For

Feed the Future Rice and Diversified Crops Activity ACDI/VOCA

Submitted by

Innovision Consulting Private Limited Research | Technical Assistance | Project Management

February 23, 2016

RICE OUTPUT MARKET ASSESSMENT

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Consultants

Team Leader

Johny Maung

Quality Control Adviser

Rubaiyath Sarwar

Sector Specialist & Lead Consultant

A.F.M. Mominul Haque

Research Associates

Ittiba Bin Azha, Khondoker M Salehin & Tahreen Zahra

Contact

Johny Maung

Head of Technical Assistance and Project Management

Innovision Consulting Private Limited

Level 3 & 4, House 26, Pragati Sharani, Block J,

Baridhara, Dhaka1212

E-MAIL: johny.maung@innovision-bd.com

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ACKNOWLEDGEMENT

Innovision Consulting would like to thank all the members of Feed the Future Rice and Diversified

Crops Activity project who participated in the interviews and helped us to secure respondents for

conducting interviews. Without their time and input, this study would have been incomplete.

We acknowledge the commendable support that was provided by the project team to design,

manage, analyze and present the findings from the study. This report is an output of a collaborative

effort between RDC and Innovision Consulting.

We would like to thank Nasir U Ahmed, Team Leader, RDC, for helping us organize the interviews

with key respondents.

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ACRONYM

AIRN

BADC

Agro-input Retailer Network

Bangladesh Agricultural Development Corporation

BBS

BDT

BINA

BRRI

CIMMYT

DAE

DD

FAO

GDP

IRRI

RDC

RVC

USD

UAO

Bangladesh Bureau of Statistics

Bangladesh Taka

Bangladesh Institute of Nuclear Agriculture

Bangladesh Rice Research Institute

International Maize and Wheat Improvement Center

Department of Agricultural Extension

Deputy Director

Food and Agriculture Organization

Gross Domestic Product

International Rice Research Institute

Future Rice and Diversified Crops

Rice Value Chain

United States of America Dollars

Upazila Agriculture Officer

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EXECUTIVE SUMMARY

Background

Feed the Future Rice and Diversified Crops (RDC) activity is a USAID-funded project designed to

catalyze market system changes that promote a diversified farm management approach oriented to

intensified rice production and higher-value, nutrient-rich crops to increase incomes and improve food

security and nutrition in the Khulna, Barisal, and southern Dhaka divisions of Bangladesh (RDC

zone). RDC’s goal is to increase rural incomes by catalyzing a process that leads to competitive and

inclusive rice based market systems. This includes supporting the private sector to expand purchases

of rice from small-scale agricultural producers in target areas.

Objective and Methodology

This assessment is commissioned by ACDI/VOCA to gain a better understanding of the potential and

challenges facing the rice “output market” in the targeted area. The assessment is expected to

support the identification and implementation of the project’s market systems facilitation activities.

The scope of the assessment is to comprehend the output market value chain, the challenges and

constraints faced by different actors across the forward market value chain and to develop probable

interventions to address prevailing constraints in the forward market.

Four stages were followed to conduct the assessment. The exercise started with an inception period

with a kick-off meeting with RDC to get a better understanding of the assignment where the key

research questions, methodology, timeline and work plan were approved. Following the kick-off

meeting, a literature review was carried out to get a better understanding of the different varieties of

rice in Bangladesh and to acknowledge existing information. Based on the secondary literature

review, the primary investigation was conducted. The primary investigation involved interviews with

different stakeholders of the rice market and key informants in the RDC region. In-depth interviews

were also conducted with major buyers to identify the consumer preference of different rice varieties

and to assess the opportunity to intervene. Overall, 25 producers, 14 traders, 16 millers and private

sector buyers, 16 wholesalers and retailers and 12 key informants were interviewed. Finally, the

findings were shared with RDC.

