Assessing the market power of millers and wholesalers in the Bangladesh rice sector

Abstract

PurposeBecause of the increasing differential between farm and retail prices, the study proposes to investigate the extent of market power in the rice value chain of Bangladesh using advanced econometric techniques.Design/methodology/approachUsing a Stochastic Frontier Estimation approach on cross-sectional data, the study examines the price spread along the rice value chain to determine whether millers and wholesalers exercise market power.FindingsEmpirical results reveal that, on average, rice millers and wholesalers charge 33 and 29% above the marginal cost, respectively. This study confirms the non-competitive behavior of the rice market with wholesalers and millers wielding substantial market powerResearch limitations/implicationsA limitation of the study is that it does not include the retailers who also play a major role in the Bangladesh rice value chain. This is left for future study.Originality/valueThis study combines primary and secondary data collected on the Bangladesh rice sector to examine the market power of two major players along the value chain, millers and wholesalers, using an advanced econometrics approach.

Assessing the Effectiveness of Rice Procurement Programme and Farmers’ Profitability in some Selected Areas of Bangladesh

“…Government procurement centers situated in the country's different areas purchase paddy directly from the farmers and rice from the mill (Rahman et al, 2020). According to the internal food grain collecting policy, all types of farmers have the opportunity to sell paddy at the procurement center, following the government's strict grain standard, and a farmer can sell 120 kg to 3 tons of paddy in a season based on the size of the farm (MoF, 2017).…”

“… The capacity of government procurement is very limited in Bangladesh. The government is procuring only 5-7 percent of the domestically produced paddy at a reasonable farmgate price (Rahman et al 2020). The rest of the paddy is being purchased, processed and controlled by the private traders.…”

“…The procurement price is now solely related to food grain production costs and declared during the planting season. The current procurement process is said to be inefficient in providing opportunities to the farmers (Rahman et al, 2020). Earlier studies such as Dorosh and Shahabuddin (2002) investigated procurement prices in four years, three of which experienced extremely high procurement rates in Boro season.…”

Spatial Co-integration and Speed of Adjustment among Rice Markets in Bangladesh

“…Agriculture in Bangladesh is evolving from a conventional to a modern system. However, the rice sector has the most strategic significance in this transition phase, as it is the staple food for the entire population and the main source of livelihood for about 16 million farm households, thus it has become a gateway to Bangladesh's political economy [8].…”

“…The rice market's efficiency is critical for the welfare of both producers and customers. If, on the other hand, the rice market is suffering from problems, such as a shortage of credit to fund short-term stocks, incomplete information, insufficient transportation, a lack of quality management, and market power, the potential welfare gains of a well-functioning marketing scheme cannot be realized [8]. Under the Structural Adjustment Program initiated by the World Bank (WB) and International Monetary Fund (IMF), the government of Bangladesh has introduced major policy reorganizations over the last four decades to surge pricing capacity among its internal rice markets [9,10].…”