine the effect of price and price variabilities on the allocation of land for the production of rice and wheat in Bangladesh. The results obtained from the study will assist policymakers and researchers to devise appropriate policies and take necessary measures, in order to stimulate and stabilize food security in Bangladesh.

Methodology:

Sources of data and analytical techniques are briefly presented in this section. 2.1. Source of data This study aims to analyse the impacts on price and price variability on acreage allocation in rice production in Bangladesh. Secondary data were used in this study and the data were collected from various issues of the Bangladesh Bureau of Statistics (BBS, 1994-95, 2002-03, and 2007-08). 2.2. Analytical techniques Two models - compound growth rate and Nerlovian model were used to estimate the growth rate of price and allocation of acreage, and short-run and long-run price variabilities of rice and wheat production in Bangladesh. 2.2.1. Compound growth rate model On the basis of the objectives, different growth rates models such as linear regression model, semi-log model, double-log model, log-log inverse model and reciprocal model have been run. However, the double-log model seemed to be the most appropriate one to analyze the data. An exponential function of the following form was fitted to the data to compute the growth rates of areas and yield of fine, medium and coarse rice and wheat.

Source of Information: The Agriculturists 10(1): 23-30 (2012) ISSN-1729-5211 A Scientific Journal of Krishi Foundation

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Achievement/Findings:

The present study has assumed the impacts of price and price variability on acreage allocation in food grain production in Bangladesh. The findings of the study show that the coefficients of the trend variable were observed negative for wheat production that has shown a downward shift in the allocation of land for rice and wheat production. However, the coefficients of the time trend variable were observed positive for the wholesale price of all types of rice that showed an upward shift in the allocation of land for all types of rice production. The values of the Nerlovian coefficient of adjustment were found low which means that although the farmers were adjusting to the changing levels of price, price variability, yield, etc., yet the adjustment was not rapid. Thus, it may be concluded that the price of rice and wheat should be adjusted rapidly along with the appropriate allocation of rice and wheat production otherwise farmers will convert paddy and wheat fields into other crop fields that will hinder food grain production in Bangladesh.

Knowledge Management: Journal