The varieties to investigate in this assignment were selected based on area under coverage in the

RDC zone and local, regional and national growth potential of the varieties. As per requirement of

RDC only fine grain rice varieties were selected for review. The RDC working area is spread along the

coastal region (Khulna, Jessore, and Barisal) and Dhaka. The major rice producing seasons in these

regions are Boro (Janaury-April) and Aman (June-November). Production in Aus season is

constrained due to high salinity. The study thus focused on the Boro and Aman varieties that are

being produced in the RDC zone. Based on review of available data and correspondence with key

informants, we selected BRRI dhan28, 29, 50 (Boro Varieties), Binadhan-7, BR23, BRRI dhan34 and

49 (Aman Varieties) for primary investigation. The primary investigation was conducted in Jessore,

Jhenaidah, Satkhira, Khulna, Bhola and Barishal districts.

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Review of Rice Market Value Chain

End Market

The end market for rice varies with respect to the variety. BRRI dhan28, 29, 50, 49 and Binadhan-7

are primarily sold in the local market. It can be noted that BRRI dhan34 is mostly consumed as

subsistence crop. A review of the growth opportunities of the varieties revealed that production of

BRRI dhan28 is mostly static; BRRI dhan29 is less popular as it has a longer duration; BRRI dhan50

has high demand in the local market as it is an aromatic variety; BRRI dhan34 has high national and

export demand and can be promoted in the FTF zone; BRRI dhan49 has become susceptible to

disease and became unpopular recently; Binadhan-7 sells at a higher price if stored for 2-3 months.

Variety Preference and Profitability Analysis

Farmers select the variety of rice based on availability of land, demand for a variety in the market,

environmental factors, yield and price of the variety. If the farmer has ample land (around 66

decimals), two varieties of rice are generally cultivated, one for own consumption and another for

selling in the market. In case of a small plot of land (usually around 20-40 decimals), rice is only

cultivated for household consumption. The costs of production of different varieties grown in a specific

season are relatively similar. BRRI dhan50, BRRI dhan28 and BRRI dhan29 are grown in Boro

season with the cost of production ranging from BDT 76,000/Ha to BDT 81,000/Ha. Similarly, BR23,

BRRI dhan49, BRRI dhan34 and Binadhan-7 grown in the Aman season costs from BDT 59,000 to

BDT 65,000 to produce. The differences in cost of production stem from the different seed, irrigation

and post-harvest costs. The yields of the selected varieties are around 5-6 MT/Hectare with the

exception of BRRI dhan34 which is around 3.5 MT/Hectare. The variation in profitability is realized

from the different selling prices resulting in different revenues and profit. Profitability is the highest for

BRRI dhan50 (33,000 BDT/MT), followed by BRRI dhan34 (32,000 BDT/MT) and BRRI dhan28

(26,000 BDT/MT). However, the farmers in the RDC zone are not very interested to cultivate BRRI

dhan50 and BRRI dhan34 as the demand is not that high compared to varieties such as BR23 and

BRRI dhan28.

Channels of distribution and value addition

Paddy cultivated by small farmers is sold to farias whereas large farmers sell to beparis and paikers

directly. The farmers who sell to traders can be observed to harvest BR23, BRRI dhan28, BRRI

dhan29, BRRI dhan49, BRRI dhan50 and Binadhan-7. As BRRI dhan34 is grown for self-consumption

it is not sold to traders. Generally, the large traders (paikers) sell to millers. They supply to semi-auto

mills and auto mills. The medium traders (beparis) usually sell to semi-auto and husking mills as they

cannot supply the volume needed by the auto mills. The small traders (farias) sell to husking mills as

they deal in very small quantity of paddy.

The husking mills generally sell to local markets. They sell directly to wholesalers or retailer in the

local and regional markets. The semi auto mills generally sell to regional markets. The auto mills

generally sell to Dhaka and Chittagong as the demand for rice is very high and they can sell in large

volumes. As the paddy or rice passes from the different actors across the value chain value gets

added. The most significant value addition occurs at the miller level which is nearly 50%.

