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Is Bangladesh heading for a food crisis?

Sreeradha Datta is Research Fellow at Institute for Defence Studies and Analysis, New Delhi. Click here for detail profile.
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  • May 15, 2008

    Since the beginning of 2007, there has been a sharp increase in global food prices, especially in developing countries. During the past year, the prices of rice and wheat have risen by 75 to 120 per cent globally. During the last 25 years global food production has gone down and has had a cascading effect upon prices. As a result, a spectrum of countries including Egypt, Indonesia, the Philippines, Ivory Coast and Ethiopia have been buffeted by food riots, while other countries have sought to mitigate the situation by massive salary hikes of public servants, thus adding to their fiscal burden.

    With the Food and Agricultural Organisation (FAO) warning about depleting food stocks, food producing countries have sought to fight inflationary trends by banning exports to meet growing domestic demand. Major rice exporting nations such as Brazil, Egypt, Argentina and India have imposed a ban on rice exports. And the two largest rice exporting countries, Thailand and Vietnam, have been unable to meet market demand. Wanting to cash in on the spiralling demand, farmers in Thailand unsuccessfully tried to increase the number of crop cycles, while in Vietnam during the last three successive seasons rice crops were destroyed by pest. Cumulatively, growing demand, shortfalls in production and ban on exports have contributed to the widespread price rise and food crisis. These developments prompted UN Secretary General Ban ki-Moon to urge countries such as Brazil and Egypt to drop export restrictions on certain food items and commodities.

    However, the April 2008 UN Study of Global Agriculture has highlighted a number of other factors that have contributed to the current food crisis. Prominent among them are:

    1. Growing production of bio fuels like bio-ethanol and bio-diesel, which are financially more attractive than traditional food crops.
    2. Lack of communication and knowledge of the agricultural system to ensure better yields.
    3. Adverse effects of climate change and global warming upon agriculture.
    4. Negative impact of the removal of farm subsidies and the subsequent rise in the cost of agricultural production in poor and developing nations.
    5. Rapid drop in per capita availability of water; in Central and Western Asia it has dropped by a third since the 1950s.
    6. Large scale environmental displacement in East and South East Asia caused not only by natural calamities but also by shifting production patterns and the construction of dams and cash-crop plantations.
    7. Despite technological improvements agricultural yields in sub-Saharan Africa have actually declined during the past three decades, thereby increasing their dependency upon food imports.

    The search for energy substitutes through bio fuel has further hampered global food production. Joining the food versus fuel debate, Jean Ziegler, UN Special Rapporteur on the Right to Food, has described the use of food crops to create ethanol ‘a crime against humanity’.

    The South Asian region has not been immune to the global price rise phenomenon. Its impact on Bangladesh has been far severe. A number of additional factors have further compounded Bangladesh’s problems. Towards the end of 2007 it faced severe floods followed shortly by cyclone Sidr. Its impact was severe on Bangladesh where more than 27 million people depend upon food subsidy. Furthermore, this natural disaster damaged at least 1.8 million tons of standing crops. With the result, the price of a kilogramme of coarse rice, the staple food in Bangladesh, has more than doubled over the past 12 months.

    The situation was so grim that the Caretaker government had to intervene, with the paramilitary Bangladesh Rifles opening up 75 fair price outlets to provide basic commodities at subsided prices. To control inflationary pressures, the government has opted for buffer stocks, setting a target of procuring 1.2 million tons of rice and 300,000 tons of paddy at the rate of Tk 28 and Tk18 per kilogram respectively. The crisis could ease if the Bodo turns out to be a bumper harvest as many Bangladeshis hope. It is estimated that during the current season rice production would be about 17.5 million tons and wheat production 800,000 tons.

    Despite the bumper harvest, experts predict that there would not be any drop in food prices and coarse rice is being sold between Tk 33 and 35 per kilogramme, far higher than the rice procurement price set by the government. According to the Trading Corporation of Bangladesh (TCB), during the past 12 months the cost of production has gone up by 54 per cent.

    This year, total food production in Bangladesh is estimated at 25.9 million tons and this would be just 100,000 tons short of total domestic demand. To meet the shortfall, Dhaka has ordered the purchase of 400,000 tons of rice from India at TK 30.10 per kilogramme or US $430 per metric ton. Bangladesh’s wish to create buffer stocks through imports has, however, not been trouble free. To meet domestic demand and to control inflationary pressures, India has imposed a ban on rice exports not only to Bangladesh but also to countries such as Saudi Arabia and other South Asian states. Political compulsions have, however, resulted in India making an exception for Bangladesh. During his visit to Dhaka in December 2007, Foreign Minister Pranab Mukherjee agreed to the sale of 500,000 tons of rice to Bangladesh.

    As an agricultural economy, Bangladesh relies heavily on food production and hence a bumper Bodo harvest is crucial to resolving the growing food crisis in the country. Even if this does not bring prices down, it should lessen inflationary pressures and keep imports to manageable limits. A food crisis is likely to be extremely unnerving to the neutral caretaker government. With Jatiya Sangsad elections slated for later this year, the government would be keen to keep not only food prices under control but also scarcity under check. Food riots are the last thing on the government’s wish list. Failure to handle relief works following the 1970 cyclone eventually culminated in popular protest against the then military junta. A repeat of such a development over a potential food crisis would dismantle everything that the caretaker government has managed to do since taking office in January 2007.