Food-grain import declined due to uncertainty

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After a gap of two to two and a half months, prices of daily commodities in the international market are on the decrease. Based on the product, prices have decreased by 15-20 per cent to 48 per cent. However, traders have reduced import despite the price cut.

Usually, whenever price keeps falling, import remains less until it stabilises. Now, the instability of dollar price has been added to that. Because of this, traders aren’t seeing any certainty of covering up the import cost by selling the products.

Businessmen say, a huge amount of daily commodities including food grains were imported in the last fiscal year. But, the demand was less in the country, due to price hike. So, there is no problem in supplying daily commodities at the moment. However, they have talked about constant monitoring under critical conditions, to avoid problems in future.

A review of the import and LC (letter of credit) data showed that, of all the daily commodities the import of wheat decreased the most.

Meanwhile, though the government allowed the private sector to import 400 thousand tonnes of rice in the first phase on 30 June to prevent the price of this commodity from rising, so far the import has not been more than 1 per cent of that.

However, the import of unrefined edible oil, soybean seed, which is the raw material of soybean oil production and lentils have remained normal.

When asked about the causes of imports going down even after the price cut, Abul Bashar Chowdhury, chairman of one of the top food grain importing company BSM Group mentioned four distinctive reasons to Prothom Alo.

One, due to the uncertainty of the dollar exchange rate, import costs cannot be matched with the market price. Two, banks are somewhat reluctant to open Letters of credit (LCs) because of the dollar crisis. Three, despite price cuts in the global market, import costs are exceeding local market prices owing to dollar price hikes. And four, though Ukraine opened for export after India closing its gates, importing from there still remains uncertain.

However Abul Bashar Chowdhury believes that despite the import going down, there’s nothing to worry about. Because the wheat from earlier imports are still there and the current market price is quite low. For this, there won’t be a crisis very soon. But it is necessary to make efforts at the government level for importing wheat from India, he reckons.

Wheat tops the import reduction list

Wheat import started declining since last 13 May, when India stopped its export. Effects of that started showing from June actually. In June of 2021, 411 thousand tonnes of wheat was imported, while only 212 thousand tonnes were imported at the same time this year.

Again, in the first 25 days of July last year, the amount of wheat import was 364 thousand tonnes, which came down to just 121 thousand tonnes in July this year. That means import went down by 57 per cent within a space of about two months.

About just a year ago, 45 per cent of the country’s demand for wheat used to be imported from Russia and Ukraine. Though wheat import from these two countries stopped after a war broke out between these two countries at the end of February, there had been no problems.

Because, wheat was being imported from India even before the war since the market of this neighboring country was open.

The country first stumbled in importing this food grain after India stopped its export. Since India stopping the export, 500 thousand tonnes of wheat has been imported in between 13 May and 14 July.

As much as 76 per cent of that came from India alone, though the LCs opened prior to the ban. Basically, moderate quality wheat that is low in protein has not been imported from an alternate market, since India closing the export of wheat.

Following the Russia-Ukraine treaty on 22 July, opportunities have been created for importing grains or wheat from Ukraine. However, the attack on Ukraine’s Odessa Port on the next day of the agreement being signed created fresh uncertainties.

However, this type of wheat will soon be harvested in the European countries. Alongside Ukraine, traders are keeping an eye on the European countries for importing wheat from there.

Nonetheless, new LCs are not being opened that much since India stopped exporting wheat. As per Bangladesh Bank records, LCs for importing only 55 thousand tonnes of wheat were opened in last June. And LCs for 63,300 tonnes of wheat has been opened till 16 July. Though, small-scale importers imported quite a lot of wheat from India, they have been left idle since the closure of the market.

Md Muslim Uddin, owner of one such importing company Nurul Islam and Brothers from Khatunganj said to Prothom Alo, “We imported wheat in smaller shipments. But, we haven’t been able to import since India stopped exporting. For larger shipments, wheat will have to be imported from the alternative countries.”

Foodstuffs produced from wheat consists a large share of our daily food consumption starting from the breakfast. The demand of wheat-made items in the food habit of both rich and poor people has escalated to 7 to 7.5 million tonnes.

A total of 1.1 million tonnes of wheat is produced in the country every year. Rest of the demand is met through import. According to National Board of Revenue (NBR)’s records, 6.2 million tonnes of wheat was imported last year.

At the time of wheat import going down, reserve of this food grain decreased in the government warehouses too. On 24 July, there was 159 thousand tonnes of wheat stored in the government warehouses, which in fact was less compared to last year. At the same time last year, the reserve of wheat was 260 thousand tonnes.

However food secretary Md Ismiel Hossain informed Prothom Alo that the process of importing wheat from alternative sources of India on the government level is underway.

Rice import didn’t increase either

After harvesting the Boro crops, there is enough rice reserved in the country now. Yet, the government allowed 95 private companies to import 400 thousand tonnes of rice at the end of last June, due to rising prices. But, even less than four thousand tons of rice has been imported till now.

Meanwhile, LCs for importing the permitted amount of rice had to be opened within 21 July whereas, LCs for only 44 thousand tonnes of rice were opened till 16 July.

That means, although two-thirds of the time limit has passed already, LCs for importing only 11 per cent of that rice has been opened till now. Under these circumstances, 62 more companies were given permission to import about 100 thousand tonnes of rice in two phases at end-July.

When asked why aren’t they importing, Omar Azam, owner of one of the companies that have gotten import permit, Monosha Store of Chattogram’s Chaktai area and general secretary of Chaktai Rice Traders’ Association, told Prothom Alo, “The cost of importing rice have gone up due to the increase in dollar price. There is no certainty of where the dollar price will go. We aren’t importing rice, fearing losses.”

Though there is no huge deficit in the production of rice compared to its demand, rice has to be imported more or less every year.

As per NBR records, about 1 million tonne of all types of rice were imported in the fiscal year 2021-22. And, almost all of it was imported from India. Meanwhile, the rice reserve in the government warehouses is more than last year’s reserve. Government records show, there are 1.46 million tonnes of rice stored.

Exchange rate should be fixed

When asked about this, Khondaker Golam Moazzem research director at private research organisation Centre for Policy Dialogue (CPD) said to Prothom Alo, the import of the main food grains such as rice and wheat should be regularly monitored.

Right now, traders are considering it risky to import for the rising exchange rate of dollar. For this, the government can ensure import in the private sector by fixing the dollar exchange rate in importing primary daily commodities, if necessary. The government itself can import directly or through traders as well, he added.