POLICY OPTIONS FOR SUPPORTING AGRICULTURAL DIVERSIFICATION IN BANGLADESH

POLICY OPTIONS FOR SUPPORTING AGRICULTURAL DIVERSIFICATION

IN BANGLADESH

Bangladesh Agricultural Research Institute (BARI)United International University (UIU)

IMPLEMENTING INSTITUTION

ToR # 06

Bangladesh Agricultural Research Institute 29 November, 2012

Outline of the Presentation

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


Rational of the study

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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.

Bangladesh Agricultural Research Institute

Rationale ---------

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HIES data shows the overall demands for fruits, vegetables, dairy products, fish, and edible oils have been increased.

Prices of most non-cereal food commodities have 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.


OBJECTIVES


1. 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.

2. 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.

3. To examine the socioeconomic and agro-climatic determinants of and constraints to agril. diversification.

29 November, 2012Bangladesh Agricultural Research Institute


Primary Data Examine the determinants of agril. diversification. Explore the constraints and opportunities to AD.

Secondary Data 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

DATA AND METHODOLOGY



SAMPLING DESIGNSl. No

12 Surplusdistrict

Selected 10 diversifiedcrops

Samplehouseholds

Control group

Total sample

1. Dinajpur Garlic, Maize, Pointed gourd, Potato 120 30 150

2. Rangpur Maize, Banana 60 30 90 3. Bogra Potato 30 30 60 4. Pabna Onion 30 30 60 5. Jessore Okra, Pointed gourd,

Culture fish 90 30 120 6. Kustia Banana, Okra 60 30 90 7. Mymensingh Culture fish 30 30 60 8. Tangail Pineapple 30 30 60 9. Faridpur Onion, Garlic 60 30 9010. Gazipur Poultry 30 30 6011. Chittagong Poultry 30 30 6012. Rangamati Pineapple 30 30 60

Total 600 360 960



PROFITABILITY AND COMPARATIVE ADVANTAGE OF AGRICULTURAL

PRODUCTIONS



Financial Profitability of Agricultural Commodities

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AusBoroAmanWheat

LentilChickpea

PotatoJuteMaizeMungbean

BlackgramGroundnut

SesameOnion

MustardSoybeanTurmericChiliGarlicGingerGuavaPineappleMango

OrangeBroiler

Layer henCow fatenning

GoatDairy cow

Koi fishPangasPond fish

Carp fishShrimpRice-fishCarp fish

0

5

101. 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.



Economic Profitability of different crops at Export Parity Level, 1997-99

Jute

BoroGram

Brinjal

Barboti

Tomato

0

100

200

300

400

500

600

11 10 7 3 5 8 10 27

322352

207

329

554

498

‘000

’ Tk/

ha

Source: Shahabuddin, & Dorosh, 2002

Cereals VegetablesPulses


In economic point of view, the production of cereals, pulses and vegetables are profitable at export parity level.


Economic Profitability of Different Crops at Import Parity Level, 1997-99

Wheat

AmanBoro Aus

Sugarcane

VetchGramLen

til

Mustard

Sesame

Linseed

PotatoChilli

Onion

-50

0

50

100

150

200

720 18 11

33

9 12 15

-3 -6-1

185

7

86

'000

' Tk/

ha

Source: Shahabuddin, & Dorosh, 2002

Pulses SpicesOilseedsCereals


Except oilseeds, the production of cereals, pulses and spices are also profitable at import parity level.


Comparative Advantage of Agricultural Commodities

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Fine Rice Aromatic Rice

Coarse Rice

Wheat Maize Lentil0

0.10.20.30.40.50.60.70.80.9

0.561

0.406 0.433

0.822

0.5680.429

DR

C

0

0.2

0.4

0.6

0.8

0.16 0.17 0.170.25 0.27

0.3100000000000

02 0.370.48

0.55

0.6000000000000

01

0.6300000000000

09

DR

C

Source: Rashid et al.2009 Karim et al. 2011


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.


Major findings:

1. The overall impressive growth performances were observed in maize, onion, garlic, potato, pointed gourd, okra, banana and pineapple.

2. Although the GRs of area and production of pulses were negative, but yield GRs were found positive in BD, India and Pakistan due to adoption of improved technologies.

3. The overall GRs of oilseeds were positive in BD and Pakistan, but it was negative for India. The GRs of vegetables, egg and mutton were found inspiring for Bangladesh compared to other two countries.