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Value Chain Functions

Post-harvest processing: The post-harvest of rice entails drying, thrashing, transporting and storing of

rice. The drying is done to reduce the moisture content of paddy. The moisture content is reduced

from 21-24% after harvest to 15-18% by drying for 2-3 days. Thrashing is the next step which can be

done mechanically or manually. After thrashing the paddy is cleaned, transported and stored. The

farmers in Jessore region generally follow proper post-harvest whereas the farmers in Barishal and

Bhola are found not to follow proper post-harvest activities. Since agriculture in Barishal are one crop

farmers face a liquidity crisis and are forced to sell off paddy right after harvest to mitigate the input

costs. The post-harvest and storing decision is also dependent on the cultivable land. Farmers with

small cultivation areas cannot keep a significant amount of paddy in storage as they need to sell the

paddy to pay for their expenses.

Trading: The trading functions include collection, aggregation, storage and transportation of the

paddy. Paddy traders can be classified as small, medium and large traders.

Processing/Milling: Rice processing in Bangladesh includes parboiling and milling activities. There are

mainly three types of mills: Automatic, Semi-Automatic and Husking. Automatic rice mills tend to

process fine rice (Miniket, Nazirshail and BRRI dhan28) due to a higher profit margin compared to

coarse rice. Paddy is procured from the FtF zone as well as Northern districts of the country. The

paddy is procured later in the harvest season due to high moisture content at the beginning of the

season; and rice is stored for 2-3 months after milling to capitalize on higher prices. The semi-

automatic rice mills process coarse and fine rice. Husking mills generally process coarse rice. Both

types of mills start procurement from the beginning of the harvest season and capitalize on lower

price when paddy is still wet. Husking mills operate manually and produce a high quantity of broken

and under-polished rice. These mills operate at 40-50% capacity utilization during Boro due to a lack

of sunshine. As technology is being adapted by the milling industry at a progressive rate more

automatic mills are being set up. Automatic mills are more profitable and pose direct competition to

semi-automatic and husking mills. Thus many husking mills are closing down as they cannot survive

in the market competition.

Wholesaling and retailing: Wholesalers buy rice in large quantities from millers and supply to retailers.

They serve the regional and local markets. Retailers cater exclusively to the final consumer of rice.

Support Functions and Regulations

There are several support functions which facilitate the rice output market. Access to finance is

available for farmers and millers. The sources of finance for farmers include input supplier’s credit,

loans from family and friends, loan from local money lenders and microcredit loans from NGO-MFIs.

Millers usually set up business by taking out bank loans. Working capital for running the business is

financed by commercial bank cash credit facilities and personal savings. Other supporting functions

include National level research initiatives taken by BRRI and BINA, machinery supply and

maintenance for the rice milling industry, extension services by the Department of Agricultural

Extension (DAE), standards and grades of rice developed by Bangladesh Standard and Testing

Institute (BSTI) and development initiatives to strengthen the rice market system. The government of

Bangladesh regulates the rice price through several mechanisms including rice trade policy, export

permits and open market sales. It also takes measures to boost productions of rice at the farmers’ end

by subsidizing inputs and supporting credit facilities.

Region Specific Findings

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High salinity is specific to Satkhira, Jessore and Khulna. This prevents farmers from cultivating

several varieties of rice which are not tolerant to salinity. Lastly, poor post harvesting is prevalent

exclusively in Bhola and Barishal. Farmers are unable to undertake proper post harvesting measures

in this area. In all the regions except Barishal BRRI dhan28 is a major variety produced. BR23,

Shorna and Mineket are also widely produced.

Opportunities and Constraints

The rice output market assessment resulted in the observation of niche market opportunities for BRRI

dhan50 and BRRI dhan34 varieties in the FtF zone among the other varieties assessed.

