Effectiveness of Bangladesh`s Rice Procurement System and Possible Alternatives: Supporting Farmers`...
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Transcript of Effectiveness of Bangladesh`s Rice Procurement System and Possible Alternatives: Supporting Farmers`...
Effectiveness of Bangladesh`s Rice Procurement System and Possible Alternatives: Supporting Farmers` Income
and Sustaining Production Incentives
Principal Investigator:
Dr. Mohammad Jahangir AlamDepartment of Agribusiness and Marketing
BAU, Mymensingh-2202
Interim Report Prepared for Presentation at NFPCSP Workshop
Roposhi Bangla Hotel, Dhaka 100028-29 November, 2012
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Research Team
Prof. Dr. Shaheen AkterCo-Investigator
Mr. Kazi Shek Farid Research Assistant
Dr. Ismat Ara BegumCo-Investigator
Mrs. Ferdoushi Begum Research Assistant
Mr. Md. Nahid Sattar Research Assistant
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Purposes of domestic rice procurement are: (i) Building stocks for PFDS & (ii) Income support to farmers
For the said purposes -- govt. provides a support price > cost of production (ensure that farmers do not produce at a loss because of distress sells)
Higher prices, are in conflict with the objective of keeping prices low enough for low-income consumers
Conflict can be avoided through
Higher govt. subsidies– BUT have budgetary implications & can reduce investment in public goods
Besides impact on govt. budget, proc. prices that are too far above market prices can favor rent seeking activities
Introduction
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Moreover - timing of announcement is also an important decision. It could
Encourage investment by farmers & greater input uses
Improve prices when farmers engage in distress sells
Food Policy Plan of Action (2008-15): importance of enhancing the effectiveness of system & providing effective support to producer, while ensuring stable consumers` price
Given this backdrop, the research will contribute to understand –
Effectiveness of the system in terms of impact on the farmers Alternative system & instruments to achieve the objective of
sustaining farmers` income
Introduction (2)
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To examine to what extent the current procurement system supports rice prices and farmers` income, thus providing production incentives (with emphasis on marginal & small farmers)
To examine to what extent the current procurement system allows the government to procure adequate supplies for its distribution needs
To identify actionable options for enhancing the effectiveness of the procurement system considering their relative costs and benefits, and possible alternative methods for supporting farm income, other than a procurement system
Objectives
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The study is designed to conduct into four phases
Phase 1 → review, farmers stocking behaviour & proportionate of proc. from farmers & millers (literature, HIES & historical data)
Phase 2 → relationships estimation (historical data)
Phase 3 → effectiveness & constraint of proc. system (field survey)
Phase 4 → feasibility, practicality & acceptability of alternative proc. systems and of alternative methods (survey in phase 3, FGD & KII)
Study Phasing
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Addressing the stocking behaviour & procurement:
1) What are the evidences of the domestic proc. & rice price stabilization interventions?
2) What are the stocking behaviours of farmers?
3) What is the proportion of grain that is procured from farmers and millers?
Research Questions in Phase 1
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Phase 1: Literature review, stocking behaviours & procurement
Farmers` stocking behaviour (Research question 2)
For calculating stocking behaviour (quantity & proportion of production stored), we have used HIES 2010 data
We have calculated this by season, farm sizes and income quartile
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On top of that , the following stock functions will be estimated
Change in Stock function: S=f (Xi)where S= change in stock & Xi= explanatory variables
x1= size of production (& its square)x2=other sources of acquisition (e. g. payments in kind & received)x3=pricex4=main occupation of hhx5=size of hhx6= location of hh (to correlate with timing of crop in a particular location) etc. x6= cost of stocking, etc.
