Shortage of crucial commodities: Farmers bear brunt of supply chain inefficiencies while middlemen profit: BB report

A recent Bangladesh Bank study has revealed significant inefficiencies and market distortions in the supply chains of five essential agricultural commodities – rice, potato, onion, egg, and broiler chicken – that are driving price volatility and harming farmers while enriching intermediaries.

The survey conducted across 14 districts has found that supply shortages, often caused by seasonal production declines and natural disasters like floods, are among the primary reasons behind rising food prices in the country.

But while farmers shoulder the bulk of production risks and rising costs, intermediaries such as forias (brokers), arothdars (stockists), wholesalers, and millers reap disproportionate profits, especially during shortages. 

The BB report stressed that the country's agricultural supply chains need urgent reforms to address inefficiencies, reduce farmer losses, and prevent middlemen from distorting prices.

According to the report, the rice supply chain is heavily influenced by intermediaries, particularly millers, who often provide cash advances to traders and dictate prices and quality standards. 

Despite claiming losses from rice sales, millers make significant profits from by-products like bran and husk, earning between Tk4.6 and Tk9.5 per kg depending on paddy variety, the report stated. This profit dynamic enables them to exert market control, contributing to price spikes.

To tackle these issues, the report recommends stronger government monitoring of rice stocks, transparent pricing for millers and traders, and reforms in procurement systems to stabilise prices and protect all stakeholders.

Regarding potato production, the report said Bangladesh produced 10.6 million tonnes of potatoes in FY24, nearly half of all vegetable output. Yet prices rose sharply due to market manipulation by intermediaries.

The study identifies intermediaries such as forias and beparis (merchants) as significant players in price formation, often profiting by creating artificial scarcity through controlling cold storage releases.

The report suggests regulating cold storage stock releases and considering off-season imports to stabilise prices without undermining local farmers. It also calls for improved seed availability to help contain production costs.

According to the central bank report, Bangladesh is the fifth-largest onion producer globally but still faces recurring shortages due to post-harvest losses, floods, and heavy rainfall. In December 2023, prices spiked to Tk250 per kg, remaining high into 2024.

The report cites poor infrastructure, lack of storage, and manipulation by middlemen during shortages as key issues. It calls for infrastructure upgrades, transparent value chains, and better dissemination of market prices to reduce volatility.

Meanwhile, regarding egg production in the country, the survey states that production is under pressure from volatile global feed prices, particularly maize and soybeans, which are highly sensitive to global trade policies, climate shocks, and market fluctuations.

Small farmers, who form the backbone of the sector, are especially vulnerable as they struggle to absorb rising costs and manage disease outbreaks.

The report notes that while eggs remain one of the cheapest protein sources, Bangladesh lacks a comprehensive value chain analysis for the sector. It recommends supporting local feed mills, reducing feed import costs, and implementing policies to stabilise prices and production systems.

According to the survey, broiler chicken farming is expanding rapidly in the country, contributing significantly to nutrition and rural livelihoods. But the sector remains susceptible to input costs, especially feed and chicks, which drive retail price fluctuations and affect both producers and consumers.

The report called for minimum pricing schemes, support for domestic feed and hatchery industries, and revisions to import duties to reduce production costs.