POLICY OPTIONS FOR SUPPORTING AGRICULTURAL DIVERSIFICATION IN BANGLADESH

1. ToR # 06 POLICY OPTIONS FOR SUPPORTING AGRICULTURAL DIVERSIFICATION IN BANGLADESH IMPLEMENTING INSTITUTION Bangladesh Agricultural Research Institute (BARI) United International University (UIU)

2. STUDY TEAM

3. Outline of the Presentation • Definition of agricultural diversification • Rationale of the study • Methodology • Profitability and comparative advantage • of major commodities • Growth performance of major crops • Diversification in food consumption, agril. production, agril. trade • Constraints to agricultural diversification • Conclusion and Recommendations

4. Agricultural Diversification • Agricultural diversification implies a shift of resources from primary staple crop, namely rice and wheat to othernon-cereal crops, and/or to live-stock, poultry, fisheries & forestry. • It has been used around the world as a strategy to minimize risk, minimize income variability over seasons, optimize the use of land and other resources, change the food habit, increase protein intake, improve food security, promote exports, substitute imports, conserve natural resources, create employment opportunities and alleviate poverty for the farming households.

5. Rational of the study • Agriculture is an important sector of the economy of Bangladesh. It comprises crop, livestock, fisheries and forestry sub-sectors accounting for 55.7%, 13.24%, 22.37% and 8.68% of agricultural GDP respectively. • AD towards products with higher value-added contributed to more rapid agricultural income growth and might contribute to local employment creation by stimulating small farmers’ participation in the market. • Diversification in production is also likely to lead to diversification in consumption, which is required for healthier and more balanced diets.

6. RATIONALE OF THE STUDY • Consumption pattern has been changed from cereal to non-cereal food in the last 3 decades. - Expenditure on cereals decreased 28.87% to 28.41% in urban areas and 41.23% to 39.62% in rural areas between 2000 and 2010. • Overall demand for fruits, vegetables, dairy products, fish, fats & edible oils have been increased. - Expen. on fruits rose from 4.10% to 5.29% and from 2.59% to 3.49% in urban and rural areas. - Expen. on fish, meat & eggs and spices rose at national level from 12.48% to 13.71%; 8.02% to 10.31% and 7.13% to 9.99%.

7. Rationale --------- • The prices of fruits, vegetables, fish and other non-cereal products have also been increased significantly. • Imports of non-cereal food commodities have also been increased to a large extent. • Yet progress in agricultural diversification is not very encouraging. • Therefore, policy formulation is essential for diversifying our agriculture to enhance the production of non-cereal crops and non-crop commodities.

8. OBJECTIVES • To assist policy makers in identifying policy interventions that will allow agricultural households to diversify their agricultural production into micro-nutrient rich foods and/or those with a strong income generating potential. • To examine the past trends of diversification of crop and non-crop agriculture, and compare the rates of growth to those in neighboring countries to gain some perspective on how rapid (or slow) growth in Bangladesh has been. • To examine the socioeconomic and agro-climatic determinants of and constraints to agril. diversification.

9. KEY RESEARCH QUESTIONS What are the past trends of acreage and production of major food commodities and to what extent they differ from the trends of neighbouring countries like India and Pakistan? What are the changes in the consumption of different food commodities and how they are related to domestic food production? What changes have been taken place in financial and economic profitability of different food commodities over time and how they affect their production? What are the constraints to and opportunities for agricultural diversification in Bangladesh? What are the determinants of agricultural diversification in Bangladesh?

10. DATA AND METHODOLOGY • Primary Survey on Farm Households • Examine the determinants of agril. diversification. • Explore the constraints and opportunities to AD. • Analysis of secondary data/study results • Financial and economic profitability over time. • Trend and growth rate in domestic production. • Diversification in consumption, agril. production, and agricultural trade. • Data Sources • Primary data- Field survey • Secondary data- Res. reports, thesis, j. articles, HIES, BBS, and FAOstat

11. SAMPLING DESIGN

12. PRESENTATION OF RESULTS

13. PROFITABILITY AND COMPARATIVE ADVANTAGE OF AGRICULTURAL PRODUCTIONS

14. Figure 4.3 Benefit cost ratio of modern variety rice production in Bangladesh

15. Figure 4.5 Benefit cost ratio of wheat production over time in Bangladesh

16. Figure 4.6 Benefit cost ratio of maize production over time in Bangladesh

17. Figure 4.8 Relative profitability of cereal, fibre and pulse crops production

18. Figure 4.11 Benefit cost ratio of fruits production in Bangladesh

19. Financial Profitability of Agricultural Commodities The productions of all crops and non-crops enterprises are profitable 2. The profitability of non-cereal crop production is higher than cereal crop production. 3. Perennial fruit prod. are the best and livestock & poultry are the least profitable agricultural commodities.

