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Structure, Conduct and Performance of the Rice Market and the Impact of Technological Changes in Milling

Structure, Conduct and Performance of the Rice Market and the Impact of Technological Changes in Milling. Institution Institute of Agribusiness and Development Studies (IADS) BAU, Mymensingh. Research Team Professor Dr. Shankar Kumar Raha - PI Professor Dr. Md. Monjurul Alam – CI

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Structure, Conduct and Performance of the Rice Market and the Impact of Technological Changes in Milling

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  1. Structure, Conduct and Performance of the Rice Market and the Impact of Technological Changes in Milling Institution Institute of Agribusiness and Development Studies (IADS) BAU, Mymensingh Research Team Professor Dr. Shankar Kumar Raha- PI Professor Dr. Md. MonjurulAlam – CI Md. Moniruzzaman – CI Dr. M. A. Awal - CI

  2. Objectives of the Research Project 1. To provide evidence and provide new evidence on rice market structure, conduct and performance in Bangladesh and • To analyze the impacts of technological changes in the rice milling sector on employment, financial viability of rice mills, market concentration, rice quality, and cost of milling 2. To construct detail estimates of costs and margins for key agents along the rice marketing chain in Bangladesh and • to analyze market integration between domestic and international markets. 3. To suggest policy implications for improving market structure, conduct and performance.

  3. Methodology The study will be conducted by adopting the structure, conduct and performance approach (SCP). This technique was first formalized by Mason (1939) and his detailed case study approach was modified by Bain (1951). Market structure Market conduct Market performance

  4. Methodology (Contd.)

  5. Methodology (Contd.) (a) Estimation of market concentration 4 firm concentration ratio, Entropy index, and Gini coefficient. (b) Financial viability of the mills was assessed by using NPV, IRR, BCR. (c) Calculation of marketing costs and margins was done by using standard formula (Kohls and Uhl, 2005) (d) Market integration • Market integration was examined by applying co-integration method developed by Engle and Granger • Data: monthly wholesale price from 1990 to 2011(domestic mkts). • Data: monthly export price of Thailand, Vietnam, and Eastern India converted into import parity price (1975 to 2011)

  6. Overview of the structure, conduct and performance of rice market in Bangladesh

  7. Overview of the structure, conduct and performance of rice market in Bangladesh contd.

  8. Structure, conduct and performance of paddy market in Bangladesh 5.4.1Buyer concentration in paddy markets 4 firm concentration (%) Markets

  9. 5.5 Conduct at paddy market -3 5.4.2 Entry barrier In fact there is no barrier except arrangement of requisite capital 5.4.3 Degree of product differentiation (paddy) No deliberate effort is made to make the paddy differentiated in the market. 5.4.4 Distribution of market information • No formal system exist for dissemination of market information. • Paddy traders collect market information through their own effort. 5.6 Performance of paddy market • Paddy market is operating smoothly throughout the country; • Millers are getting paddy as much they need, though farmers are not getting reasonable price for their paddy. • Farmers’ perspective, paddy market is not running in favour of them.

  10. Market structure, conduct and performance of rice milling industry 5.7 Dimensions of market structure (4) 5.7.1 Seller concentration in rice mill industry 5.7.2 Degree of product differentiation 5.7.3 Entry barrier • Lack of utilities • Skilled manpower • Tough competition • Sufficient capital • Suitable site

  11. 5.8 Market conduct 5.8.1 Price Policies • Selling price of rice is set independently • Automatic rice mill owners are in better position in negotiation for setting price. • In the case of husking and semi-automatic mills buyers are more powerful. 5.8.2 Product Policy • With the changing of milling technology, millers are capable to process rice according their own choice and also to buyer’s choice • Sometimes the millers supply rice with labeling as per direction of trader- buyers. 5.8.3 Policies aimed at coercing rivals No evidence of predatory and/or exclusionary tactics adopted by the established firms in rice market.

  12. 5.9 Performance-Dimensions Capacity utilization of rice mills 54.45 • Size of selling cost • Product quality • Progressiveness of the industry • Employment position • Discrimination by sex

  13. Impact of technological changes in rice milling Cone Polisher De-stoner Paddy Separator Silky polisher Colour sorter Riceshifter Modern Rice mill Equipment

  14. Impact of technological changes in rice milling Table 6.1: Milling cost and profit by different types of rice mill *Without modern equipment **With modern equipment

  15. Table 6.2. Employment in different rice mills

  16. Financial viability of the rice mills

  17. Procurement centre Farmer Faria Aratdar-cum-wholesaler Bepari Rice miller Paddy processor Aratdar Aratdar-cum-wholesaler Wholesaler Wholesaler-cum-retailer Retailer Government procurement Consumer Figure 5.1: Typical Marketing Channels of Paddy/ Rice in Bangladesh

  18. Marketing margins of paddy/rice for different actors (for 1 quintal of rice /and equivalent amount of paddy)

  19. Share of different actors in gross marketing margin, marketing cost and net margin

  20. in 2010 Map 6.1: Extent of rice surplus and deficit at district level in 2010

  21. Integration of Rice market • All the 12 districts rice markets found integrated • This study strongly supports marketing efficiency in the selected rice markets. • The results of the strong forms of market integration indicate strong form of market integration in all the rice markets • Govt. price policy of rice will be effective in rice market. • Rice market of Bangladesh , Eastern India, Vietnam and Thailand found integrated • The strong form of market integration does not support Eastern India-Thailand, Vietnam-Eastern India, Eastern India-Bangladesh and rest of markets support strong form of market integration.

  22. Policy options • Formation of farmers’ marketing cooperative / group • Dissemination of paddy prices of different important markets (by cell phone, display board at market places). • Provision of credit facilities for the farmers and paddy traders. • Husking mills should either be closed or modernized. Profitable cases should be financed . • Labeling on the bag of rice should be mandatory.

  23. Policy options contd. • Needs investigation of the nutritional aspects of milled rice after extracting bran to ensure the quality of rice. • Ensure regular and undisrupted power supply to rice mills • Vocational training programme helps to produce qualified personnel for operating automatic rice mills. • Govt. should develop a complete and accurate data base on rice mills and market intermediaries

  24. Thank You for Patience Hearing

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