Export Trends in Native Vegetable and Seasonal Fruit Markets

Fluctuating price trends in native vegetables & seasonal fruit markets

Introduction:

Bangladesh has an overwhelmingly agricultural economy . Agriculture accounts for

32%of its gross domestic product ( GDP ) , and absorbs 63% of the country’s labor force .
Sustained government investment in irrigation facilities , rural infrastructure ,
agricultural research & extension services has helped Bangladeshi farmers achieve
dramatic increase in agricultural production . Bangladesh is a land of farmers & farming
thus agriculture is the backbone of this developing nation . The rich & fertile land is a
blessing which providing many types of rich vegetation .

But now food prices have become a major talking point for the media . Under mounting
pressure , the government has unveiled some short term measure to curb prices . The
problem , however , is not short term in nature . A timeline of food prices of common
food items serves as a reminder that the rapid food price inflation dates back to several
years & even more in the case of certain items like seasonal fruits , vegetables , rice ,
wheat etc ( Source : Financial Express ) . The main purpose of this research is to find out
the causes behind the inadequate profit earnings by the farmers , intermediary intervals
in every step , the proper food marketing system that is preferable & consumer reaction
towards the current situations & suggestions .

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Literature Review:

Vegetables & seasonal fruits are part & parcel to the people of Bangladesh to fulfill the
nutrition factors . The price rise is variously blamed by the different government
representatives on last year’s drought ( monga ) , on ” dysfunction in distribution ” . The
government has been fairly candid in admitting its helplessness in combating the price
rise . The Planning Commission Deputy Chairman has made public his belief that policy
changes to make credit dearer are not a remedy . Imports without a government
subsidy are also not possible as prices internationally are higher ( Bangladesh Bureau of
Statistics).

Diversification into vegetable crops and increasing commercialization can support the
development of the agricultural sector in several ways . Commercialization is
characterized by households moving from subsistence systems into semi-commercial &
commercial systems (with the main objective of achieving food self-sufficiency ),
thereby maximizing profits & generating surplus ( Pingali & Rosegrant 1995 ) .

It implies increased market transactions since farmers participate in the process to

capture gains from specialization ( Von Braun 1995 ) . Similarly , increasing capital
intensity in production & processing

leads to growth in the agribusiness sector . As a result , the number of agro-processing ,

distribution and farm -input provision companies increases (

Reardon & Barrett 2000 ) . Commercialization can take place on the output side-when
the farmer sells their products on the markets-or on the input side with increased use of
purchased inputs ( Von Braun 1995 ) .

The nature of the Agriculture Marketing System in Bangladesh is rather complex which
stems from the fact that there are innumerable small farmers spread all over the
country , where marketable surplus or marketed quantity of the crops they grow is very
small . Collection of these widely dispensed and small-marketed quantities is bound to

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be costly and insufficient . There are almost 13098 ( DAM study 2000 ) small , medium
and big sized markets in the country . In Bangladesh except the activities performed in
connection with Public Food Distribution System ( PFDS ) and agriculture price and
marketing policy decision of the government the trade in all agricultural products is
largely handed by the private sector . The general agricultural marketing policy of the
government is to allow free play of the market forces in determining the price and
encourage larger participation of the private section ( Md. Fazlur Rehman ) .

In practice, how can prices be stabilized so as to secure producer and trader incomes
and encourage the investment required to modernize production and markets? For
researchers, the answer depends on the type of instability. If the instability is “imported”
from international markets, State intervention is required. Price stabilization on a global
scale necessarily calls for international market regulation, while on a national or
regional scale, it involves controlling borders so as to compensate for the effects of
international price variations (as far as WTO regulations permit this, since they forbid
variable import taxes). If the instability is “endogenous”, public intervention may be
required to calm market speculation fever. This may entail regulating markets, resorting
to international markets, or using public stocks. Lastly, if the instability is “natural”, the
solution lies in getting to the root of the problem, by modernizing food product
production and trade structures. However, modernization inevitably takes time.
Moreover, it calls for a degree of prior price stabilization, since modernizing farms and
markets relies on investment on the part of producers and traders, who are reluctant to
invest if prices are very unstable. This prior price stabilization will thus mean using fast-
acting instruments such as public stocks or border controls .

Finally, it is important to bear in mind that for public price stabilization policies to be
effective, they need to be realistic, transparent, and credible. What needs to be done is
to define a

sufficiently wide, flexible price range to determine the thresholds for State intervention.
These “intervention prices” will have to be announced publicly, be credible, and be

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respected, otherwise public intervention could well increase uncertainty among market
operators rather than reducing it ( CIRAD ) .

