Written by Mehedi Hasan, Manager, IDLC Finance Limited 

It is very obvious that after rice, flour is the second most important food in Bangladesh. It might also be considered one of the staple foods in our country. Staple foods are those that contribute to the majority of our diet. Observing our daily life’s diet, we easily find out that flour has the second position, just after rice. Climate, culture, trade, and production are the determining factors of staple foods for a nation. Reportedly, more than 50,000 plants are edible, but very few of them become staple foods, and surprisingly, corn, rice, and wheat together contribute 51% of the world’s caloric intake. The Middle East is where wheat originates, as it was first grown in the Ancient Mesopotamian region near present-day Iraq. Researchers believe this was the first domesticated crop, prompting the spread of agriculture and resulting in rapid increases in the human population. The US, China, Russia, India, and France are the largest producers of wheat in the world. Wheat is typically dried and pulverised to make flour. This flour is used to make bread, crackers, pasta, breakfast cereals, and pastries. Its nutritional value is higher, however, when it is consumed whole. Approximately 15% of the world’s calorie intake comes from wheat. (Source: WorldAtlas)

Changing lifestyles and rapid urbanisation are playing a vital role in increasing the demand for wheat in Bangladesh over the years. The current yearly domestic demand for wheat is more than 8 million MT. The challenge is that Bangladesh is highly dependent on imports. As per the latest report of the USDA (U.S. Department of Agriculture) on Grain and Feed Annual, domestic production only meets 13% of total demand. As the lion’s share of demand has been met through imports, foreign currency exposure is obvious. Moreover, the Russia-Ukraine issue has insisted on the wheat price in the international market as well as in Bangladesh. Around 40% of wheat imports are made from Russia and Ukraine. The Russia-Ukraine issue forces the importer to secure alternative exporting countries, i.e., India, Australia, Canada, and the United States.

Flour milling has been rapidly changing with advanced technologies. It was started with a traditional milling process called “chakki” and is now transforming into automated wheat milling. The industry is growing fast, overcoming several obstacles with large market players like City Group, Bashundhara Group, and others.

Wheat Production in Bangladesh

Bangladesh is mainly a rice-consuming country. In 1965, Dr. Norman Borlaug and the International Maize and Wheat Improvement Centre (CIMMYT) successfully introduced two Mexican wheat varieties (Sonora 64 and Penjamo 62) into northern Bangladesh. The success of the CIMMYT program, however, was disrupted by the war with Pakistan. After a severe drought in 1973 and major floods in 1974, there were food shortages all over the country. This led to a huge international effort to help the country meet its basic food security needs. With the influx of food aid shipments, wheat became a regular feature in the Bangladesh diet, particularly among urban consumers seeking to supplement their rice-based diet. But as wheat imports rose to 2.3 million metric tonnes in 1972/73, the government of Bangladesh began to institute policies to encourage domestic wheat production. Wheat cultivation quickly expanded around Khulna and the generally less flood-prone areas of the northern and western districts. The harvested area rose from 105,000 hectares in 1974/75 to 591,000 hectares in 1980/81. Wheat yields increased by nearly 70%, with domestic wheat production increasing from 116,000 metric tonnes in 1974/75 to 1.093 million metric tonnes in 1980/81. (Source: GAIN Report: BG3006, USDA). 

Wheat is a cereal crop. Wheat seeds are planted in the month of November to mid-January. The harvesting time of the crop is March to April. As it is a winter crop, the growth is highly dependent on the cold weather. To get a better yield, farmers have to depend on the prolonged prevailing cold weather; that is why the countries like Russia, Ukraine, and Canada got an advantage in wheat production over others. Wheat production in Bangladesh is facilitated naturally by alluvial soils, and the advancement of irrigation also helps to give a favourable condition for wheat production. Almost similar planting time of wheat and Boro rice restricts farmers from moving towards spontaneous wheat production as farmers don’t want to take the risk of cold weather, which is the main natural factor of wheat production. To overcome this, the respective authority may introduce an incentive or compensation policy for wheat farmers; if the production gets hampered by bad weather, farmers will get compensated by the respective authorities.

 In 2018, the Bangladesh Bureau of Statistics (BBS) published a report named “45 Years of Agriculture Statistics of Major Crops (Aus, Amon, Boro, Jute, Potato & Wheat)”, where we got the data on wheat production from FY 1970-71 to FY 2014-2015. It’s been observed that during FY 1998-99, the country was blessed with the highest wheat production, which was 1.9 million MT. Wheat production crossed 1.5 million MT in FY 1992-92, FY 1997-98, FY 1998-99, FY 1999-00, and FY 2002-03.

Moreover, the growth of wheat production has been reduced over the years. We have also found that during FY 2015-16, wheat production was 1.35 million MT, whereas, in FY 2020–21, the production was 1.085 million MT. One of the main causes is that the total area of wheat production has also been reduced over the years since the farmers are very much motivated to grow paddy in the Boro season.

