Mehedi Hasan, Assistant Manager, CRM- SME and Mitali Saha, Senior Officer, Corporate Division

Rice is the most significant cereal and staple food in Bangladesh for which we have been acknowledged as one of the world’s top rice consuming countries. Rice provides more than 70% of the total calorie intake in Bangladesh. According to the report published by the Food and Agriculture Organization (FAO) of the United Nations in 2020, the average per capita rice consumption in Bangladesh was second highest in Asia with an average of 179.9 kg per year while the world average was 53.5 kg per year; during the period from 2016 to 2019. Despite various challenges posed by the Covid-19 pandemic and floods, Bangladesh’s rice production reached almost 37.14 million metric tons (MT) in 2019-20 as stated by the Bangladesh Bureau of Statistics.

International Rice Market - At a Glance

Rice is the basic food of more than half of the world’s population. According to the USDA (United States Department of Agriculture), approximately 500 million tons of milled rice has been produced globally during the year 2019-2020.China is the largest producer, accounting for 30% of the production, followed by India (24%), Indonesia (7%), Bangladesh (7%), Vietnam (5%) and Thailand (4%). According to MarketWatch, some of the significant global exporting countries of rice include India, Thailand, Vietnam, Pakistan, and Brazil. Unlike exports, the import scenario of rice is quite fragmented, with the top five importers accounting for only 30% of the global imports. The global rice consumption is dominated by countries in the Asia Pacific region, like China, India, Indonesia, Bangladesh, and Vietnam.

Rice Import-Export

IMPORT

Philippines was the largest importer of rice, importing 2.5 million metric tons in the year of 2018-19 and China was the second with about 2.3 million metric tons of rice import worldwide in that year. Although China is in the leading position for rice producing country in the world, due to high consumption of rice in the country they still have to import rice from international market.

EXPORT

India had the highest export volume of rice worldwide, with 9.8 million metric tons as of 2018- 2019. Thailand was the second largest rice exporter, with about 7.56 million metric tons of rice worldwide in that year. India is also the leading exporter of basmati rice in the global market. The major countries importing rice from India are Saudi Arabia, UAE and Iraq with 9.3%, 9.2% and 7% of the total rice export shares from India, respectively.

Rice Mill Industry of Bangladesh

The rice milling sector in Bangladesh is undergoing a revolution. In recent years, significant numbers of people are not using Dheki or traditional method for the paddy processing. This place has been occupied by the machines through automated rice mills. As, per capita income of people in Bangladesh has increased in recent years, people now prefer processed rice, which is less costly, looks glossy, takes less time to cook, free from stones & dead rice, and has longer shelf life.

a. Types of Rice and its Nature of Dependency

Rice is the key crop and staple food in Bangladesh. Almost 70-80% of our cultivable land (10.5 million hectares) is used for rice production. Production of rice depends highly on nature. Broadly, there are three categories of rice - Aus, Aman and Boro. Cropping calendar of Bangladesh is given below to understand the planting and harvesting season of rice.

Aus rice is planted through March to first half of May and harvested on July and first half of August. Aman rice is planted from last half of May to first half of August and harvested on November to first half of January. Boro rice is planted from last half of December to first half of February (next year) and harvested from last half of April to first half of May.

b. Different Category of Rice Mills

Generally rice mills are categorized by their production process. There are three types of rice mills in Bangladesh:

-Automated Rice Mill

-Semi-Auto Rice Mill

-Traditional Husking Mill

Normally millers source paddy from the traders/ wholesaler (locally known as Aratdar/Faria) and store it in warehouse. The paddy has been processed through mainly following stages:

These processes will be discussed in brief in the following section.

i) Automated Rice Mill

In an automated rice mill, all the stages of rice milling processes have been functioned by automated machines. The main division of automated rice mill is parboiling unit. The main function of the parboiling is to boil the paddy and the drying section dries the paddy to further process. Dried paddy has been processed through following stages in Automated Rice Mills:

Machinery Setup of Auto Rice Mill with Costing:

In auto rice mill different types of machinery are required for different stages of operations. The price of the machines also depends on the different stages of production and it can vary from brand to brand.