4. Fisheries sector also performed better both in Bangladesh and Pakistan.

Growth Rates of Area, Production and Yield of Different Crops, 1990-2009



DIVERSIFICATION IN FOOD CONSUMPTION



Major findings:1. The highest GR registered in maize availability (36.47%)

followed by egg (12.75%), potato (9.77%), and meat (7.38%) during 1990-2009.

2. The per capita availability of mango, jackfruit, papaya, pointed gourd, sugar, onion and garlic also registered impressive GRs during that period.

3. The GRs of some vegetables (okra, cabbage, brinjal, cauliflower, bittergourd) were found to be positive that ranged from 2.20% to 5.14%.

Growth Rate of Per Capita Food Availability



Major findings:1.The overall consumption of non-poor people was 24.5%

higher than that of poor people.

2.The PCC of livestock products, fruits and fish of non-poor households were much higher (46-87%) than that of poor people.

3.The consumption differences were found less in rice, potato, and vegetables between two groups.

Per Capita Consumption of Major Food Items by Poor and Non-poor



Share of Cereal Consumption

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Rural Urban National10

20

30

40

50

60

70

5648

5551

444948

4146

HIES_2000 HIES_2005 HIES_2010

% S

hare


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


Share of Calorie Intake (kcal) from Non-cereals

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Rural Urban National1015202530354045505560

23

32

2525

332729

39

31

HIES_2000 HIES_2005 HIES_2010

% S

hare


The share of calorie intake from non-cereal foods has increased over the time at rural, urban and national levels.


DIVERSIFICATION IN AGRICULTURAL PRODUCTION


Trend of Agricultural Diversification in Bangladesh, 1993-2010

1. The overall agricultural diversity is increasing with fluctuating nature. 2. 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.

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19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

0.45

0.5

0.55

0.6

0.65

0.7

0.52

0.66

0.58f(x) = 0.00439628482972144 x + 0.515013071895424R² = 0.417683227532848A

DI


ADI of Different Regions (1993-2010)

1. 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.

2. 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.

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1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0.30.350.40.450.50.550.60.650.70.750.8

Barisal Chittagong Sylhet Dhaka Khulna Rajshahi Rangpur

ADI



Comparative ADI of Bangladesh, India and Pakistan, 2010

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Bangladesh

India Pakistan0.30.40.50.60.70.80.9

0.581 0.573

0.756000000000

001

Leve

l of A

DI


In 2010, the ADI of Pakistan was much higher than BD & India.

The ADI of BD was little bit higher in that period.

Determinants of AD at Household Levels

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Explanatory variables dy/dx SE z-stat Probability

Irrigated land (decimal) 0.0000752**

0.00003 2.31 0.021

Land suitability (dummy) 0.0155356

0.01209 1.29 0.199

Training received (No.) 0.0091053***

0.00287 3.17 0.002

Extension linkage (score) 0.0037835***

0.00113 3.36 0.001

Family influence (dummy) 0.0249559***

0.00557 4.48 0.000

Credit facility (dummy) 0.0131809*

0.00732 1.80 0.072

Storage facility (dummy) 0.0034165

0.00654 0.52 0.601

Access to market (km)-0.0069307 0.00507 -1.37 0.172

Dependent variable = Value of ADI (0 to 1)

Marginal effect of different variables included in the probit model


Determinants of AD at National Levels

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GLS regression estimates of variables determining AD at national level

Variables Coefficients SE z-stat Probability

Constant 0.2217013***

0.0499821

4.44 0.000

Wage rate (Tk/day) 0.0034604***

0.0006451

5.36 0.000

Wage rate squire -0.0000122*** 0.0000028 -4.35 0.000

Road density (km) 1.7001180**

0.8302275

2.05 0.041

Road density squire -9.4564130**

4.0094610

-2.36 0.018

Rainfall (mm) 0.0000358*** 0.0000085 4.22 0.000 Agril. credit disburs. (Lakh Tk) 0.00000086** 0.0000004 2.20 0.028 Bangladesh Agricultural Research Institute

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DIVERSIFICATION IN AGRICULTURAL TRADE



Net Trade of Major Food Commodities of Total Availability and Production, 1990-2009