20. Comparative Advantage of Agricultural Commodities • The values of DRCs for cereal, lentil and vegetables are less than unity. • It implies that BD has comparative advantage in producing these crops for import substitutions and export promotion. Source: Rashid et al.2009 Karim et al. 2011

21. Growth in Production, Acreage and Yield and their decomposition Comparative Analysis of Bangladesh performance with India and Pakistan

22. Table 5.1 Index of area, production and yield of rice crops

23. Table 5.3 Index of area, producton and yield of maize

24. Table 5.4 Index of area, production and yield of sugarcane

25. Figure 5.1 Changes in yields (t/ac) of selected spice crops over the years

26. Table 5.26 Growth decomposition in production of cereals in Bangladesh, 1990-2009 (%)

27. Table 5.28 Growth decomposition in production of sugarcane in Bangladesh, 1990-2009 (%)

28. Table 6.1 Comparative indices of area, production and yield of cereal crops, 1990-2009

29. Table 6.2 Comparative indices of area, production and yield of fruits

30. Table 6.3 Comparative indices of area, production and yield of vegetables

31. Table 6.4 Comparative indices of area, production and yield of pulses, oilseeds and spices

32. Table 6.5 Comparative indices of production and yield of livestock products

33. DIVERSIFICATION IN FOOD CONSUMPTION

34. Table 7.2 Trend of per capita availability of major food items in Bangladesh, 1990-2009

35. Figure 7.1 Per capita consumption of major foods in Bangladesh

36. Table 7.3 Per capita per day intake (gm) of major food items by residence

37. Table 7.4 Per capita intake (gm/day) of major food items by poor and non-poor

38. 7.5 Per capita consumption (gm/day) of major food items by operated land

39. Per Capita Consumption of Major Food Items by Poor and Non-poor • Major findings: • The overall consumption of non-poor people was 24.5% higher than that of poor people. • The PCC of livestock products, fruits and fish of non-poor households were much higher (46-87%) than that of poor people. • The consumption differences were found less in rice, potato, and vegetables between two groups.

40. Per Capita Consumption of Major Food Items by Operated land • Major findings: • The PCC of most food items except fruits has decreased to a large extent for marginal, small and medium category farmers in 2010 compared to 2000 and 2005. • For large farmers, the PCC of fish, meat, fruits, and edible oils has considerably increased and cereals, pulses and milk have decreased in 2010. Cereal consumption shows declining trend but it is still much higher than both national and desired levels. • Substantial gap remains in the consumption of quality food items (fish, meat, fruits & oils) between large farmer and other categories of farmers.

41. Per Capita Consumption of Major Food Items by Diversified and Non-diversified Farmers • Major findings: • The PCC of major food items for diversified farmers was higher than non-diversified farmers. It was found highest for meat (14.5%) followed by pulses (11.3%), fish (10.4%), edible oil (10.3%), and fruits (6.7%)..Only the PCC of cereals and milk was 11.1 and 14.7% lower for diversified farmers compared to non-diversified farmers respectively. . • Substantial gap remains in the consumption of quality food items (meat, fish, edible oils & pulses) between diversified and non-diversified farmers. • Although the level of consumption of diversified farmers is much higher compared to non-diversified farmers, but the consumption level is not balanced at all.

42. Per Capita Consumption of Major Food Items by Bottom and Top Quintile Groups • The level of consumption of vegetables, pulses, and fish is much higher for high-income group compared to low-income group. • Therefore, the balanced consumption of different food items remains an issue for the low-income households.

43. Share of Cereal Consumption • The share of cereal consumption to total food consumption has decreased over the time at rural, urban and national levels.

44. Share of Calorie Intake (kcal) from Non-cereals • The share of calorie intake from non-cereal foods has increased over the time at rural, urban and national levels.

45. DIVERSIFICATION IN AGRICULTURAL PRODUCTION

46. Trend of Agricultural Diversification in Bangladesh, 1993-2010 The overall agricultural diversity is increasing with fluctuating nature. A sharp increase that took place in 2007 which was due to the combined effect of sharp increase in the productions and prices of some vegetables, spices, fruits, and fishes.

47. ADI of Different Regions (1993-2010) The highest AD took place at Chittagong and Barisal region over the time due to the increase of the productions and prices of some non-cereal commodities. The lowest AD took place at Rangpur and Rajshahi region. Its implying a wide scope for diversifying agriculture through introducing high value crops and non-crop commodity to the existing agricultural farming in future.

48. Comparative ADI of Bangladesh, India and Pakistan, 2010 • In 2010, the ADI of Pakistan was much higher than BD & India. • The ADI of BD was little bit higher in that period.

49. Determinants of AD at Household Levels Marginal effect of different variables included in the probit model Dependent variable = ADI (0 to 1)

50. Determinants of AD at National Levels Marginal effect of variables determining AD at national level