Volatility is a directionless measure of the extent of the variability of a price or quantity.

It follows that volatility measures derive from the second moment of the distribution of
the price or quantity in question, or transformations thereof. Economists generally
focus on the standard deviation of logarithmic prices since this is a unit-free measure.
For low levels of volatility, the log standard deviation is approximately equal to the
coefficient of variation.

Economic series typically exhibit trends. Measurement of volatility therefore requires

the series to be de-trended since otherwise trend movements will be included in the
volatility measures. Because trends are rarely linear and deterministic ( Kim et al 2006 ;
Kerald & Wohar 2006 ), detrending requires a trend model that implies a judgmental
trade-off between attribution of variability to the trend itself and to variation about the
trend. The volatility measure can therefore depend on the choice of the trend model in
an undesirable manner. In looking at price volatility, economists often circumvent these
issues by measuring volatility as the standard deviation of price returns, i.e. the
standard deviation of changes in logarithmic prices. We adopt this standard
measurement convention.

Academic and policy analyses have tended to focus on price levels rather than
volatilities. An exception is who showed that agricultural price volatility was low in the
1960s but was higher in the 1970s and the first half of the 1980s ( Gilbert 2006 )
Volatility fell back in the second half of the 1980s and the 1990s but remained well
above its 1960s level. credible, and be respected, otherwise public intervention could
well increase uncertainty among market operators rather than reducing it ( CIRAD ) .

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Fresh Fruits and Vegetables

Bangladeshi businessmen despite slow growth in exports of fresh vegetables

and fruits are optimistic of the potentials of these sectors. According to the
recent media reports, they believe they would be able to export more fresh
produces provided they get ‘one modern processing centre’ for testing,
sorting and packaging facilities and efficient and hassle-free airport services.
They are for a modern processing centre to help them export m o r e f r e s h p r o d u c e s
by meeting requirements of buyers, especially in the European
markets. The Bangladesh Vegetable and Allied Fruits Exporters Association have sought
technical and financial supports besides allocation of land from the
government for the centre. The fresh vegetable and fruit exporters have now
been facing stiff competition from their counterparts from Pakistan, India and
Kenya in Middle-east markets including United Arab Emirates, Qatar, and Kuwait,
Pakistani and Indian exporters.
According to local exporters, Bangladeshis in many European cities look for fresh
Bangladeshi vegetables and fruits. Earlier Britain was the major destination for local
fresh vegetables and fruits. For the past few years Bangladesh has been exporting such

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consignments to Italy and France. According to the Export Promotion Bureau’s latest
data, fresh produces worth $10 million was exported in two months – July and August
of the current fiscal year, nearly 7 per cent less than the export of the corresponding
period of last year.

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Conceptual Model:

The proposed research is about consumer perception towards the rising price of
vegetables & seasonal fruits . It will also focus on farmers position & distribution
channel & their effects on the marketing of vegetables & fruits . Again achieving food
self-sufficiency thereby maximizing profits to only to the distributors & giving negative
signals towards the consumers ( Pingali & Rosegrant 1995 ) , ( Haque 2000 ) . To find out
the consumer perception there can be selected variables or factors . These independent
variables are : intermediaries’ intervention , in-season stock tendency of businessmen ,
farmers’ unawareness of price news , distribution/transportation cost , processing cost ,
storage cost , weather condition , disease. The effects of these variables will be
evaluated in this study.

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Research Methodology:

A survey was conducted for one month using a semi- structured questionnaire through
interviews among a cross section of people .Information were also collected from some
published reports , papers and some official documents & also reviews on the existing
information in different aspects of price increasing in the purchasing & attitudes of
consumers on it . Nature of the study is descriptive . The information required are both
primary and secondary . The required primary data were collected from different places
of Dhaka city . And the secondary data were collected from institutions like BADC , BRRI ,
Department of food and nutrition , genetic engineering and biochemistry of Dhaka
University etc .

