FOOD MARKET PRICE, STOCKS AND PUBLIC FOOD DISTRIBUTION SYSTEM

1. FOOD MARKET PRICE, STOCKS AND PUBLIC FOOD DISTRIBUTION SYSTEM Food Planning and Monitoring Unit (FPMU) Ministry of Food June 17, 2002.

2. Market Price The market price is one of the prime considerations of public food management in Bangladesh. Price stabilization especially food grains price stabilization in the developing countries like Bangladesh is required to arrest instability arising from shocks in the domestic supply of food grains due to shortfall caused by natural calamities or ample supply of bumper production. The stabilization of price constitutes an important element to maintain production incentive to the growers and to provide consumers welfare.

3. Average Wholesale Price of Coarse Rice, Bangladesh Taka/Quintal) Source: DAM

4. Average Wholesale Price of Wheat, Bangladesh Taka/Quintal) Source: DAM

5. Nature and Extent of Rice Price Stabilization There are two types of temporal variation in prices: Inter-year (annual) and Intra-year (seasonal), Annual price fluctuations in Bangladesh arise mostly from Fluctuation in Production, which can be attributed to random effect of natural calamities like floods or drought.

6. Nature and Extent of Rice Price Stabilization (Cont.) The seasonal component is defined as the intra-year pattern of variation, which is repeated constantly or evolve from year to year. The increase in the size of the boro harvest relative to aman and aus is the major factor of seasonal price variation. Increase in the share of boro in the total production have eliminated the steep seasonal rise in prices in June and July observed in the late 1971s and resulted in relatively stable prices from May to October. As a result, the ratio of peak to trough has been reduced.

7. Strategies for Price Stabilization • Price stabilization does not necessarily mean the fixation of foodgrain prices. It means to keep the fluctuations in market prices within reasonable limits. In Bangladesh following strategies and programs are used as a mechanism for stabilization of foodgrains prices. • Public foodgrains distribution • Domestic procurement of foodgrains • Encouragement of private import of foodgrains.

8. Stock • Stock includes Government food stock & private food Stock. Government food stock presently consists of mostly rice and Wheat

9. Foodgrain Availability and Requirement in Bangladesh from 1985/86 to 2000/2001 000 m. tons

10. Why Govt. needs food stock? • For security reserve • For distribution both in monetized and non-monetized channels • For emergency relief operation • To stabilize the market price

11. How much stock is needed? • The minimum stock=Dead stock (the amount of stock needed for the system to be operational) + stock level needed for food security consideration. • The food security consideration is that the public food distribution system must hold sufficient stocks to meet three months off-take requirement, allowing the time frame necessary for importing food grains to replenish the stock facilities. • Above the minimum stock there should be the emergency stock to meet any kind of disaster.

12. How stock is managed? • There are few components for stock management as: Supply Side: • Food aid • Import through own resources • Internal procurement Demand side: • Normal distribution • Priced channel • non-priced channels • Emergency distribution • Stock replenishment through auction, free sale • Lending foodgrain to others

13. PFDS (Public food Distribution System) • Objectives: • Make foodgrain available to poor households that would not otherwise be able to acquire enough food to satisfy their requirement • Stabilize prices by distributing foodgrains in urban and rural areas, thus preventing excessive foodgrain price increase • Support food grain prices and maintain incentives for domestic production through a system of domestic procurement of marketable surplus • Supply foodgrain to the priority groups • Arrange for the distribution of food during emergency situations such as natural calamities

14. Distribution of foodgrainsthrough the PFDS: • Two major channels: • Monetized (Sales) • Non-monetized (Targeted) • Monetized channels include: • Subsidized sales through Essential Priorities (EP) and Other Priorities (OP) • Sales to the Ministry of Eductation for Food for Education (FFE) Program • Open market sales (OMS) where food grain is sold in small lots at fixed prices whenever market price goes up at an abrupt rate.

15. Distribution of foodgrains throughthe PFDS: (Cont.) • Targeted distribution Channels include: • Food For Works Programs (Rural infrastructure development and rural development) • Vulnerable group development (Targeted to the poor women). • Relief programs (Test relief, Gratuitous relief, Vulnerable group feeding, Vulnerable group development

16. Govt.. Decisions Recent Changes in Food Policy Flows 2000-2001 Issues Private vs.. Govt.. import. Domestic Procurement: quantity, method, price Private import Liberalization. Enhance domestic procurement instead of govt.. import Procurement Food Aid 479000 MT Domestic Procurem- ent 1088000 MT Private Import 1062600 Public Food Distribution System: Total: 1774000 M.ton Rice: 983000 M.ton Wheat: 791000 M.ton Monetized: 267000 M.ton (15%) Non-Monetized: 1507000 M.ton (85%) Optimal Stock Level. Security Stocks. Price Support to the growers. Targeted distribution. Efficient stock management Stock to be raised to one million MT. Balance between rice and wheat Stocks Effectiveness of existing channels. Balancing the system. Increased Distribution in targeted programs. Less market intervention. VGD FFW FFE VGF EP OP Distribution

17. Public Foodgrain Balance - 2001/02 figure in lakh m. tons

18. Public Foodgrain Balance - 2001/02 (cont.) figure in lakh m. tons

19. Public Foodgrain Balance - 2001/02 (cont.) figure in lakh m. tons

20. THANK YOU.