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Review of Rice market of Bangladesh: Role of different actors and competitiveness

Accelerating growth, generating employment and reducing poverty and inequality are the predominant goals of the current development paradigm in Bangladesh.  The country has been recorded as a lower middle income country by the World Bank with per capita Gross National Income (GNI) of US$1080 (Atlas method, current US dollars 2014) and it is expected that in near future Bangladesh will be eligible to apply for graduating to a developing country from the current status of a least developed country (LDC) according to the definition of the United Nations. Though Bangladesh is pursuing a manufacturing-led development strategy, agriculture is still an important source of gross domestic product (GDP) and the dominant source of employment. Despite these remarkable achievements, the country’s development process is still marked by several major challenges, such as high incidence of poverty, growing inequality in income and assets, and persistent food insecurity among poor. Volatility in the price of a range of essential food items aggravates the food security situation. Specially, sudden rise in main staple like rice leads to dissatisfaction not only among poor but also middle-income households. Price volatility is closely associated to food insecurity. Therefore, initiatives to alleviate poverty and food insecurity need proper understanding of reasons of price volatility of essential commodities. If price volatility of rice is associated with sub-optimal level of competition in the market, then correction to price volatility could be managed by bringing more competition in the market at different level of the rice value chain. Often it has been difficult to understand reasons behind price volatility because of lacks in correct insight regarding various actors associated to the value chain of rice and their roles in the market. Roles of different actors actually frame the level of competition in the market. If there is any lack in competition, then certain groups of actors can influence the market. Thus it is important to understand the roles of different actors in the markets and their power (if any) to control the market at different level of the value chain. 

Effective policy and market intervention to stabilize price of rice depend on proper understanding of the values chain and the actors involved in the value chain and their power to distort competition in the market. Clear understanding of the role of various actors in the market for rice could assist various institutions like the Competition Commission to suggest timely measures to keep the market competitive. 

In recent years Bangladesh economy has experienced repeated volatility in prices of, among other essential things rice. The rise is rice price in the first quarter of 2017 continued for quite a while. Several studies have identified actors involved in the whole value chain of rice- from production till retail sale (for example, Mujeri et al, 2012; Asaduzzaman and Ahmed 2017 etc.). Though some studies on rice have described value chain of rice, we do not have up to date information regarding the situation of the value chain. 

The proposed study will provide a clear understanding on the value chain of rice after the grower level, role of various actors associated to milling, marketing and import of this main crop of Bangladesh and power of the actors in different segments of the value chain. The study will indicate possible sources of market distortion those lead to monopoly or oligopoly in the market specially at the rice milling level. This study will also discuss the potential roles of institutions like the Competition Commission to bring competitiveness in the market of rice.

Objectives

i) Estimate the demand for rice in the economy according to the production and import. 

ii) Analyse the structure of the rice market in Bangladesh. 

iii) Find out the roles of different actors in the rice market. 

iv) Understanding the rice value chain after the farm gate. 

v) Analyse the competitiveness of the rice value chain according to various scales of competition. 

vi) Analyse anti-competitive behavior/ actors (if any) in the rice market to understand the presence or intensity of monopoly/ oligopoly/ cartel in this market

vii) Review of recent research on the rice marketing system 

viii) Analyse the level of coordination between agricultural, food and commerce ministries for proper management of food supply in the country. 

ix) Analyse the import-export policy of Bangladesh in connection to international trade of rice. 

Methodology

The study will be based on mainly on secondary information, with some primary information. As several studies are already there on rice, the study will mostly consult secondary information with updated information on activities of the rice mills, specially the auto rice mills. Some latest information on the rice value chain will also be collected from primary sources (mainly through key informant interview). Interviews will also be conducted with various actors in the value chain such as millers, wholesalers, aratdars, transporters of Rice, and retailers in Dhaka. Information from selected importers will also be collected. The International Food Policy Research Institute (IFPRI) is conducting a study on rice production and marketing. The current study will take and attempt to utilize relevant data collected by this study. 

The information will be analyzed with proper statistical tools and a report will be written on the basis of that. The report will contain analysis on the rice value chains along with roles of various actors. The report will also make recommendations on ways to handle price volatility in rice in a better way. 

Timeline of the study

The study will be conducted between January, 2019 and June, 2019.

Research Team

The study will be carried out by a team of BIDS researchers –

Dr. Nazneen Ahmed, Senior Research Fellow, BIDS (Study Director) and 

Dr. Md. Mainul Hoque, Research Fellow, BIDS. 

Sponsor: The Competition Commission of Bangladesh 


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