Why prices rise at Khatungaj despite ample stocks

Prices of several food items in Khatunganj – one of the country's largest wholesale markets for essential commodities – have risen although stocks remain sufficient, and despite the fact those items had been imported before the Iran war began.

It takes around 45 days for soybean shipments from Latin America to reach Chattogram port. Yet following news of war in the Middle East on 1 March, the price of soybean oil in Khatunganj rose by up to Tk150 per maund.

Infographics: TBS

This is despite the fact that 463,000 tonnes of crude soybean oil were imported during the first eight months of the current fiscal year. Although there are sufficient stocks, soybean oil has reportedly become scarce in retail markets in Dhaka and Chattogram a week after the war began, as unscrupulous traders allegedly manipulated the supply.

The price surge is not limited to soybean oil. Palm oil prices in Khatunganj have increased by up to Tk200 per maund, even though palm oil is imported from Malaysia and has no direct connection to the Middle East conflict. According to customs data, 1.038 million tonnes of palm oil were imported during the first eight months of the fiscal year.

Market insiders say there is no justification for prices to rise for goods that are already in stock due to the war. Even if prices were to increase, the impact would likely be felt only after two to three months. Experts blame the administration's inaction and unethical traders for the current volatility.

Dr Naeem Uddin Hasan Aurangzeb, a professor of economics at the University of Chittagong, told The Business Standard that the government has not yet increased fuel prices.

"If fuel prices increase, that may affect other commodities. But the conditions for the war to influence commodity prices have not yet arisen, and even if it does, it will take some time. In reality, dishonest traders are raising prices," he said.

Traders say prices in Khatunganj generally move in line with international markets – rising when global prices rise and falling when they fall. Although soybean prices fluctuate, mill owners sometimes reduce sales during uncertain periods such as wartime despite adequate stocks. They also note that the cost of imports depends heavily on international market prices.

According to traders, the war must end soon, otherwise it may affect the country's economy and foreign exchange reserves.

Market inquiries show that until the afternoon of 1 February, open refined palm oil was selling at Tk5,900 per maund. After news of an attack on Iran spread, the price rose to Tk6,000 in the evening. Although it fell slightly the following day, it later increased again by Tk200 and is now trading at around Tk6,200.

Similarly, wheat prices have risen to Tk1,300 per maund, around Tk150 higher than before. The price of open soybean oil has increased by Tk120 to Tk150 per maund and is now selling between Tk7,180 and Tk8,200. Sugar prices have also risen by Tk70 to Tk80 per maund to Tk3,470–Tk3,480.

Super oil prices have increased by Tk200 to Tk6,400. Drum bitumen is now selling for Tk15,000 compared to Tk12,000 previously. Raisins are selling at Tk780–Tk800 per kg, with prices rising by Tk100–Tk120 depending on quality. The biggest increase has been seen in the price of dried sour plums (tok alu), which have jumped from Tk300–Tk400 to Tk800–Tk1,000.

Prices of imported pulses and dry food products have also been trending upward, although they had begun to decline slightly in the wholesale market after the start of Ramadan.

Cumin is trading at Tk570–Tk580 per kg, cardamom at Tk4,200–Tk4,500, cinnamon at Tk355–Tk450, cloves at Tk1,300–Tk1,320 and black pepper at Tk1,020–Tk1,040. Nutmeg is selling at Tk720, mace at Tk2,700–Tk2,800, ginger at Tk100–Tk110 and onions at Tk25–Tk52 depending on quality. Chinese garlic is selling at Tk200 per kg while local garlic is priced at around Tk50.

Md Mohiuddin, general secretary of the Chaktai-Khatunganj Aratdar General Traders Welfare Association and an importer of consumer goods, told TBS that prices of a few items have increased but most commodities remain at normal levels.

"If the war in the Middle East becomes prolonged, it could affect the supply chain of consumer goods, creating a risk of price increases for all products," he said.

Consumer rights activists say some traders are using the war as an excuse to create instability in the market.

SM Nazrul Hossain, vice-president of the central committee of the Consumers Association of Bangladesh (CAB), told TBS that traders often look for an issue to raise prices.

"The war has provided them with such an excuse. There is no reason for such an immediate impact here because of the war. Only if there is a fuel shortage and transportation costs rise might there be an effect—but that is not the case now," he said.

He added that the administration has not taken any action on the issue.

"Even though there is a new government, no instructions have yet been issued from the ministries to the administration. The government must take a tougher stance," he said.