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Production, disposal and stocks Marginal farms(0.05 – 0.49 acre)
Small farms(0.50 – 2.49 acre)
Medium & Large farms (> 2.49 acre)
Mean Std Mean Std Mean StdBoroProduction (kg/year) 596.5 681.1 1612.3 1412.7 4411.6 4101.7Change in Stocks (kg/year) 76.3 161.0 229.7 458.3 671.2 1480.2% Stocks =(Stocks/Production)*100 12.9 23.3 13.9 23.2 15.2 23.5Number of farms 693 2046 546AmanProduction (kg/year) 361.9 445.9 950.5 724.2 2701.7 2282.6Change in Stocks (kg/year) 21.7 109.1 78.1 244.2 341.4 920.0% Stocks =(Stocks/Production)*100 4.7 15.1 7.0 17.5 11.6 21.2Number of farms 501 1694 504AusProduction (kg/year) 354.4 437.1 715.8 626.9 1490.4 1506.8Change in Stocks (kg/year) 27.2 140.2 38.0 114.4 121.8 318.1% Stocks =(Stocks/Production)*100 3.8 13.8 4.9 13.7 7.7 16.9Number of farms 119 480 185
Table 1 : Disposal of paddy in Boro, Aman and Aus seasons by farm size
Source: Calculated from HIES 2010
Preliminary findings
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Production, disposal and stocks Marginal farms(0.05 – 0.49 acre)
Small farms(0.50 – 2.49 acre)
Medium & Large farms (> 2.49 acre)
Mean % of production
Mean % of production
Mean % of production
1. Production (kg/year)742.2 100 2047.0 100 5771.9 100
2. Given to landlord (kg/year)84.8 11.4 207.3 10.1 364.7 6.3
3. Paid for wages (kg/year)8.8 1.2 33.0 1.6 163.5 2.8
4. Seed (kg/year)6.5 0.9 23.2 1.1 64.8 1.1
5. Feed (kg/year)1.9 0.3 3.8 0.2 12.3 0.2
6. Wastage (kg/year)3.1 0.4 6.5 0.3 14.0 0.2
7. Other uses (kg/year)5.2 0.7 16.9 0.8 29.8 0.5
8. Consumption (kg/year)412.3 55.6 855.8 41.8 1531.0 26.5
9. Sold (kg/year)142.1 19.2 658.7 32.2 2791.4 48.4
10. Change in Stocks (kg/year)77.4 10.4 241.8 11.8 800.4 13.9
Number of farms 826 2566 701
Table 2 : Production and disposal of all paddy by farm size
Note: Stocks= 1.-(sum of 2. to 9.) Source: Calculated from HIES 2010
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Production, disposal and stocks
Surplus districts (Kg/household)
Surplus districts %
Deficit districts (Kg/household)
Deficit districts %
1. Production 2556.7 100 2158.4 1002. Given to landlord 225.0 8.8 179.5 8.33. Paid for wages 45.0 1.8 60.5 2.84. Seed 24.3 1.0 31.7 1.55. Feed 4.9 0.2 4.8 0.26. Wastage 6.0 0.2 9.1 0.47. Other uses 18.0 0.7 14.3 0.78. Consumption 897.3 35.1 851.0 39.49. Sold 1060.2 41.5 651.1 30.210. Stocks 275.9 10.8 356.4 16.5
Table 3: Production, disposal & stocks of all paddy by surplus & deficit district categories
Source: Author`s calculated from HIES 2010
Average production is higher in the surplus districts, stocks are less than the deficit districts
Share as a percentage of production by Income quartile 12
Consumption Sold Stocks 0
5
10
15
20
25
30
35
40
45Lowest quartile Quartile 2Quartile 3 Highest quartile
Per
cent
Consumption, sold and stocks
Stock is the lowest for lowest quartile & highest for highest quartile
Domestic procurement (Research question 3)
Calculation of domestic procurement from farmers & millers
We will impute total domestic procurement which is a sum of the procurement from farmers & millers (Total domestic proc. = ∑ proc. from farmers & millers)
Calculated by season (Aman & Boro)
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Figure 1: Procurement from farmers (Aman and Boro)
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Figures indicate that the percentage of grain procured from farmers in both Boro & Aman is declining & it is very sharply in the recent past
Between 1989/90 – 2011/12, only 21.35% was procured from farmers (Aman) Between 1991 - 2012, only 20% of the grain was procured from farmers (Boro)
Pe
rce
nta
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of
pro
cure
d g
rain
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% of grain procured from farmers (Aman season)
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2010
2011
2012
% of grain procured from farmers (Boro season)
Pe
rce
nta
ge
of
pro
cure
d g
rain
Figure 2: Procurement from millers (Aman and Boro)
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Proportion of grain that was produced from millers (Aman season) fluctuated to a great extent
Proportion of Boro procurement from the millers is rising sharply. In fact, 80% of the grain was procured from the millers.
Conclusion is – the millers are the primary source of procurement.
0102030405060708090
100
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
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2005
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2010
2011
2012
% of grain procured from millers
Pe
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d g
rain
(A
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n)
Pe
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d g
rain
(B
oro
)
What is the relationship between ----
a) Production deviations from trend & govt. procurement?
b) Production deviations from trend & govt. distributions?
c) Proc. price & prevailing market price?
d) Government stock & price level?
e) Procurement & deviations of real market prices from trend, and
f) Distributions & deviations of real market prices from trend
Research Questions in Phase 2
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Phase 2: Estimating relationships
Models
Estimating trend
In doing this, we will estimate polynomial trend function
Y = production, T = time trend & n= order of polynomial
Other models could also be used (linear, quadratic etc.)
tn
ii TY 0
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Y=actual procurement (distribution) & Xi= explanatory variablesx1= Opening govt. stock at the start of the seasonx2= planned dist. of current seasonx3= deviation of prod. from trend x4= deviation of real (inflation adjusted) market price from average of past n years (t= 1, 2 or 3)
titit XY 0
Prod. deviations from trend & govt. procurement; Production deviations from trend & govt. distributions?