The cultivation of BRRI dhan50 is increasing from the FtF zone. Around 75% of the national

production comes from Jessore-Khulna region (DAE, 2014-15). This variety also has the highest

profitability (BDT 33391/ha) compared to other types in the FTF zone. The demand for BRRI dhan50

is increasing in the end market in the FtF zone as well as in Dhaka. Demand for the variety among the

millers is also increasing by 10-15% sales in the FtF zone.

Few constraints could be observed that hinder market prospects of BRRI dhan50. There is a lack of

awareness amongst the millers about the profitability and market prospect of the variety; the millers

apart from Jessore are not connected to the buyers of fine grain rice in the national market. The poor

packaging at miller level fail to attract buyers and result in wastage. The value chain actors are also

not aware about the proper drying method after harvesting.

BRRI dhan34 is the most popular aromatic rice variety in Bangladesh. The profitability for the farmers

(BDT 31945/ha) is higher if compared to other varieties. Demand for the variety is increasing with the

increased purchasing power of the consumers. Almost all rice marketing companies and mills trade

BRRI dhan34; popularly known as Chinigura. This variety is permissible for export and currently tops

the list of exported rice varieties from Bangladesh.

The constraints of expanding market prospects of BRRI dhan34 in the FtF zone include missing large

scale national food product processors and exporters in the region, lack of processing mills for

aromatic rice varieties in FtF zone and inadequate extension services.

During our assessment we identified production of two more varieties- BRRI dhan63 and BRRI

dhan67. BRRI dhan63 has similar characteristics to BRRI dhan50 but the yield is higher by about 1

tonnes/ ha. BRRI Dhan 67 has been released recently for saline prone regions. Production of these

two varieties could benefit the millers by improving their productive output (increased capacity

utilization).

There are several generic challenges that are relevant for all the varieties assessed. Semi-automatic

and automatic rice millers do not procure paddy directly from farmers which results in an inefficient

procurement channel and lower quality of rice supply. Husking mills are underutilized as they operate

after the Aman season only. This reduces the competitiveness to semi-auto and automatic rice mills.

There is a lack of good quality seeds from private suppliers and BADC. Farmers use seeds which are

not retained properly. This results in wastage at the production stage. . The extension services at the

Department of Agriculture Extension (DAE) are limited which lead to poor productivity and profitability

at the farmers’ end. After harvesting farmers in Barishal and Bhola do not follow best post-harvest

practices. This results in inferior quality paddy. Lastly, farmers in coastal areas of Bhola, Satkhira and

Khulna have limited varietal choice due to the high salinity in the water and soil.

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Recommendation

Vision

To build on the niche market opportunities and address the relevant market systems challenges for

the output market value chain of the selected rice varieties in the FtF zone the following vision for the

RDC project is proposed:

‘Facilitate establishment of a vibrant high value rice market characterized by increased production,

processing and marketing of fine grain parboiled and aromatic rice varieties from the FtF zone in

Bangladesh.’

Recommended Interventions

Strategic Intervention I: Strengthen the forward market linkage between the auto rice mills in the FtF

zone and the national buyers to stimulate demand for high value rice varieties from the FtF zone

Intervention activities need to be taken to address the shortcomings of the market system of aromatic

rice varieties in the FTF zone. The varieties in this context are BRRI dhan34 and 50. Furthermore, a

newly introduced variety, BRRI dhan63 could be promoted to achieve a first mover advantage and

secure the national market from the FtF zone rice supply. RDC can facilitate national buyers to

undertake trial procurement and demonstration of the aromatic varieties with cooperation of auto rice

mills. The project could work with the auto rice mills in the region to assess the impact of branding on

expanding the market for high value rice locally and regionally. As a part of the intervention the

packaging of rice done by selected auto rice millers need to be addressed to reduce the wastage of

rice. The intervention will lead to increased capacity utilization and revenue for the auto rice mills;

improve overall efficiency and value added in the output market chain for the selected varieties.