The average price of the standard boiler machine is about BDT 4.8 million to 8.0 million, which has the capacity of boiling (assuming 16 hours) 50 ton to 100-ton paddy per day. But the cost of the Japanese and Chinese brand is lower than the Korean brand. However, almost 90% of parboiling rice milling machineries in Bangladesh are generally imported from India. In case of quality, machineries from Japan and Germany are better but expensive compared to Indian machineries. The average cost of Indian machine for parboiling section is about BDT 12 million for 100 tons per day capacity. Another Indian machine for drying section has the average cost of 100 tons per day capacity, costing about BDT 12 million. But the cost of Chinese brand is only BDT 4.2 million. However, 90% of Milling and Bagging machineries are imported from China.The price of the Chinese machine of milling is about BDT 15 million to 20 million for 100 tons per day capacity. Color sorter machines are very expensive. The Indian color sorter machine costs around BDT 4.5 million to 6 million.

ii) Semi-Auto Rice Mill

Semi-auto rice mill doesn’t process the paddy in automated way. Basically, the paddy has been boiled by the boiler keeping paddy in an open house (made by brick and cement) and then the paddy is dried in an open space locally known as Chatal. The dried paddy is processed through milling to get the rice. The output from semi-auto rice mill is not as sophisticated in nature as the millers of semi-auto rice mill needs to sort the rice by color sorter machine.

iii) Husking Mill

Husking mill is the traditional approach of the rice milling in which rice has been boiled and dried manually like semi-auto rice milling process. It is basically a single pass mill. Steel is used by creating high pressure to remove husk and bran from the paddy. It results in many broken rice and kernels. Actually, it was the introductory phase of rice milling in Bangladesh. During the period of 2012 to 2014, more than 12000 husking mills were shut down as the husking mill doesn’t compete with auto-rice mills and semi-auto rice mills regarding cost effectiveness and production capacity.

c. By Product Generation

Rice mills can produce three varieties of by-products which include rice husk, rice bran, and broken rice. The percentage of head rice, rice husk, rice bran and broken rice varies according to mill types. On average, automatic rice mills could generate 67.67%, 5.60%, 20.67% and 1.0% of head rice, rice bran, rice husk and broken rice respectively, while husking mill produces less amount compared to automatic.

d. Category and Division wise rice production in Bangladesh

As said earlier, there are three main varieties of rice produced in our country: Aus, Aman, and Boro. Among them Boro and Aman varieties contribute around 93% of our total rice production.

Bangladesh is divided into eight divisions among them the northwest part of our country: Rajshahi and Rangpur Division contribute almost 34% of our total rice production. Less industrialization, abundance of cultivable land, favorable weather etc. results in superior rice production in these areas.

e. Domestic Demand and Trading Scenario

Though total rice production in Bangladesh has almost tripled since the country’s post-independence period, from the following table, we can see that the domestic demand (=Production + Import – Export) of our country is not being fulfilled by its production. So, we have to depend on the import of rice every year. At the same time, we should keep in mind that the population of our country is increasing by two million every year. On the other hand, total cultivable land is decreasing at a rate of more than 1% per year to meet the increased population demand (the construction of industries, factories, houses, roads, highways etc.). Besides that, the production of rice is hampered every year due to climate change and various natural disasters.

Generally, four groups are involved in the channel for milled rice: producers, aratdar/bazaar, mills and wholesalers/ retailers. Farmers grow crops, harvest them and sell them to the village market or various intermediaries (faria, aratdar, or agent). After harvesting crops from the field, it needs to be processed for final consumption. At this stage, rice millers collect, process, and grade crops. City Auto Rice Mills Limited, Raipur Auto Rice Mills, Majumder Group of Industries, Kazi Auto Rice Mill, Rashid Automatic Rice Mills Limited, A.R Specialized Auto Rice Mill are some of the top rice mills in Bangladesh. Rice millers then supply the rice to the wholesalers or retailers and finally it goes to the end consumers.

Impact of COVID 19 on Rice Market- A Blessing rather than Curse

Corona virus has affected almost every spheres of life in the world including different businesses and industries. Agricultural sector in our country is not an exception. During the period of March-April’20 rice millers faced cash crisis for lockdown and limited banking hours. Since the mainstream rice mill owners had their bank accounts with private banks, they were facing a cash crunch for which they couldn’t purchase paddy. So, for a short period of time, there was an uncertainty about supplying rice to the government storehouses in due time. But from May’20 and onwards, the situation has been improved. As rice is the basic food item of our country, regardless of any situation people will consume it. Despite the pandemic, due to handsome production and government policy, rice millers did not face much difficulty in this pandemic rather sales of rice increased during the time as people used to purchase more than regular out of fear and also different organizations and NGOs procured rice to distribute relief. During the 3rd quarter of 2020, price of rice increased by millers to BDT 5-7 per kg due to unavailability of paddy for flood and cyclone as stated by millers. So, the pandemic seems to be a blessing for rice millers. Recently, AIREA (All India Rice Exporters Association) stated that in the fiscal year of 2020-21, export of non-aromatic rice will cross over 10 million MT.

