Potato price hike : Plenty production, scarce supply

Share on facebook
Facebook
Share on twitter
Twitter
Share on pinterest
Pinterest
Share on linkedin
LinkedIn

When Spaniards brought potatoes from the New World in the mid 16th century, none of them, neither the old world habitants, knew what this seemingly tasteless, odorless vegetable would become in the future. Between 1700 to 1900, the potato has become the world’s fourth most produced food crop. And for valid reasons thanks to its versatility as a food source. It’s a staple food in many countries and holds an essential position in the human food supply.
Bangladesh is no different. Potato is used as a vegetable, snacks, ingredients for preparing other dishes and also, half-rotten ones are used as cow fodder. It’s perhaps a staple diet for bachelors and the poor section of the population. A hike in potato price is a thing of concern. However, it seems unlikely, as the production was never thought to be an issue. According to the Bangladesh Bureau of Statistics, Bangladesh produces about 10 million tonnes of potato per year, whereas yearly demand is 7 to 8 million tonnes. So how come the hike? And what’s the nature of it?

The hike

By mid-October 2020, one kg of cardinal or diamond variety of potato was sold at Tk50-55 per kg in the open market. Numbers clocked Tk60 by late October. Before reaching at this level, potato prices had already risen by 20% since the start of that month. If you’re wondering, it’s a 100 percent price hike compared to last year. The public was mad understandably. The price of other vegetables has also increased since that time. It’s not like the price shot up suddenly. By June 2020, potatoes were already being sold at Tk28-32 per kg, a 65% increase compared to 2019. The crossing of Tk50-55 is just a trend that has been started way earlier in this year. It’s surprising since generally, the price of this particular food source stays around Tk20-22 per kg and never exceeded the Tk30 mark even when production was low compared to the 2019-2020 yield. Let’s have a closer look. According to a report by the Government Department of Agriculture Marketing, the production cost of per kg potatoes in the 2019-20 fiscal year was Tk8.32, while farmers sold them at Tk 10-12 per kg. How come this same product is sold at more than Tk50 in the retail market!

Let’s have a more detailed look. At the start of this year, cold storages sold potatoes at Tk19 per kg. This includes grading charges (Tk0.45), storage rent (Tk3.66 per kg), and weight loss (Tk0.88). During the start of the COVID-19 pandemic in Bangladesh, prices increased to Tk22.50. But since August, prices shot up to Tk35 per kg. And by October, it reached Tk40-42 per kg. So this was the price at the cold storage gate, and it crosses Tk50 by the time it comes to the retail market.

Government explanation for the hike

Agricultural minister of Bangladesh, Abdur Razzaque, indicates several reasons for the sudden price hike. According to him, a four-month long flood in northern Bangladesh, one of the chief potato growing regions, has hampered production. Besides, cold storage facilities don’t have enough potatoes stored compared to previous years. The coronavirus pandemic played a role behind this hike, according to the government and various other sources. During the lockdown, the government was handing free or subsidized aid to the general people. Potatoes were distributed, and many argue these have caused a shortage despite considerable production. Foreign aid agencies are also to be partly responsible. They bought a massive amount of this vegetable in the April-May timeline to distribute among 10-12 lakh Rohingya refugees camped in Cox’s Bazar. Since there was a massive production and a government-imposed subsidy of 20%, potatoes were exported in large volumes. Last year, from July to September, potato exports amounted to just 0.3 million US dollars. In contrast, this year, more than 10 million dollar worth of potatoes have been exported at the same time. This probably created a shortage in the home market. There is also a price hike going on in India and Nepal. In the neighboring Indian state of West Bengal, the price is around Rs34-38 (Tk39-43) per kg. This might have a spillover effect on the Bangladeshi market. The government also blames corrupt business practices to be a crucial reason. Storage owners and business entities are holding back stored potatoes or selling at inflated prices. Despite production reaching more than 1.09 crore tonnes during the fiscal year of 2019-2020 against a demand of 77 lakh tonnes in the home market, general people are finding it tough to buy this essential vegetable.