Wheat production in Bangladesh is geographically concentrated. Around 70% of wheat production in Bangladesh is contributed by the Rangpur and Rajshahi Divisions. These two divisions contributed 68% of production during FY 2020-21. The top five wheat-producing districts in Bangladesh are Thakurgaon, Chapai Nawabganj, Pabna, Naogaon, and Rajshahi. These five districts contributed 47% of total production in 2020-21.

Wheat Import status of Bangladesh As stated earlier, more than 80% of current domestic demand has been met by imports. From 2010 onwards, it has been observed that there is a sharp upward inclination in wheat imports up to 2017. After slightly falling in 2018, the imports were again raised in 2019 and onwards. As domestic production has decreased over the years, on the other hand, the demand for wheat-based products has increased, which makes the market move to import.

Despite the higher price of wheat in the international market, Bangladesh imported substantial amounts of wheat during FY 2020–21, which was around 7.5 million MT. The war between Russia and Ukraine makes Bangladesh source wheat from its neighbouring country, India. According to the USDA, India accounted for 26% of total wheat imports, followed by Russia (26%), Canada (20%), and Ukraine (16%). Lower lead time, lower freight costs, geographical proximity, and transportation facilities (by road & rail) are also critical factors for moving toward India for wheat imports.

Flour Milling in Bangladesh

Flour milling in Bangladesh started with traditional chakki mills with meagre capacity. Wheat millingin Bangladesh is operated by two milling processes: traditional “chakki” mills and roller mills. “Chakki” mills are normally imported from India. Light engineering workshops in Bangladesh also install this mill. A “Chakki” mill is one kind of traditional stone mill which is connected to a diesel engine. It can produce 300 to 800 kg per day. The major challenges of this milling are low-quality products and the small scale of production. Due to several impediments, this type of milling has become less popular in Bangladesh over the years. Many Chakki mills are shutting down, and millers have been transforming from Chakki mills to roller mills. Reportedly, there are still more than 1,500 chakki mills in Bangladesh. Considering technological advancement, shifting demand toward higher quality products, and scale of production, it can be opined that it will become history in the near future. A diagram showing how flour is milled in a modern roller mill is presented below:

More than 90% of the flour mills in Bangladesh are roller mills. Until the mid-1980s, local roller mills tended to be small, with a milling capacity of 10 to 20 metric tonnes a day. However, today, many of these smallerscale roller mills are no longer operational. The current capacity of most roller mills is now at least 50 tonnes a day, with several of the more recently constructed facilities capable of milling 300 to 500 tonnes a day or more (Source: USDA). Considering the growing demand, many large conglomerates have entered this industry and have supported the growing demand by creating employment by acclimating to advanced technologies. Major contributors to this industry are City Group, Bashundhara Group, ACI Group, Meghna Group, T.K. Group, IFAD Group, and others.

City Group is the largest producer and marketer of consumer goods in Bangladesh. The Rupshi Flour Mill is City Group’s largest flour mill, with eight milling lines producing 625 MT each. It can produce a total of 6,150 MT per day of flour under one roof. The project was

The project was executed in a record 24 months since the December 2019 signing of the contract between Bühler and City Group. Biswajit Saha, executive director of City Group, was interviewed by a National Daily in January 2022 and said, “As far as we are concerned, this flower mill built on a 23-acre plot of land is the largest of its kind in the world. More than BDT 3,000 crore has already been invested in this factory so far, excluding the cost of land development. Over 1,500 people have been employed.” City Group has also given details on how the mill will produce healthy products automatically by maintaining quality. The raw material, wheat, first go from the factory silo to the magnetic separation machine, where iron content, if there is any, will be separated from the wheat. Then the raw material goes to the touch machine, where it goes through initial cleaning. After that, the wheat goes to the Vega separator machine via bins. This machine acts as a sieve. The Vega separator separates grains larger or smaller than wheat. These activities run in four stages.

The de-stoner machine then removes the stones. The aspirator machine then separates thinner grains from the wheat through air recycling. The scorer cleans the dirt on the wheat skin. The wheat is then sent to the colour sorter machine. This machine uses 30 cameras to identify and sort other ingredients, including maze, soybeans, and sorghum. In the MYFD machine, humidity is controlled. The wheat is then left in the bin for 24 hours and then sent to be processed into the end product. (Source: Business Standard, January 27, 2022)

Bashundhara Food and Beverage Limited has set up a new flour mill with a daily production capacity of 2,000 MT in 2021, with an existing capacity of 2150 MT. The current daily capacity of Bashundhara Food and Beverage is 4,150 MT per day. Moreover, Meghna Group has a mill with a daily production capacity of 1,330 MT. Besides these conglomerates, there are many mills located in several places in Bangladesh. Most of these are under proprietorship concerns, with capacity ranging from 50 MT to 300 MT per day. In North Bengal, Shima Flour Mills and Shambhu Flour Mills have been renowned for their larger capacity and good business acumen.

Products and Distribution

There are mainly three sorts of products derived from wheat in Bangladesh, i.e., flour, chaff and semolina. Normally, millers concentrate on flour and chaff. The normal ratio of production between flour and chaff is 60:40. This ratio is totally dependent on the price of flour and chaff in the market, which is derived from the demand for cattle feed.

