Could There Be A Stable Grain Market?

Bad weather augurs ill for crop yield, Making holes in the poor's food shield. Rice grower may become major importer, Making food inflation a serious matter.

After heatwaves flash flood poses challenges to Boro harvest, which has already been started in the haor areas and will take some time to be completed. Heavy downpour could submerge the Boro crop,which accounts large part of our rice production. This year Boro harvest is crucial for Bangladesh as this part of the world is witnessing fury of the climate and El Niño is yet to arrive.

This year government has set a production target for 4.27 million tons.Last year Bangladesh produced 3.92 million tons of rice. Both the import and public procurement of grain declined compared to last year. Food grain stock has also decreased this year,only 1.8 million tons of grains available at govt storage facilities¹. But at the domestic market food inflation shows no sign to abate. A good Boro harvest could give great relief.

Harsh climatic conditions cast shadow over crop production in major producing countries. China is major producer of both rice and wheat. But rice production took a hit due to high temperatures there. El Niño may also make an impact on India's rice production. In addition, grain deal between Russia and Ukraine may discontinue if both the countries do not reach a consensus. In that case, wheat prices in the international market may go up again.

Luckily, both Thailand and Vietnam, two major producers and exporters, have good news in terms of rice production^{2 & 3}. Bangladesh in the past imported rice from these two countries. If they have a good harvest this year, then Bangladesh will import rice from them again. But as China will import grain from these countries because of bad harvest, price may again go up in the international market.

Worrying thing is higher grain prices in international market may worsen the food inflation at home. Govt's monetary policy is not working as inflation is still hovering around double digit figures. Grain price hike will only make the matter worse. Despite good harvest at home,it will increase the social security spending. Government has to increase rice import to check the food price inflation.

I think the best measure is to go for early negotiation with the exporting countries. Securing early commitment from few of these countries at one hand will stabilize the local grain market and will ensure food security for the vulnerable population on the other.

Notes And References

1. ”Major Economic Indicators: Monthly Update”,March 2023.Bangladesh Bank.
2. ”Vietnam’s Rice Export Forecast To Enjoy Another Successful Year”,Vietnam Plus,February 03,2023. For more read at https://en.vietnamplus.vn/vietnams-rice-export-forecast-to-enjoy-another-successful-year/247796.vnp
3. ”Thai Rice Output To Reach Five-Year High”,www.world-grain.com,March 21,2023.For more read https://www.world-grain.com/articles/18264-thai-rice-output-to-reach-five-year-high