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From low to high value agriculture

Beneath the surface

Abdul Bayes
The time has come to shift policy emphasis from the concept of "rice first" for food security. There was a time when the importance of rice reigned high, but now, with positive structural changes in the economy, we should focus on high value agriculture. some of our individuals and institutions have demonstrated that given the proper environment, they can raise the exports of vegetables and other non-rice crops.***
BANGLADESH is known as a rice growing economy with principal attention given to rice. At the lower end of the per capita income scale, the proportion of the budget spent on the staple food rice is much higher. Besides, the poor tend to derive a big share of the calories they need from rice. However, the Household Income and Expenditure Survey 2000 reveals that per capita consumption of cereals decreased while that of High-Value Agricultural (HVA) products increased during the last decade. Noticeably, per capita daily consumption of fruits, livestock products, and vegetables posited an upward trend. A projection GDP growth rate of 7 per cent per annum also tends to indicate a significant rise in the daily consumption of non-cereal food items. This rise would, obviously, be prominent in the case of incomeelastic goods such as fruits, vegetables, fish, and meat and milk items.
The reasons are not hard to find. First, Bangladesh realized a respectable rate of economic growth during the 1990s; it averaged 5-6 per cent per annum during the period, 19962000. An average of 5 per cent plus growth rate, achieved up to 2003, points to a remarkable progress compared to the average of 3-4 per cent during the last two decades. A declining population growth rate, at 1.3 per cent per year, has helped in raising the per capita income. On the other hand, a fall in the rice prices has contributed to a rise in the real income of the poor people. The contribution of agricultural sector to GDP has been on a gradual wane over the years to stand at about 23 per cent in 2001.
Empirical evidence from sample household surveys have shown that the growth in rural incomes over the period 1987-2000 was largely due to the non-agricultural sectors. The fastest growing economic activities were business and trade, followed by non-rice agricultural crops. Non-agricultural sector emerged as the engine of rural uplift which reminds us of the observations made by economists: From a relatively a minor sector, often largely part-time and subsistence-oriented at the early stage of development, the rural nonfarm economy develops to become a major motor of economic growth in its own right, not only for the countryside but for the economy as a whole. Its growth also has important implications for the welfare of women and poor households, sometimes helping to offset inequities that can arise within the agricultural sector.
Second, Bangladesh has also witnessed a remarkable progress in , the communication sector, both in roads and telecommunications. Cellular phones are now available in many rural areas to help the information flow, and the poor have largely been benefited from such a technology. The construction of the largest bridge, named Bangabandhu Bridge, has helped in marketing of perishable products from the northern side to distant districts. The northern region, once deemed to be the poorest, is now poised to benefit from crop diversification programmes following the construction of this bridge.
And third, a recent survey of eight villages conducted by Jahangirnagar University (Savar, Dhaka) has shown that large farmers (owning above 300 decimals) market 70 per cent of their paddy, the middle farmers market 42 per cent and the small ones (up to 150 decimals) market 36 per cent. About 80-90 per cent of the vegetables produced by these farmers are now being marketed. The figures shown by the survey seemingly stand close to the national level statistics on the marketed surplus. A decade ago, the proportion of marKeted products was almost negligible, if not non-existent. Quite obviously, the release of land through HYV-cultivation has, along with the development in rural marketing networks and communication, contributed to an increase in the commercialisation of agriculture.
Let us now have a look at the pattern of expenditure also. It has been found that rural households spend about 52 per cent of their income on food items, originating from agriculture, but they spend 34 per cent of their incremental income on food items. The income elasticity has been estimated to be 0.65, implying that a 10 per cent rise in income would lead to a 6.5 per cent rise in the demand for food items. Apparently, neither elasticity coefficients nor incremental income share would justify a substantial change in the retail chain. Information reveals that within the food sector, the market for non-crop agriculture is strong. For example, fruits, fisheries, and livestock products tend to claim a larger part of the incremental income and also these products display high elastic demands. By and large, both incremental budget share and the income elasticity of demand for noncereal crops (potato, vegetables, oilseeds, pulses, spices, etc.) are much higher than those of cereal crops. Since non-cereal crops and non-crop agricultural products are more perishable in nature and have higher marketable surplus, the findings indicate stronger potential for the expansion of their market for rural processing, storage, trade, and transportation activities.
Unfortunately, an intertemporal variation in elasticity and budget shares could not be produced in this paper, but it has been shown in a recent book on rural livelihood system in Bangladesh that both expenditure elasticity and average and marginal budget shares for high-value agriculture have increased over the last two decades or so in rural areas. Possibly, that would indicate the trend for urban areas too.
Assuming that demand would rise for the above-mentioned products, with a paripassu rise in growth rate, the required growth rate in supply of these products, these projections show that growth rates of supply of non-cereal food items would have to be much higher to keep up with the growing demands.
Thus, the time has come to shift policy emphasis from the concept of "rice first" for food security. There was a time when the importance of rice reigned high, but now, with positive structural changes in the economy, we should focus on high value agriculture. Some of our individuals and institutions have demonstrated that given the proper environment, they can raise the exports of vegetables and other non-rice crops. Extension services now should be geared towards production of high value crops. But bear in mind, rice still needs more research for releasing lands for high value crops. Institutions, incentives, and innovations need to be directed towards non-rice crops. The future seems to be bright in this respect.
Abdul Bayes is a Professor of Economics at Jahangirnagar University.