The main objective of the research is to identify the ways for improving the situation
regarding price rise in the local market. So data is collected from some primary sources
by preparing a questionnaire which is open ended in nature. Primary data sources are
the independent producers of vegetable products, the exporting firm. Secondary data
have played an important role because maximum information is reviewed from these
sources as primary data was hard to find out. Secondary data has been reviewed and
collected from different articles, published journals, and websites in order to meet up
the gap of information available. Here some data has been collected also from relevant
topics as well as substitute products because the data is not available about vegetable
goods in some matters. The nature of the research is exploratory in nature as the article
tried to emphasize on the problem which can further be studied for making decisions
about price rise condition. In case of selecting the elements for sampling, judgmental
method of non-probability sampling has been used because of the fewer vegetable
product producers are available in Dhaka. Informal questionnaire which is given in the
appendix has been used as an instrument, in many cases the questionnaire was
conducted in sequence but without directly asking the respondents. The sample size is
very small only 30. In some cases, instead of face to face interview telephone survey
method has been conducted to collect data. In case of analyzing the data no statistical
method such as ANOVA, ANCOVA, REGRESSION, CONJOINT has been used because the

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natures of the questions are open ended as well as secondary data are qualitative in
nature. Instead of using any statistical techniques data are simply analyzed in light of
different models developed by different theorists. Personal in-home interview &
personal interview were selected as survey method . Survey instrument was proposed
as questionnaire which followed the 5 point likert scale standard.

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Analysis & Findings:

The findings are based on responses of small sample size . The nature of the Agriculture
Marketing System in Bangladesh is rather complex which stems from the fact that there
are innumerable small farmers spread all over the country , where marketable surplus
or marketed quantity of the crops they grow is very small .

The number of middlemen are present in vegetables and fruit markets . The rise of
middlemen specializing in such activities as storage , transportation , processing , and
retailing .These cost more .This is one of the reasons of fluctuating vegetables and fruit
prices . Some businessmen stock the vegetables and fruits during the season and
market them in off-season at higher prices . This is another reason for price fluctuation
in vegetables and fruit market .

Farmers are unaware of price news . Some middlemen and also some businessmen take
this unethical advantage . they buy vegetables and fruits at lower prices from farmers
and sell them in Dhaka city at higher prices . This is a common practice in our total food
market . Almost no processing is involved for the daily price list on vegetables and
seasonal fruits, Processing of growers’ price data does not follow any definite time
schedule .

The reasons behind price fluctuation lie in the inelastic supply and demand curves for
agriculture and the unpredictable changes in food supplies as a result of weather
condition , disease and other factors . because of the inelastic curves , shifts in either
demand or supply will result in proportionately larger price changes . In turn , instability
of farm incomes is directly related to unstable farm prices . Farmers are punished in
market place when they succeed in producing good yields and high output . The
rightward supply shift lowers farm prices and , to add insult to injury , this movement
along an inelastic demand curve reduces gross farm income .

Now the most influencing factors affecting vegetables & fruit prices will be discussed

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Intermediaries’ intervention: Middlemen buy products from farmers at lower prices and
sell them in Dhaka at higher prices . This is common practice in our country . In-season
stock tendency of businessmen: Some businessmen stock products during the season
and sell them in off-season at higher prices . Farmers’ unawareness of price news:
Farmers are unaware of market price of their products due to lack of proper
information system & control power.
Distribution/transportation cost: Transportation cost is higher which is sometimes
added to the price of the product. Toll on the way to Dhaka creating more pressure on
price.
Storage cost: Storage condition, either frozen or not costs much in Bangladesh.
Processing cost: Processing cost is also higher.
Weather condition: Unfavorable weather condition may hamper production and thus
price .
Disease: Because of various diseases price of vegetables & fruits may fluctuate .

Figure: Factors causing price rise.

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Conclusion & Recommendation:

In Bangladesh, agriculture has been the backbone of economy and chief source of
income for the people. Bangladesh have accelerated and changed her exports
substantially from time to time. Bangladesh needs to develop its export strategies to
increase the value added of its products. The development of a successful export
market requires the development of a performing internal economy. Efforts should be
undertaken to reduce internal barriers to development due to weak governance, weak
legal system and difficult labor relations

Food prices have become a major talking point for the media. Under mounting pressure,
the Government has unveiled some short term measures to curb prices. The problem,
however, is not short term in nature. A timeline of food prices of common food items
serves as a reminder that the rapid food price inflation dates back to several years &
even more in the case of certain items like seasonal fruits, vegetables, rice, wheat etc.
This research found the causes behind the inadequate profit earnings by the farmers,
intermediary intervals in every step, the proper food marketing system that is
preferable & consumer reaction towards the current situations & suggestions.

Limitations :

The proposed research was conducted only in Dhaka city. Again there were random &
non-random sampling error because of small sample size. There may be response error
for their inability to recall and unwillingness to participate.

Scope of Future Research :

This research can be used for future research if sampling error will be reduced . Under
this research sample size is small. The existing random sampling error can be reduced
only by increasing sample size. Response error can be can reduced by encouraging
respondents so that they will be willing to answer.

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