The myth of the egg syndicate

The previous government repeatedly accused poultry companies of manipulating the price of eggs and chicken. But what really happened?

First, when Russia invaded Ukraine, the prices of most imported feed materials increased. This was beyond the control of the poultry industry and was also beyond the control of the government.

Second, the Taka depreciated against the US dollar, from 86 to 120. The Taka depreciated because of the previous government's disastrous economic policies.

Bangladesh Bank publishes money supply statistics every month (in Monthly Economic Trends). Money supply is the sum of cash and bank deposits. Bangladesh Bank statistics show that money supply grew rapidly during the tenure of the last government.

Different statistics are used to measure money supply. The most important one is M2 (broad money), cash plus all deposits. In June 2020, broad money was 13.7 trillion (lakh crore) Taka. By June 2023, broad money had increased to 18.9 trillion (lakh crore) Taka. So, in just three years, money supply increased by 5.2 trillion (lakh crore) Taka. That is enough money to pay for sixteen Padma bridges.

During this period, the previous government (a) forced banks to lend money at a low interest rate, and also (b) maintained a large fiscal deficit (meaning government expenditure was much higher than tax collection). Any economist would agree that the combination of fiscal deficit and low interest rate is likely to cause rapid money supply growth and inflation. A government which engages in such policies is colloquially said to be "printing money".

The previous government did not want to admit that they had caused inflation by printing money. So, they blamed imaginary cartels ("syndicates") for inflation. The Competition Commission accused several poultry companies of manipulating prices. These accusations were baseless; the government was simply looking for a scapegoat.

Thousands of farmers sell chicken and eggs every day. Markets with thousands of sellers are textbook examples of competitive markets. In such markets, prices rise and fall because of fluctuations in supply and demand. The price of eggs is usually low in winter, when many consumers eat winter vegetables instead of eggs (which reduces the demand for eggs). The price of eggs is usually high in summer, when hens naturally lay fewer eggs (which reduces the supply of eggs). In any agricultural production, seasonal fluctuations in supply and demand are normal. The Competition Commission should have hired an economist to study the poultry industry before jumping to the conclusion that price increases were caused by manipulation.

To prevent further inflation, the right economic policies must be taken. Interest rates (bank lending rates) must remain high, and the fiscal deficit must be reduced. Otherwise, the Taka will continue to depreciate, and inflation will continue.

One hopes that future governments will not scapegoat private companies for inflation. Inflation is never the fault of private companies; it is always the result of irresponsible macroeconomic policy.

Kazi Zahin Hasan is a Director of Kazi Farms.

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