Cold Storage owners differ in opinion

Contradictory to government reports, store owners and traders are telling a different story. The last two years’ bumper production arguably made potatoes not profitable for the farmers; hence, production may have been less than predicted. Cold storage association says this year’s potato storage amounted to 45 lakh tonnes, 10 lakh tonnes less than the previous year. Also, they refute the government estimates and predict 2020s potato production is around 85 lakh tonnes. About 11 lakh tonnes are stored as seed for the coming season.

There are other complaints. Electricity prices have risen this year, making storage costly. Facility owners say they have nothing to profit from illegally storing the vegetable, as they just rent their facilities. Since holding costs have risen, they can’t lower the prices. However, specialists voice doubt in this claim.

A secret syndicate?

There is a well-known phenomenon in the Bangladeshi market. Often, despite massive production, price skyrockets, thanks to alleged corruption among traders and suppliers. In many instances, secretly massive amounts of products are stored, and after prices rise they are sold at a very profitable rate.
The unexpected hike in the price of onions is the most recent example of this. Last year, India imposed a ban on onion export. Prices in the Bangladeshi market skyrocketed as a result. It was Tk50 per kg in August, and by November, it crossed Tk200 per kg. Of course, the export ban was a reason, but various task force operations revealed a vast amount of onion was illegally stored. The same tendency has been common in the case of many essential commodities. During Ramadan, prices regularly surge up. Even right now, many items like rice or other vegetables are being sold at a higher price.
It begs the question – How come this vegetable, which costs around Tk8-9 per kg to produce, reaches Tk60 per kg in the retail market? It’s alleged that since July-August, cold storages around the country stopped the supply of stored potatoes, creating an artificial crisis. Various reports show that cold storages have been selling potatoes at Tk35 to per kg, and the wholesale price is hovering around Tk40 in Kawran Bazar.
A food crisis

Recently, essential commodities like onions, rice, chickens, and potatoes all have experienced price hikes to some extent. There was a time when the government itself promoted potato consumption to relieve pressure on Bangladesh’s staple food, rice. Lower-income households and students are very dependent on potatoes; a dependence which increased more due to the pandemic. However, this widespread demand is not being met, creating pressure to search for a supplementary diet, which is almost non-existent. Potatoes contain significant amounts of fiber, potassium, manganese, magnesium, phosphorus, and vitamin (B6 and C). It lacks cholesterol. Higher immunity, increased blood sugar control, and a reduction in heart diseases is the prime benefit of potato consumption. Its antioxidants provide immunity against chronic diseases. Besides all these nutritional values, potatoes are incredibly filling, helping to reduce food intake. Also, it provides much-needed food security for low-income people. It is widely used as a supplement for meat and vegetables. Understandably, a price hike in potatoes creates a long-term ill impact on the mass population’s nutritional level.

Government measures

The government has already taken steps to counter soaring prices. The Department of Agricultural Marketing has fixed Tk30 per kg price and instructed Deputy Commissioners (DC) to ensure potatoes are sold at this rate. On the other hand, wholesale prices have been fixed at 25tk per kg, and the cold storage selling price is Tk23. Various government agencies are reported to be monitoring this fixed-rate accordingly.

The measures are already yielding some results. According to the Trading Corporation of Bangladesh (TCB), the price has decreased by 9.5 percent and is likely to follow. Various markets are selling potatoes at 45tk per kg (retail price). Task Force operations have already revealed some corrupt businessmen storing potatoes illegally.

We were afraid the production of food crops would plummet due to the COVID-19 pandemic. Our farmers proved this fear wrong, yet they didn’t benefit from their hard work. Mismanagement and intermediaries are eating up the results. Specialists warn if the government doesn’t formulate a policy regarding potato production and take staunch steps against syndicates and corrupt business entities, price hikes like this will come again and again.

Share:

Share on facebook
Facebook
Share on twitter
Twitter
Share on pinterest
Pinterest
Share on linkedin
LinkedIn
On Key

Related Posts

Going Green with Guardian

Every entity on the planet bears the responsibility to understand the circumstances that enable its existence. In the quest for superiority, we seem to have