Most of the millers distribute their products on a wholesale basis in their locality as well as different districts based on their market and production capacity. Capturing larger markets requires the strong support of the working capital position of the concern. Large millers have to provide credit facilities to their customers. Moreover, the wheat price hike in recent days makes it more challenging for the millers to run their operations smoothly. Many millers are still practising “Halkhata” for closing the accounts at yearend, which was very effective before the COVID-19 pandemic, as the average recovery from receivable was around 80%, but after the pandemic, it dropped to less than 50%, which also affected the working capital position of millers.

 The renowned millers, as discussed earlier, like large companies or conglomerates, are successfully distributing their products in wholesale and in retail packets under 1 kilogram, 2 kilogram, and 5 kilogrampackets. These are very popular with city dwellers, and they are also gaining popularity in the rural market as well. Normally, large conglomerates have very strong distribution channels to channel their products and service the end-users, and they easily use the existing set-up to retail these products, which is definitely a major challenge for small and medium-sized millers.

Prospects & Challenges

foreign currency exposureAs per the Household Income and Expenditure Survey (HIES, 2005–2016) conducted by the Bangladesh Bureau of Statistics (BBS), daily per capita wheat as food intake was 12.08 gramme in 2005 and 19.83 gramme in 2016. It must be much higher now since we can see the growth of imports over the last six years, implying a higher demand for flour in Bangladesh. Urbanisation, the increasing popularity of fast food & restaurant food and changing lifestyles have made the demand for flour higher over the years. The industry has very good prospects with increasing demand. Besides domestic demand, many FMCG companies have started exporting flour-made products, i.e. bakery items, which will also facilitate the state in managing foreign currency exposure.

One of the major challenges faced by the industry is high import dependency. More than 80% of current domestic demand has been met by imports. This scenario is not definitely a healthy combination between importing raw materials and domestic sources of raw materials. Respective stakeholders should focus on domestic production as this import dependency.could be reduced in the future. Import dependency also causes the risk of price volatility and foreign currency exposure as we have to depend on the international market as well as the exchange rate of USD. Increased domestic production and a multi-currency payment system for import payments can be considered better ways to mitigate this risk.

 Another challenge in wheat production is the similar timing of wheat and paddy production in the Boro seasons. Due to the uncertainty of cold weather, farmers are more interested in growing paddy in the Boro season than in growing wheat. The government may introduce compensation or incentive packages for wheat growers to encourage wheat production. More research might be conducted for high-yielding seeds for incremental production.

 Due to an import-based industry, Bangladesh has to depend on supplier countries. The overall supply chain of the world, as well as Bangladesh, has been highly affected by the Russia-Ukraine war. Reportedly, around 30% of the total wheat supply in the world has been produced by Russia and Ukraine. These two countries are the two major suppliers of wheat in Bangladesh, contributing around 40% of the total wheat imports. Due to the Russia-Ukraine war, the wheat supply has been disrupted, and the price of wheat has been increased by more than 50%. Small-sized millers have been severely affected as they have to reduce their capacity utilisation to 50% from their regular 85%. Moreover, we lack skilled workers to operate modern mills since millers have to hire overseas human resources to operate the mill smoothly. We also need to train our human resources to acclimate them to modern technologies.

The Government of Bangladesh (GoB) has taken several initiatives to expedite this industry. Wheat has been considered one of the major crops in Bangladesh Strategic Plan for Agricultural and Rural Statistics-SPARS (2016-

2030), which was approved by the Ministry of Planning on July 27, 2017. The Central Bank of Bangladesh, Bangladesh Bank (BB), has an Agro Refinancing scheme to lend the millers at a soft rate under BMRE (Balancing, Modernization, Rehabilitation, and Expansion) to establish the project. Also, it’s great that BB just started a refinancing programme that will give loans to wheat and maize farmers at 4% interest. This will help them grow more food grains and make the country less reliant on food imports.

Lastly, we cannot deny the importance of agriculture in our economy. The agricultural sector contributes to the highest employment in Bangladesh. It is unfortunate that the contribution of agriculture to the gross domestic product (GDP) and employment has been declining over the years. The contribution to GDP has decreased from 17% in 2010 to 12.6% in 2020. According to the provisional calculation of BBS, agriculture’s contribution to the GDP in FY 2021-22 is about 11.50%.

Moreover, the employment rate in the agriculture sector was 48.10% in 2006 and 45.10% in 2013, whereas it was 40.62% in 2017. One of the major threats to our economy is export concentration. It is very obvious in the current situation that it is high time to plan for export diversification as more than 80% of total export has been made through the RMG sector and agriculture is the best alternative for this export diversification as well as ensuring food security with sustainable development of the economy. Relevant stakeholders should immediately focus on this industry and plan accordingly, which will drive the industry to its optimum level of value addition in the agriculture sector and contribute to Bangladesh’s sustainable development.

The writer is working as Manager at IDLC Finance Limited and he can be reached at hmmehedi@idlc.com.