Bangladesh rice trade and price stabilization: Implications of the 2007/08 experience for public stocks
The extent to which Bangladesh should rely on imports for rice price stabilization is a contentious policy issue. This issue was underscored in the wake of the 2007â€“08 world food crisis, during which international rice prices skyrocketed and rice import supplies from India were disrupted. For more than a dozen years, from 1994 to 2007, private-sector rice imports made a major contribution to price stabilization and food security in Bangladesh, adding to domestic supplies following production shortfalls. In particular, following massive floods in 1998, private-sector imports sourced from wholesale rice markets in India contributed more than 2 million tons to rice supply in Bangladesh. Subsequently, between 2003 and mid-2007, Bangladesh prices were particularly stable. This paper presents econometric evidence that trade with India was a determining factor in this price stability. In particular, the authors show that in this period, Bangladesh domestic wholesale prices were co-integrated with import parity prices of subsidized below-poverty-line rice from Indiaâ€™s public stocks. Import flows in these years generated an estimated total of 1.0 to 1.6 billion US dollars in consumer surplus for Bangladesh households but reduced producer surplus by a similar amount.
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