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Crop

Bangladesh India Pakistan% of net trade of % of net trade of % of net trade of

Availability Production Availability Production Availability ProductionRice 1.9 1.9 -2.3 -2.2 -39.5 -28.3Wheat 59.3 145.6 -0.4 -0.4 6.1 6.5Maize 38.2 61.7 -4.9 -4.7 0.5 0.5Pulses 37.5 59.9 8.5 9.3 20.7 26.1Oilseeds 65.2 187.6 -4.0 -3.9 31.3 45.5Spices 5.2 5.5 -9.6 -8.8 -12.3 -11.0Vegetables -0.1 -0.1 0.1 0.1 0.8 0.8Potato 0.1 0.1 -0.2 -0.2 -3.1 -3.0Pineapple -0.0 -0.0 -0.1 -0.1 100.0 0.0Banana 0.0 0.0 -0.1 -0.1 -7.0 -6.5

Note: +ve sign represents net import and –ve sign represents net export



Share of Non-cereal Commodity Trade to Total Agricultural Trade, 1990-2009

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Bangladesh

Pakistan-500

50100150200250300

77.3-1.6

68.2

25.1

67.5

49.7

66.6

45.1

1990-94 1995-992000-04 2005-09

% S

hare

Note: +(ve) sign represents net import and –(ve) sign represents net export

India


The share of net import of NCC to TAT has decreased over the years in BD.

But, opposite scenario is found in Pakistan.

India is a net exporter in this case.


Share of Non-cereal Food Trade to Total Food Trade, 1990-2009

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Bangladesh

India Pakistan-104090

140190240290

65

-7

35

5510

35

67

12 38

69

6

38

1990-94 1995-992000-04 2005-09

% S

hare

Note: +(ve) sign represents net import and –(ve) sign represents net export


In the case of non-cereal food trade to TFT, BD, India and Pakistan are net importers.

But, the shares of net import of NCFC have increased in BD and Pakistan over the time.

India is found to be an exporter during 2005-09.

Constraints to agricultural diversification

Constraints Respondent

(N = 360)% of

responsesLack of suitable land/land far away 163 45.3Lack of sufficient capital 159 44.2Scarcity of labour and its higher price 95 26.4Higher cost of production 89 24.7Lack of fair price of the produces 63 17.5Lack of training facility 33 9.2Infestation of insects and diseases 32 8.9Higher price of fertilizers 30 8.3Required higher labour 29 8.1Lack of HYV seed/seedling/check 26 7.2Lack of short duration crop 14 3.9High risk in production (bird flu, etc) 14 3.9Lack of irrigation facility 12 3.3Higher price of seed/seedling/feed/cheek/fingerling 11 3.1Natural calamities (drought, rainfall, storm, fog) 6 1.7Lack of credit facility 5 1.4Lack of transport facility 5 1.4Load shading of electricity 4 1.1



1. The cultivation of agril. commodities are profitable both in financial and economic point of view. But, non-cereal productions are more profitable than cereal production.

2. Maize, potato, pointed gourd, okra, onion, garlic, and mango show impressive growth performance both in area and production during 1990-2009. The overall growth performance of maize, oilseeds, vegetables, potato, mango & fish found better in BD compared to India and Pakistan.

3. The share of cereal food consumption has gradually decreased over the time. Again, the share of calorie intake from non-cereal foods has increased at all levels. The PCC of livestock products, fruits and fish of non-poor households was much higher (46-87%) than poor people.

4. Despite expanding food supply, agril. production is not becoming more diversified. The average level of ADI has grown from 52% to 58% over the last 18 years (1993-10). The average ADI of BD is 39% lower than Pakistan and 9% lower than India. So, there is scope for rapid diversification in Bangladesh.

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CONCLUSION



5. Labour wage, road density, rainfall and agricultural credit disbursement significantly affect the level of AD at the district level. Besides, Agricultural diversity at the farm level is affected by irrigated land, agricultural training, extension linkage, family influence, and credit facility.

6. Except vegetables, BD is a net importer of most food commodities. With demand for non-cereal foods faster than domestic supply, the balances of agricultural trade and food trade in BD have deteriorated manifolds in the past decades. Pakistan’s scenario is little bit similar to BD, but India’s balance of trade for both agriculture and food are mostly positive.

7. Non-diversified farmers have identified different constraints related to production, marketing and social in diversifying their agriculture.

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CONCLUSION



1. Development of rural infrastructure

2. Strengthening extension services

3. Facilitating agricultural credit

4. Facilitating crop insurance

5. Formulating price support policy

6. Linkage with international market

7. Development of new technologies

8. Encouraging farm mechanization

9. Assuring quality input supply

29 November, 2012

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POLICY OPTIONS FOR SUPPORTING AGRICULTURAL DIVERSIFICATION IN BANGLADESH

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