Why is rice market jittery?

| Updated: October 24, 2017 07:18:53

Why is rice market jittery?

That rice growers were not getting fair price for their produce very often used to hit the newspaper headlines for the last couple of years. Farmers were truly frustrated that they were not being able even recoup their cost of production.  The government could do nothing to help them. 
But as far as rice price is concerned, the situation, of late, has changed radically. The price of the main staple is now ten-year high. The minimum price of coarse variety of rice is Tk 38 a kilogram (kg) and the fine variety now costs on an average Tk 60 a kg.
The hike in rice prices, however, is not benefitting the rice growers. The post-harvest price of Aman price this year was higher compared to the previous season. Farmers did not have much to complain about the price. But it is the rice millers who are the real beneficiaries. Rice market insiders say that the millers built large stock of rice following the harvest of Aman rice. Now they are raising the rice price under different pretexts. 
In fact there is no earthly reason for the price of rice to increase by about 30 per cent, on an average, over a period of a few months. The production during last Aman season was excellent as there was no natural calamity or pest attack. The production of rice in the preceding seasons was also very good. Moreover, the private importers taking advantage of lower international prices had imported enough rice during the years 2013 and 2014.  But they lowered the amount of import in 2015 and 2016 when the government levied 20 per cent duty---10 per cent customs duty and 10 per cent regulatory duty. In the budget for the current fiscal the duty rate was raised by another 5.0 per cent to 25 per cent following demand from the rice millers to this effect. 
With their stocks full to the brim, the millers are now taking full advantage of the lower import of rice during the past two years. Through various mechanism they have been raising the prices of rice in the domestic market in recent months despite the fact that rice has become cheaper in the international market. A tonne of rice in the international market now costs around US $ 350. The price of the staple had peaked to over US $600 in 2012. The international rice market has been more or less stable during the past three years. 
In a situation where international rice market is stable and domestic production of the staple remains satisfactory, there should be no valid reason for domestic rice market to be volatile. Yet it is happening and the government appears to be unconcerned. This is, however, a common phenomenon in this part of the world. 
The hike in rice prices does not matter much in the case of living costs of the middle class and the affluent section of society. The spending on rice constitutes a small part of their daily consumption costs. Other consumable items are far more expensive. 
But the situation is not the same for the poor people. The increase in rice price hurts them, financially. The expenditure on rice constitutes a substantial part of their daily spending on food items. Even marginal farmers who usually sell most part of their produce during the harvesting season do suffer if the price of the main staple goes up. 
The government's intervention mechanism to help the poor consumers is not working at this time of rice market volatility. The limited open market sale of rice in major cities through mobile trucks is apparently encountering problems. The trucks are in most cases selling flour, not rice at a rate of Tk 15 a kg. 
Traders are hopeful that the rice prices would start declining as soon as Boro rice harvest begins. But the prices are unlikely to go down to the previous level. 
The consumers do need to know the reasons for the ongoing unreasonable hike in rice prices and what the government has been doing to address the issue. Should the profit-hungry traders, not the market factors, decide the price of a commodity, always?  
The holy month of Ramadan begins next month. The consumers are worried about the price situation ahead of the holy month. In most cases, they would see hike in prices of some selected essential items and the ministry of commerce will be holding meaningless meetings with the traders with a view to keeping the prices of essentials 'stable'. Traders would assure the government of their all-out cooperation. But once they are out of the meeting, they would forget their promises made at the meeting and engage in the task of fleecing the poor consumers.   
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