Uttara University

Assignment Topic:

Impact of Covid-19 Pandemic on the Agriculture Trading in Bangladesh

Submitted To:

Mr. Munayem Bin Mujib

Lecturer
Department of Law
Uttara University

Submitted By:

Tahmina Akter
Id: 2191261027
Course: International Trade Law
Batch: 46 (Continue 47)
Dept. of Law

Date of Submission:

August 11, 2022

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Assignment:

Impact of Covid-19 Pandemic on the Agriculture Trading in Bangladesh.

Answer:

Introduction:

COVID-19 has become an alarming pandemic for our earth. It has created panic not only in
China but also in developing countries like Bangladesh. The COVID-19 pandemic has
significant implications, including financial, economic, and social effects. It has caused
massive negative impacts, especially in the agricultural sector. In rural areas, the poor
farmers, dairy farmers, vegetable producers, poultry farmers are in deep crisis due to lower
prices and lockdown issues .In this paper, we have summarized the Impact of COVID-19 on
the Agro business in Bangladesh. The effects of the pandemic cannot be mitigated
individually, but an integrated effort on the part of the state authority and the part of people
from all sectors need to come forward.

The Economic Implications of Covid-19 in Bangladesh:

Like most other nations, the COVID-19 pandemic outbreak poses an unprecedented shock to
Bangladesh's economy. Bangladesh's concern is higher, as the economy was already in
a state of parlous before COVID-19 struck. Bangladesh's economy is likely to face a
prolonged period of slowdown in development with the prolonged country-wide lockout,
global economic recession, and subsequent disruption of demand and supply chains. The
extent of the economic effect would depend on the duration and severity of the health crisis,
and how the situation unfolds when the lockout is lifted. On April 9, International Monetary
Fund Leader Kristalina Georgieva said the year 2020 may see the worst global economic
effect since the Great Depression in the 1930s, with more than 170 countries expected to
experience negative GDP growth per capita due to the raging corona virus pandemic.
Declining domestic and global demand for manufactured goods, particularly in the
agricultural and clothing sector, risks creating unemployment and worsening poverty. It is

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estimated that the urban poor will be hardest hit while the number of additional poor in rural
areas will be higher, as the national shutdown would affect private consumption

Agricultural Resilence:

While overall merchandise trade fell sharply in the first half of 2020, agricultural and food
exports increased by 2.5 per cent during the first quarter of the year compared to the same
period in 2019, with further increase in March and April. However, the crisis has exerted
further downward pressure on food prices, and therefore on producer revenues, added the
note. In addition, while world food stocks and production levels for the most widely
consumed staples - rice, wheat and maize - are at or near all-time highs, the Covid-19
pandemic's impact on jobs and incomes has increased the number of hungry people
worldwide. The paper warned that countries are still fighting the pandemic, and its
repercussions for food supply chains are still unfolding. While there is currently no reason
why the ongoing health crisis should turn into a food crisis, disruptions to food supply chains
constitute a risk, with governments' trade policy choices likely to determine how the situation
evolves. It is to be noted that the Agreement on Agriculture (AoA), in its Annex 1, defines
agricultural products by reference to the Harmonized System of product classification. The
definition covers both basic and processed agricultural products, as well as products such as
wines, spirits and tobacco, fibres such as cotton, wool and silk, and raw animal skins destined
for leather production. Fish and fish products are not included, nor are forestry products.

Trade in agricultural products has been more resilient than trade in other products owing to
several factors including, in particular, the relative income inelasticity of demand for food
(given that food products are essential for survival) and the fact that most agricultural trade
(notably cereals and oilseeds) takes place in bulk marine shipments that require less human
interaction and have not been heavily disrupted by pandemic-related transport restrictions.

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Food Price Index Downstream:

According to the Food and Agriculture Organization of the United Nations (FAO), the food
price index was already trending downward in early 2020, even before the Covid-19 crisis
put further pressure on prices, and consequently farm revenues. The FAO Food Commodity
Price Index indicates that the sharpest fall was in vegetable oil and sugar prices, followed by
the prices of meat and dairy products. By contrast, prices for cereals have been relatively
stable, as demand has been less affected by the pandemic, and supply chains have been less
disrupted due to the fact that cereals are typically shipped in bulk, and bulk shipments have
not seen any major disruptions.

Rising Global Inflation and Price Hike:

The Current inflation and price hike started back in the US-China trade war in 2018 when the
prices of commodities increased in the global market due to disruption and delay. The
situation got worse during the Covid-19 pandemic as the inflation rate and price reached an
all time high since the financial crisis in 2008. In 2022, when the global market was
recovering from the Covid-19 pandemic, the breakout of Russia-Ukraine war further
impacted the global market by disrupting global logistic and supply chains.

