Alarming warning signs in food security

High inflation, slow production growth, reduced imports, and disruptions in the supply chain have put our food security at risk. We were generally informed by various sources that 20 to 22 percent of people suffer from food insecurity. Now this has risen to 26 percent. This information were revealed from a survey conducted under the joint management of the United Nations and various international development organizations. The survey, published on November 7, states that 2 crore 36 lakh people in the country are currently living under severe food crisis. Most of them live in the Sylhet, Chattogram, Rangpur, and Khulna divisions. Since the beginning of 2024, the real income of Bangladesh’s working poor has decreased, and their expenses have increased.

Due to a decline in remittances, sluggish export growth, and rising import costs, foreign exchange reserves have rapidly decreased. As a result, the depreciation of the Bangladeshi taka has become a concerning issue. The impact of climate change has been felt across the country in April and May, with intense heatwaves and droughts. Later, Cyclone Remal, floods in the Haor region, sudden floods in the southeastern part of the country, and subsequent floods in northern Bangladesh, including in Mymensingh and Sherpur, severely disrupted agricultural production. On the other hand, due to the dollar shortage and difficulties in opening letters of credit (LCs), food imports have decreased. Furthermore, political instability and the manipulation of unscrupulous traders have damaged the supply chain of goods. As a result, food inflation has increased. This problem has been exacerbated by the global economic crisis and conflicts. As a result, the hardships of the low- and fixed-income working people have increased, along with their food insecurity. This is a warning sign of a decline in people's living standards.

In October, the food inflation rate in the country was 12.66 percent, based on point-to-point calculation. This means that if the price of a food item was 100 taka in October last year, consumers had to buy it for 112.66 taka this October. In October 2023, the food inflation rate was 12.56 percent, and in October 2022, it was 8.5 percent. This shows a rapid increase in food inflation from a high baseline in the previous year. The recent rise in food inflation has been mainly influenced by the sharp price increases in rice, vegetables, eggs, chicken, and onions. In the recent past, especially in the vegetable and egg markets, such a chaotic situation has never been observed before. The main reasons for this price increase are supply shortages, followed by increased production costs due to higher input prices. Thirdly, the recent political instability has provided an opportunity for unscrupulous traders to manipulate the market and attempt to make profits. During this period of high inflation, the general inflation rate has remained around 9 percent, and food inflation has hovered close to 10 percent over the past few months.

In this situation, one of the key reasons for the sharp rise in food inflation last October was the largely barren transitional period during the Ashwin-Kartik months. During this time, government monitoring and intervention are crucial to prevent unscrupulous traders from monopolizing the market; however, in reality, we did not witness any significant success in this regard. As a result, the burden has fallen on the poor consumers in the country. When domestic production is low, one way to maintain a steady supply of goods in the market is to increase imports; however, the rise in the value of the dollar and the tightening of bank facilities for opening letters of credit (LCs) have negatively impacted food imports. High international prices for goods have also been a major reason for the decline in imports. Over the past two years, the volume of our agricultural product imports has steadily decreased, which has led to price hikes due to supply shortages in the market. It was already anticipated that the crisis during the Ashwin-Kartik months would be severe, but there was no preparation for it.

Recently, efforts have been made to increase the supply of some goods by reducing import duties on various items, but this came too late. In a few days, the Aman rice will start arriving in the markets, and new potatoes will be harvested. Onion bulbs and leaves will begin coming from the villages. In this context, by encouraging imports belatedly, the farmers who are directly involved in domestic production have been discouraged. The indifference of those working at the policy-making level of the government regarding the sense of timing has caused confusion among the public. On October 31, the import duty on rice was waived to increase imports. However, it is questionable whether 59 private importers being granted permits to import 327,000 tons of rice with the goal of controlling retail rice prices is the right approach. Currently, the amount of rice stored in government warehouses is about 850,000 tons. Is there any need to hold such a large quantity of rice in government warehouses just before the harvest of Aman paddy? The government should keep a stock of only 2-3 lakh tons of rice and release the rest into the open market immediately. This would help control the high pre-harvest prices without the need for imports.

The government's Aman rice and paddy procurement will begin on November 17 and continue until February 28. The procurement of Atap rice will continue until March 15. This year, the government plans to collect 350,000 tons of paddy, 550,000 tons of boiled rice, and 100,000 tons of Atap rice, making a total of 1 million tons. Considering the paddy as rice, the total rice procurement target is 880,000 tons, which is approximately 5.5% of the estimated total rice production. The procurement prices have been set at 33 taka per kg of paddy, 47 taka per kg of boiled rice, and 46 taka per kg of Atap rice. These prices are nearly equivalent to the production cost. At these prices, farmers have little incentive to supply rice and paddy to government warehouses, especially when it comes to delivering paddy to the warehouses. As a result, for the past 3-4 years, the procurement targets for paddy have not even been met halfway. Farmers are selling paddy to traders at much lower prices than the government-established rates.

