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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

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

1 background and rationale of the research project
1 Background and Rationale of the Research Project
    • There has been concern over the efficient marketing system of rice in Bangladesh
    • due to volatility of rice prices in domestic and international market
    • Negative impacts on farmers and consumers
  • No visible sign of any serious imperfection in rice market.
  • Rapid technological changes in the rice milling.
  • Impact of semi-automatic and automatic rice mills
  • Increased volatility of international grain markets and the govt. policy of rice exporting countries necessitate to assess the integration of domestic and international markets.
slide3
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.

methodology
Methodology

The study is 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

methodology contd1
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 rice from Thailand, Vietnam, and Eastern India converted into import parity price (2000 to 2011)
slide10
Structure, conduct and performance of paddy market in Bangladesh

Table1: Buyer concentration in paddy markets

slide11
Structure, conduct and performance of paddy market in Bangladesh

Table 1: Buyer concentration in paddy markets contd.

slide13
Structure, conduct and performance of paddy market in Bangladesh

2. Entry barrier

Table 2 : Problems for the new entrant as perceived by established traders

slide14
Structure, conduct and performance of paddy market in Bangladesh

3. Degree of product differentiation (paddy)

No deliberate effort is made to make the paddy differentiated in the market.

4. Distribution of market information

  • No formal system exist for dissemination of market information.
  • Paddy traders collect market information through their own effort.
slide15
Structure, conduct and performance of paddy market in Bangladesh

5. Conduct at paddy market

Table 3: Price setting mechanisms during buying and selling paddy

slide16
Structure, conduct and performance of paddy market in Bangladesh

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.
  • From farmers’ perspective, paddy market is not running in favour of them.
market structure conduct and performance of rice milling industry
Market structure, conduct and performance of rice milling industry

1.1 Dimensions of market structure (4)

1.2 Degree of product differentiation

  • Product differentiation is exist buy does not create any

significant for competition

Table 4. Seller concentration in rice mill industry

market structure conduct and performance of rice milling industry contd
Market structure, conduct and performance of rice milling industry contd.

Table 5. Major problems for potential entrant as perceived by established mills

market structure conduct and performance of rice milling industry contd1
Market structure, conduct and performance of rice milling industry contd.

Table 6. Reasons for exit from the market

2 1 price policies
Market structure, conduct and performance of rice milling industry contd.2.1 Price Policies

2. Market conduct

  • 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.

2.2 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.

2.3 Policies aimed at coercing rivals

No evidence of predatory and/or exclusionary tactics adopted by the established firms in rice market.

3 performance dimensions
3. Performance-Dimensions

Figure 2. Capacity utilization of rice mills

54.45

  • Size of selling cost
  • Product quality
  • Progressiveness of the industry
  • Employment position
  • Discrimination by sex
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Impact of technological changes in rice milling
  • Number of husking rice mills are shrinking and the businesses are shifted either to semi-automatic or to automatic rice mills.
  • The demand for quality rice (brightness, polishing, free from foreign particulars and black rice) and higher price encouraged semi-automatic and automatic rice mill owners to use the new technologies.
  • The bran of semi-automatic and automatic rice mills have good demand in the edible oil mills
  • Automatic rice mills have overcome the problem of rainy season and shortage of labour supply for processing of paddy.
slide24
Table 8. Employment in different rice mills

*Without modern equipment

**With modern equipment

slide26
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 3: Typical Marketing Channels of Paddy/ Rice in Bangladesh

slide27
Table 10. Marketing margins of paddy/rice for different actors

(for 1 quintal of rice /and equivalent amount of paddy)

*only from rice ** Commission

slide28
Figure 4: Marketing margins of paddy/rice for different actors (for 1 quintal of rice /and equivalent amount of paddy)
slide30
in 2010

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

integration of rice market
Integration of Rice market
  • ADF test shows that all the rice price series were non-stationary at level but stationary in their first differences.
  •  All the 12 districts rice markets found integrated
  • Dhaka market is significantly integrated to all regional markets of rice markets in Bangladesh due to having the facility of infrastructure and information technology, which closely connected the markets to each other.
  • Price move in the unison in all the markets together. Central price policy making will be effective in rice market.
  • Rice market of Bangladesh , Eastern India, Vietnam and Thailand found integrated also
suggested policy options
Suggested policy options
  • Paddy market
  • Structure –Oligopsonistic and atomistic
  • Formation of farmers’ marketing cooperative / group
  • Development of market yard for paddy market as most of the paddy markets sit along and /on the road
  • Provision of credit facilities to paddy traders. The traders should have trading licenses.
  • Conduct
  • Cost of inputs in paddy production can be reduced through adopting cost reducing technologies and optimum utilization of machines.
  • Arrangement to be made to disseminate paddy prices of different important markets through mobile phones.
  • Display of buying prices of paddy on board by buyers Association / market committee on market.
suggested policy options contd
Suggested policy options contd.
  • Rice mills
  • Structure
  • Husking mills should be modernized to semi-automatic/automatic rice mills. Profitable cases should be financed
  • Conduct
  • Development and introduction of quality standard for rice in the market
  • The rice bag should contain minimum information about the product (name of the mill, its location, date of processing, number of boiling, net weight, variety of rice, millgate price). Labeling on the bag of rice should be mandatory
  • Needs investigation of the nutritional aspects of milled rice after extracting bran to ensure the quality of rice
suggested policy options contd1
Suggested policy options contd.
  • Performance
  • Ensure regular and undisrupted power supply to rice mills
  • Make available of spare parts at reasonable prices in markets Quality standard of the spare parts may be introduced
  • Contractual arrangements btw. rice growers and millers
  • Improvement in processing technology should be encouraged through providing various services (credit facility, technical knowledge and necessary permission)
  • Installation of Engleberg rice huller in the country should be banned
  • Vocational training programme helps to produce qualified personnel for operating automatic rice mills
suggested policy options contd2
Suggested policy options contd.
  • Ensure optimum use of by-products such as husk, bran, broken rice, husk–ash.
  • Wage discrimination by sex needs to be addressed.
  • Arrangement of foreign visits particularly the rice exporting countries for the millers may help to change the attitudes to the business. FAO may sponsor such visits.
  • Govt. should develop a complete and accurate data base on rice mills and market intermediaries.
slide36
Thank You

for

Patience Hearing

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