Middlemen eat into farmers’ pie

Md Mohsin Ali, a farmer in Rangpur's Mithapukur, grew 12,600kg of potatoes on 1.5 acres of land.

As he lacked preservation facilities, he sold the potatoes at Tk7.5 per kg from his field. Potatoes are now selling for Tk32-35 per kg in markets in Dhaka and elsewhere. Thus, Mohsin has been deprived of Tk23.45-26.45 per kg of potatoes.

He got only about 26.71 percent of market prices for his produce.

"I made Tk107,800 by selling potatoes. I spent around Tk75,000 on cultivation, seeds, fertilisers and pesticides and harvesting. If I include land expenses and my efforts, I would  incur some losses," Mohsin told The Business Standard.

Farmers are not getting fair shares of their products' selling prices in markets owing to a change of hands in the supply chain, poor transportation, inadequate storage capacities and poor market infrastructure.

Vegetables of late are being sold at high prices in big markets across the country on the explanation that rains have damaged harvests. However, producers are not benefiting from such steep prices of their produce. A lion's share of the money is going to merchants, retailers and middlemen.

For instance, brinjal that was sold at Tk37 per kg in fields is now selling at Tk70 in different Dhaka markets. Spiny gourd is selling at Tk50 per kg, which was sold at Tk15 per kg in fields. The price difference is at least Tk35 per kg for pointed gourd, which is selling at Tk55-60 per kg in markets. Cucumber, which was bought at Tk15 per kg, is selling at Tk50.

According to an Asian Development Bank (ADB) report, producers in Bangladesh get only 27 percent of the selling price of red amaranth, 44 percent of that of pineapple, 45 percent of that of tomatoes and 46 percent of that of cucumber.

The report, "Dysfunctional Horticulture Value Chains and the Need for Modern Marketing Infrastructure: The Case of Bangladesh," also notes that producers get less than 40 percent of prices at the consumer level. Merchants get 43 percent while the remaining 17 percent is spent on transportation, preservation, sorting, packaging and other expenses.

Agricultural economists said product prices are rising at different stages of the supply chain due to market failure, which causes a loss for both producers and consumers.

Farmers should get more money from the sales of their produce to survive, said Emeritus Professor Dr Sattar Mondol, former vice-chancellor of Bangladesh Agriculture University.

They should receive at least 60 percent of market prices, said M Hamidur Rahman, former Director General at the Department of Agricultural Extension (DAE), while it should be about 70 percent according to Dr Mizanul Haque Kazal, secretary general of the Bangladesh Agricultural Economists Association.

Reasons behind higher prices at consumer level

The annual post-harvest losses amounting to $2.5 billion lead to price differences between production and consumer levels, according to the ADB.

Poor transportation, inadequate storage capacities and poor market infrastructure are attributed to post-harvest losses, says the report.

The ADB also linked seasonal fluctuation of prices for agro products to lower gains by producers. The price difference is six times for tomatoes, over two times for potatoes and 2.5 times for onions.

According to the report, producers and consumers are losing $815 million or over Tk6,900 crore annually as a result of such price differences.

ADB's recommendations

The report recommends improving drainage and waste management systems, reducing traffic congestion and ensuring an integrated cold chain, including packing and cooling fresh food products, cold storage, distribution using refrigerated transports in a very short time, to ensure fair shares of market prices for farmers.

The ADB also recommends that the government relocate wholesale markets away from Dhaka in order to offer services like e-auction, banking and price information to minimise the price gap.

The report suggests improving the collection and marketing of products in the production areas with cold chain and other agro-logistics for easy access by farmers and small traders.

Considering the strong seasonal nature and diverse quality of production, these centres should also provide spaces for sorting, cleaning, grading, packaging and storage.

The blame game

Merchants, wholesalers and retailers blame one another for the differences in prices of agricultural goods. They sometimes blame natural disasters, such as floods, droughts and rains.

Aminul, who sources vegetables from Rangpur, told The Business Standard that the supply was low due to rains.

"I have to spend Tk4 on per kg of vegetables as trucks cannot be filled with products. Storehouse owners in Karwan Bazar take Tk2 in commission per kg of vegetables from both buyers and sellers. Also, storehouse owners take away 10 percent of the selling price of some products," he explained.

Arif Shikder, a wholesaler in Karwan Bazar, sells products as a street vendor. He says he has to pay Tk720 in bribes every day to conduct business on the street.

"Local goons do not allow one to do business on the street if the money is not paid. Storehouse owners also take commissions. That is why I have to charge at least Tk5 for per kg of vegetables in addition to the price paid to middlemen," he said.

Tariqul Islam, a retailer, says it is not possible to sell vegetables at low prices at the retail level as wholesalers charge higher.

When asked why an extra Tk20 is charged, he said the demand for vegetables had fallen as there were fewer people in Dhaka now.

"Trade volume has fallen by half compared to normal times. So, some vegetables are wasted every day. After paying staff and store rent, the amount of profit that remains is not very high," he added.

What experts say

Emeritus Professor Dr Sattar Mondol said consumers pay extra for agricultural products but farmers remain deprived. Farmers should get more money.

"There have been attempts to retain farmers' income by increasing harvests per acre of land. Now, there should be initiatives to raise their income by improving market management," explained Dr Sattar.

Professor Dr Mizanul Haque Kazal said producers of agro products were getting about 80 percent of the final price in developed countries and it should be at least 70 percent in Bangladesh.

He said the market failure is causing losses for producers and is also forcing consumers to pay extra money.

Kazal also said the government had no provision to set prices of products in the open market but could intervene in the market by providing some policy and infrastructure support.

He also said a smooth and modern transport system could reduce the cost of shipment. Wider cold storage facilities up to production centres could encourage farmers to store products for a certain time, which would ensure justified prices for them.

Agriculturalist Dr M Hamidur Rahman said farmers should get at least 60 percent of market prices.

"They are losing as they are getting less than that," he said.

According to Hamid, neglecting market management is the reason why farmers remain deprived.

"Since liberation, increasing agricultural production has been prioritised. Thus, all projects and initiatives have remained limited to that objective."

Mohammad Yousuf, director general at the Department of Agricultural Marketing, said farmers should get over half the market prices of products.

He admitted that farmers were not getting even half the market price because of the change of hands in the supply chain.

The number of middlemen needs to be restricted to ensure coordination of prices at the farmer and consumer levels, said Yousuf.

He thinks online markets are key weapons for bringing prices under control.

"At our department's end, the task of setting up online markets across the country is almost done," added Yousuf.