As Ukraine shares 12% of the world’s total food production and supplies 17% of percent of
the world’s corn, and Russia contributes to 16% of food production as well as exports oil,
gas, fertilizer, chemical goods, the Ukraine war contributes to the surge of inflation. The
sanctions imposed by USA on Russian economy has also made it tough for the traders to
maintain the natural supply and demand mechanism, which in turn result in increasing price
of food, energy and daily commodities.

Countries across the world are, therefore, facing serious economic turmoil. The US inflation
rate has reached to 8.6% in May which is higher than its been since 1981. Other parts of the
world, including Turkey, Argentina, Brazil, China, and India are also suffering due to higher
inflation, increasing food and daily commodity price.

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India, the third largest economies of Asia, has also hit 7.8% inflation in April which is
highest in last 8 years. India’s economic growth also slowed to the lowest a year in the first
three months of 2022 due to weakening consumer demand amid soaring price soaring prices
of daily commodities. Between September 2021 to April 2022, the consumer food price
inflation in India has also risen from 0.68% to 8.38% year on year.

Pakistan, another South Asian country is also going through economic turmoil, including
high inflation, reserves declining to as low as less than two months’ of imports and a fast-
weakening currency. Its inflation climbs up to 13.8% in May due to rising food and fuel
prices. The consumer food prices rate in Pakistan surged to 17.3% in May 2022.

Global Inflation Impact on Bangladesh:

As an importer of edible oil, food, sugar, intermediate goods, fuel oil and raw materials for
production, Bangladesh is also not immune from the adverse impact of global inflation, food
and consumer price inflation. According to data published by the Bangladesh Bureau of
Statistics, the inflation rate in Bangladesh rises 7.42 percent last month, up from 4.87 percent
a year earlier, while the food inflation rate accelerated to 8.3 percent. Bangladesh’s consumer
prices rise 7.42% in May which is highest in 8 years.

The current global food price hikes have resulted in a sharp rise in price of food items in
Bangladesh. Apart from food, as Bangladesh is also an energy importing country, the
increased prices of oil, gas, fuels in the global market have already been reflected in domestic
prices. Thus, sectors like transport and agriculture have been adversely affected. In addition,
due to the looming energy crisis, Bangladesh like many other South Asian countries, is also
having power cuts as a response to adjust energy shortage.

However, As per the key finding of KRF Center for Bangladesh and Center for
Bangladesh and Global Affairs (CBGA), while most of the countries from the
developing world are suffering from market fluctuations and economic crisis, Bangladesh
has been showing resilience in terms of inflation, food inflation, foreign currency reserve.

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In terms of food inflation, in South Asia, Bangladesh (8.84) has relatively stable food
prices compared to three other countries i.e. Sri Lanka (30.7), Pakistan (17.04), India (8.38),
and Nepal (8.83) in percentage.

Regarding foreign currency reserve, Bangladesh is still in good position in comparison to its
neighbouring countries despite Covid-19 and Ukraine crisis. The foreign currency reserve of
India has reduced from $7.5 billion USD to $572 billion till July, 2022. In the case of
Pakistan, it has reduced from $23.2 billion to $16.4 billion while foreign exchange reserve of
Bangladesh is decreased to $46.1b to $39.77 billion as of July 2022.

Though Bangladesh is still one of the stable economies in South Asia, the prolonged global
inflation and food price hike might adversely affect the people and the economy of
Bangladesh through increasing the gap between rich and poor, rising in the number of
households falling below the poverty line, creating new economic pressure on the middle
class, increasing unemployment rate as well as threatening the viability of small businesses
which have already suffered losses in terms of jobs and income during Covid-19. These
economic pressure might also trigger social and political unrest among the people.

Therefore, it is right time for Bangladesh to take appropriate and adequate measures to deal
with inflation and price hike by effectively monitoring local and global markets, diversifying
import destinations as well as increasing export by exploring new market. As it is a global
problem, the government, businessman and mass people should work together to effectively
handle the crisis.

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Conclusion:

The Covid-19 crisis has had a major impact on the global economy and trade. Countries are
still fighting the pandemic, and its repercussions for food supply chains are still unfolding.
While agricultural trade has proven more resilient than trade in other goods owing to the
essential nature of food products, additional disruptions to supply chains could start to
undermine this resilience, with damaging consequences.

There is currently no supply-related reason why the ongoing health crisis should turn into a
food crisis. However, disruptions to food supply chains constitute a risk for global food
security. Governments' trade policy choices will play a major role in shaping how the
situation evolves.

Transparency remains crucial for food security. Incomplete or insufficient information

creates uncertainty that, in turn, leads to sub-optimal policy decisions. Sharing timely
information on trade- related measures, as well as making information available on
production, consumption, stocks and food prices, would help markets function efficiently and
contribute to ensuring global food security.

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