Present Market Condition and Industry Overview

Our rice market is mainly operated by both government and private sector players. As per the information provided by Bangladesh Auto Major and Husking Mill Owners Association, there are 18,700 rice mills in Bangladesh from which 500 are automated rice mills, 700 are semi-automated rice mill and 17,500 are husking mills. Most of the mills are located at North Bengal region. The success factor of the industry depends on the paddy production. Another aspect of the industry is that; even though the farmers are the main catalyst in this industry, they are not happy. Most of the time middleman (faria/aratdar) gets the benefit.

The price of rice fluctuates frequently in the Bangladesh market because of several reasons including natural disasters, strong syndicates, creating some artificial crisis, high-profit tendency, increased price of seeds and fertilizers etc. Generally, in November, December and January these three months farmers harvest crops resulting in more supply in the market and the market offers relatively low price of rice. On the other hand, in May, June, and July these three months customers have to pay a very high price due to floods and other natural disasters.

The food grain reserve has dwindled to seven lakh tonnes in December’20 from 13 lakh tonnes in December’19. Of this, around five lakh tonnes are rice, according to the food ministry. Bangladesh took some policy measures to control the price of rice from 30 September 2020. Wholesale prices of fine rice (Miniket) is fixed at BDT 51.5 per kg and BDT 45 per kg in the case of medium-quality rice, in an effort to avert further increases in prices of essentials. Also, as a procurement policy, the government purchased parboiled rice at BDT 36 per kg, white rice at BDT 35 per kg and paddy BDT 26 per kg. 

Recently the government is going to allow the private sector to import six lakh tonnes of rice with 15% duty (which was 62.5% before) to stabilize the rice market. The authorities will fix how much rice an individual or a firm will be allowed to import so that farmers do not incur losses. As the rice price is high, the government is allowing the private sector to import rice under special consideration. The government will also import rice when necessary.

Future Prospects and Possibilities of Rice Market in Bangladesh

In 2019-20, agriculture sector has contributed 13.35% in total GDP of our economy. And rice is the most vital element of this agriculture sector. Bangladesh is currently the world’s fourth-largest rice producer. As it is the basic food grain of Bangladesh, this sector has huge prospects and possibilities in near future. Despite having huge production we still have to import rice from outside. If we want to increase our production within our limited resources, we must use modern technology in our farming process as use of drones, field sensors, satellites for water balance calculation, spraying, and other operations. This use of technologies helps to reduce production costs, save resources, and maximize productivity. In recent times we are
facing various climatic changes, which harm our production. We can adopt Climate Smart Agriculture (CSA) practice to boost up the production. A pilot project of CSA was conducted by IRRI and ADB in Chattogram, resulting in 20% higher production than the regular. If we consider the cost-benefit analysis of this system then it can expect an average increase in income of BDT 30,642 to 36,321 per hectare (an average increase of 52% - 61%).

Financing facilities should be ensured along with crop insurance policy to facilitate the farmers, millers, exporters, and related parties. According to Bangladesh Bank, in 2018-19 schedule banks disbursed BDT 23,616.25 crore as farm loan for 38,83,424 borrowers. The Bangladesh government has introduced a stimulus package of BDT 5,000 crore for the farmers with a 4% interest rate, which is indeed very satisfactory news for agriculture. We need to increase the amount of credit in this sector and arrange loans to farmers on easy terms. And the government should strengthen the policy for import-export so that fair price can be ensured for farmers and middlemen tyranny can be reduced.

There are different types of food related organizations which produces different food items as biscuits, cakes and cookies for which rice is used as the main ingredient. Our government can provide incentives, stimulus fund and tax holiday to motivate the entrepreneurs and also supply these rice based healthy foods to different schools and projects like ‘Work for Food’, ‘Pushti’ etc.

Our country is greatly dependent on RMG export. Being dependent in a specific sector solitarily may create a threat in future especially when we won’t be able to get duty free access to many countries which is available now. In that case, exporting rice could be a potential source of export income. We need to develop our technology to boost up the production. Our government also needs to form a body to plan, coordinate, promote, encourage, and assist export efforts.