Farmers are unwilling to bear the hassle of selling paddy at the food warehouses in the upazila towns. In this case, the government could procure paddy directly from farmers at fluctuating prices based on changing humidity levels. Currently, the price of rice in the international market is between 410 to 520 dollars per ton, and the import cost per kg in Bangladesh is around 55 to 65 taka. It would be more beneficial for the country to collect a larger quantity of rice at domestic prices, which are much lower. Those involved in the Ministry of Agriculture, Food, and Commerce should consider the interests of the country's farmers. Even if the government collects just 10 per cent of the total production of rice, the amount of rice procured in the current Aman season would reach around 1.5 million tons. This would allow the government to effectively intervene in reducing rice prices during the production season and curb price hikes during the lean periods.

In neighboring India, the government collects 15 to 20 percent of the total agricultural production from different states. They set procurement prices by adding up to 20 per cent profit over the production cost. Farmers in India are demanding 50 per cent profit over their production cost.

The relevant government departments should provide reliable statistics on the country’s agricultural production and food reserves in a timely manner. In this regard, we have a lack of awareness. For instance, take the total production of rice. For the 2023-24 fiscal year, the total rice production was estimated at 47.5 million tons, which suggested no concerns about supply shortages or price increases up until December. However, in reality, such issues have arisen. This has led to doubts among the public regarding the accuracy of the government-provided statistics. Many believe these figures are inflated or overestimated. On the other hand, the government’s statistical department often takes too long to provide up-to-date data on agricultural production. For example, our Boro rice harvest ended last May, but the figures for that were only released at the end of September. It has been reported that last year’s potato production was 10.3 million tons, but traders say it was a maximum of 8 million tons. Many are skeptical of the official potato production figures, as cold storage facilities are holding far less stock, and the excessive price rise in the market contradicts the government's claims.

Even in the non-cereal agricultural sector, production statistics are often exaggerated and presented in an inflated manner. The reported production and per capita availability of milk, eggs, meat, and fish, as shown by the government’s HIES survey, do not even reflect half of the actual consumption. So, where does the rest of the production go? Why is there such price inflation? The overestimation of agricultural production in various sectors is a major obstacle to market stability. As a result, it has become difficult to adopt timely and appropriate intervention policies.

To reduce food insecurity, the first step is to increase per capita availability. The main way to achieve this is by boosting production and reducing inflation. If production per unit increases, production costs will decrease, which will have a positive effect on inflation. The government has already implemented several changes to the country's monetary and fiscal policies. Interest rates have been raised, government spending is being tightened, money supply has been reduced, and measures to combat corruption are being taken. Reforms are underway in the banking sector, and steps are being taken to prevent money laundering.
In the coming days, if export earnings and remittances increase, foreign currency reserves will rise. This will help curb the depreciation of the taka, and eventually, the value of the currency will increase. As a result, general inflation will decrease. If people's real incomes also increase, their ability to access food will improve. Along with ensuring the availability and accessibility of food, food distribution disparities must also be addressed. Currently, income and wealth inequality in the country are stark, and as a result, significant disparities exist in food access as well. These disparities exist between the rich and the poor, across gender, and regionally. There is also inequality in earning opportunities. These inequities must be eliminated.

Assistance for the low- and fixed-income groups must be increased. Inclusive development and financing can help reduce income inequality. Additionally, ensuring equal opportunities for all will help reduce disparities in education, healthcare, and overall human development. The student protests centered around discrimination in government jobs in July-August must result in positive changes that benefit all sectors of society and the economy. For this, reforms in the state, society, and the economy are necessary. Constant efforts should be made to secure people's freedom, equality, and the pursuit of a better life.

In Bangladesh, the rural population are subject to serious discrimination, and within this group, the farmers are in the worst condition. They work harder but receive less in return. Their expenses in agriculture are high, and profits are low. The pressure of inflation is also heavier on the rural population, and farmers are bearing the brunt of it. They face a lack of healthcare, education, and even basic safety in their daily lives. In the fields, they are often struck by lightning or face other calamities, yet there is rarely any remedy or compensation for their suffering. They also receive minimal government assistance. A Bangladeshi farmer gets only 900 taka in agricultural subsidies annually, while in China, this amount is 20,000 taka. Even in countries like Indonesia, Thailand, and Bolivia, farmers receive more subsidies than in Bangladesh.

The government buys paddy at 33 taka per kg, while farmers in the famed paddy-producing areas of Sandwip get only 20 taka per kg for their rice. This injustice must be understood by all. We need to bring the issue of inequality in the agricultural sector to the forefront of policy-making. Only then will farmers find relief. They will be motivated to increase production, which will, in turn, boost the country’s overall food grain production. This will help significantly reduce our food insecurity.

Author: Agricultural economist, researcher, and educationist. Former Director General of Bangladesh Livestock Research Institute and former Vice-Chancellor of the University of Global Village.