Models
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Government stock & market price
where Pm=market price & S=government stock
Procurement & market price –
where Pm=market price
Pp=procurement price
tptimt PP 0 ttimt SP 0
Procurement & deviations of real market prices from trend, and Distributions & deviations of real market prices from trend
titit PY 0
Y=actual procurement (distribution) & Xi= explanatory variablesPit = deviation of real market prices
Data: Historical data such as total rice production, total government procurement, total government distribution, procurement price, market price, government stock for both Boro and Aman will be used
Will explore the relationships for(i) the entire data period; (ii) before 1992; and(iii) 1992 & after.
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Figure 3: Production deviation from trend and procurement
Initial results were a bit surprising
BUT latter, it shows the similar trend
r = 0.48
Qun
tity
(‘000
MT)
-Am
an
-2500
-2000
-1500
-1000
-500
0
500
1000
1500 Prod Deviations from trend
Procurement
Qun
tity
(‘000
MT)
- Bor
o Here most of the year, we found the positive correlation between good production and procurement
r = 0.57
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Figure 4: Production deviations from trend and public distribution
PFD was surprisingly low during years of low production (1997/98 -1998/99)
BUT some years such as 1999/2000 and 2004/05, when prod. deviation from trend was small, distribution was relatively higher
r = 0.77
Qun
tity
(‘000
MT)
Addressing overall assessment, alternative systems, methods:
1) What is the farmer`s overall assessment of the proc. system?
2) What are the overall views of millers on the effectiveness of the system?
3) What are the other country experiences on alternative systems & farmer`s income support?
4) What are the feasible alternative systems & alternative methods (other than proc.) that would enhance the benefits to rice farmers?
Phase 3 & 4
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Research Questions:
Table 4: Farmers selection (Non-participating farmers) (n=300)
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Dhaka Division (n=150) Rajshahi Division (n=150)Sherpur (n=75) Mymensingh (n=75) Dinajpur (n=75) Naogaon (n=75)
LSD (5) LSD (5)Marginal & small Medium Large Marginal & small Medium Large
Effectiveness and constraints (Questions 1 & 2)
Table 5: Participating farmers (n = 200)
Dhaka (n=100) Rajshahi (n=100)Sherpur (n=50) Mymensingh (n=50) Dinajpur (n=50) Naogaon (n=50)
LSD (5) LSD (5)
Table 6: Millers’ sampling (n= 280)Dhaka (n=140) Rajshahi (n=140)
Sherpur (n=70) Mymensingh (n=70) Dinajpur (n=70) Naogaon (n=70)LSD (5) LSD (5)
Husking Semi-auto Auto Husking Semi-auto Auto
Phase 4: Feasibility, practicality & acceptability of alternative methods
Critical theoretical review (pointing out the existing paradox in fixing both a quantity to be procured & a procurement price) (comes from phase 1)
Alternative Systems and Instruments:
In the form of a matrix listing instruments along the left hand side and objectives across the top.
Cells of the matrix can then be filled with plus, minus, or zero depending on the effect of each instrument on each objective
In doing so, FGDs, KIIs & results in the different phases will be the keys
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Matrix Development
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Instruments Objectives Expected ImpactProducer Consumer Govt. Society
Bangladesh Domestic procurement To support the producers
India Regulating exports Disincentives for grain exports
(bans on wheat and maize and non basmati rice exports)
Indonesia
Philippines
So on
On top of that - we will explore whether we can use any quantitative tools (as suggested by Mr. Naser Farid, DG, FPMU) especially to see the impact at government exchequer
Different activities and its` status
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Work Plan Update/Progress madeWorking on research problem, literature review, formulating conceptual framework etc.
Completed
Draft inception report Completed Preparation and submission of final inception report Completed Inception workshop at BAU CompletedPreparation of methodological note which will incorporates questionnaire, sample design and detailed fieldwork plan
Completed
Collecting secondary data from official sources including the HIES 2010 data, secondary data analysis/ KIIs
CompletedKIIs are going on
Secondary data cleaning and model estimation Major part of this step completed (has been working to improve the results from the model estimation)
Developing questionnaire, pre-testing and finalizing questionnaire
Completed
Sampling, selection of data enumerators, and organizing training
Completed(Training will be arranged before going to field survey)
Consultation with different professors and researchers at national and international levels
Completed
Preparation and submission of interim report Submitted Conducting field survey with face to face interview/FGD To be done (survey period has been changed after
consultation with TAT and CTA)Field Data cleaning/preparation (field survey data) To be done after/during field surveyData analysis and model estimation To be donePreparation and submission of (a) draft report & (b) dataset, codebooks & documentation (in electronic format)
To be completed on time
Final workshop with results To be completed on timePreparation and submission of final report To be completed on time
Thank You
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