Long supply chains inflate food prices by up to 116%, hit poor hardest: CPD
High logistics costs, middlemen keep Bangladesh’s food inflation above 9%, says commerce minister.
Long and multi-layered food supply chains are widening the gap between producer and retail prices of essential commodities, disproportionately hurting poor households and exposing structural weaknesses in Bangladesh's food markets, according to a study by the Centre for Policy Dialogue (CPD).
The findings were presented today (31 July) at a national dialogue titled "The Food Price Chain: Markets, Margins and Intermediaries in Bangladesh", organised by the CPD at the BRAC Centre in Dhaka.
Based on 820 interviews with market actors across 10 major markets in Dhaka division, the study traced the supply chains of 10 essential commodities – medium-quality rice, lentils, native onion, potato, green chilli, brinjal, hen eggs, beef, Rui fish and chicken – from retail outlets back to producers.
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We need to bring down input costs and unaccountable financial transactions such as extortion as much as possible.
Presenting the keynote paper, CPD Senior Research Associate Foqoruddin Al Kabir said green chilli recorded the highest price escalation from producer to retail consumer at 116%, followed by medium-quality rice at 100%, native onion at 87%, lentils at 78%, brinjal at 72% and potato at 50%.
Products with shorter marketing chains saw significantly lower markups, including eggs at 25%, chicken at 22%, beef at 13% and Rui fish at 10%, he said.
The study found that retailers rely heavily on urban aratdars, or commission agents, to procure six of the 10 commodities studied – onion, potato, green chilli, brinjal, eggs and Rui fish – creating market concentration and increasing the risk of price volatility and anti-competitive practices.
It also found that for medium-quality rice, farmers receive only 50.8% of the final retail price, while auto-rice millers capture the largest marketing margin among intermediaries. Poultry and livestock farmers, meanwhile, often face negative net margins because of soaring feed and veterinary costs.
Foqoruddin further noted that food accounts for 59% of Bangladesh's Consumer Price Index basket. The poorest 5% of households spend 59.8% of their income on food, compared with 28.9% among the wealthiest 5%, highlighting the disproportionate impact of persistent inflation on poorer households.
Addressing the issues, Commerce Minister Khandakar Abdul Muktadir, speaking as the chief guest, said the government was prioritising wholesale market monitoring, greater price transparency and reducing unnecessary intermediary layers to ensure fair prices for producers and consumers.
Experts at the programme, however, broadly agreed that food inflation was rooted in structural weaknesses rather than the actions of intermediaries alone.
Muktadir also identified logistics costs as one of the biggest obstacles to bringing down food inflation.
"While logistics cost stands at around 10% of GDP in other countries of the world, it is 16% in Bangladesh. If we can rein in logistics costs, food inflation can be brought down," he said, reports UNB.
He also noted that inflation, which had been rising since the post-Covid period and currently stood above 9%, had been brought under control by other countries around six months ago, while Bangladesh had failed to do so because of the complexity of its market system.
"Our market system is quite complex. Alongside logistics costs, we need to bring down input costs and unaccountable financial transactions such as extortion as much as possible," he said.
The minister said successive governments had focused on the agriculture sector separately, but there had been a lack of coordination. He also said farmers often lacked accurate market information, leading to production decisions that could result in losses.
"A farmer who cultivated potatoes extensively over the past few years and got a good yield but did not get a fair price in the market, why does he still grow potatoes in excess of demand the following year and incur losses? This is a question. The major reason is that market information does not reach the farmer. He cannot understand what would be profitable for him to cultivate," he said.
Muktadir also said Bangladesh's agriculture sector had seen little scientific and planned work, with most agricultural activities being carried out in a "natural way", stressing the need for proper planning.
CPD Executive Director Dr Fahmida Khatun, who chaired the session, said food inflation remained one of Bangladesh's most pressing economic challenges, driven by production constraints, supply chain inefficiencies and weak market competition.
She cautioned against drawing oversimplified conclusions about market exploitation, noting that the study's findings remained a "work in progress".
Echoing that view, former BIDS Research Director Dr M Asaduzzaman cautioned against portraying all intermediaries as exploitative or attributing inflation solely to market syndicates. He argued that policy responses should address structural bottlenecks rather than target trading channels indiscriminately.
Highlighting those bottlenecks, BIDS Professorial Fellow Prof Dr MA Sattar Mandal pointed to inadequate cold storage facilities, outdated logistics systems and post-harvest losses, advocating direct farmer-to-consumer and farmer-to-retailer linkages to improve market access.
Consumers Association of Bangladesh President AHM Shafiquzzaman called for stricter enforcement against price manipulation and mandatory price display boards at wholesale markets to improve transparency.
Bangladesh Garments Sramik Sanghati President Taslima Akter Lima urged the government to expand open market sales programmes and rationing schemes for industrial workers, while Microcredit Regulatory Authority Executive Vice Chairman Dr Mohammed Helal Uddin stressed improving farmers' access to affordable credit.
Bangladesh Bureau of Statistics Director Md Shahabuddin Sarker highlighted the need for real-time price data to better inform import and tariff policies.
The CPD recommended streamlining supply chain layers, strengthening competition in wholesale markets, expanding cold-chain infrastructure, reducing farm input costs and taking targeted action against proven cases of hoarding and anti-competitive practices.