Strategic Intervention II: Strengthen the backward market linkage between the auto rice mills and the

rice producers to stimulate increased production and appropriate post-harvest processing of selected

high value rice varieties in the FtF zone

As more rice mills are being established competition for procurement is increasing. Often times large

automatic rice mills procure from the Northern Region. RDC can facilitate more efficient procurement

channels that can stimulate production of the selected varieties in the FtF zone. RDC can facilitate

direct procurement of paddy from farmers by the millers. The project can take up the collection point

model developed by the RVC project of IRRI and promote such a model to the millers. The

intervention on establishing deep procurement channels for the auto rice mills could be leveraged to

promote improved post-harvest practices amongst the farmers and the traders. The technical

expertise of the millers also needs to be improved; specifically of husking mills that cannot operate

during monsoon. RDC project can work with the husking mills to install solar driers which can dry the

paddy more effectively within a short period of time. Lastly, the project needs to promote good quality

seeds and support demonstration trials so that farmers are aware of the profitability of the promoted

varieties. The strengthened backward market linkage interventions would improve the overall output

market profitability and productivity. It can also increase the revenue for farmers.

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TABLE OF CONTENTS

Introduction

11

Status of Rice Production

15

Rice Output Market Value

Chain

18

Constraints

32

Recommendations

36

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1. INTRODUCTION

1.1 Background

Bangladesh agriculture involves food production for 163.65 million people from merely 8.75 million

hectares of agricultural land (Salam et al., 2014). Rice is the staple food of the millions of the

population in the country providing about 70% of direct human calorie intake. Rice sector contributes

one-half of the agricultural GDP and one-sixth of the national income in Bangladesh (Sultana, 2012).

There has been more than three-fold increase in rice production in Bangladesh since independence

from nearly 10 million ton in 1971 to about 34 million ton in 2013 (Ricepedia, 2015). On the other

hand, the population of Bangladesh increased from around 65 million in 1970 to nearly 161 million in

2015 (Worldometers.info, 2017). This indicates that the growth of rice production was much faster

than the growth of population in the country. As a result, the country has not only earned self-

sufficiency in rice production, but also gradually entering into the export regime. According to

FAOSTAT (2017), Bangladesh is the fourth largest producer of rice in the world.

1.2 Objective

The main objective of the study was to understand the rice output market in the RDC zone and

identify possible intervention areas. The specific objectives of the study were to:

Analyze the output market value chain of selected rice varieties in the RDC zone

Define the challenges and constraints faced by different actors across the forward market value

chain

Define probable interventions to address the constraints in the forward market

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1.3 Methodology

1.3.1 Methodology Overview

The study was undertaken in four stages- inception, literature review, primary investigation and

dissemination & final report submission. The study team conducted a kick-off meeting with the RDC

team to review the study objectives, key research questions, methodology, timeline and work plan

which were approved on review at the kick off meeting. Following the kick off meeting, a literature

review was carried out to review the status of rice production in Bangladesh, its opportunities and

challenges and the scenario in the RDC program area. The primary investigation was conducted in

the RDC programme area to determine area specific status with regards to the specific research

questions. This led to the final analysis and recommendations on interventions that are presented in

this report.

1.3.2 Selection of Varieties for Primary Investigation

The rice varieties that were reviewed in the primary investigation were selected based on several

criteria (i) area under coverage in the RDC zone and (ii) local, regional and national growth potential

of the varieties. As per requirement of RDC only fine grain rice varieties were selected for review

because of higher value addition in comparison to coarse rice varieties.

Rice is produced in Bangladesh in three seasons – Boro (Mid Dec- End April), Aus (May-Aug) and

Aman (July-Mid Dec). Production in the RDC zone is limited to Boro and Aman seasons. Production

in Aus season is constrained due to high salinity. The study thus focused on the Boro and Aman

varieties that are being produced in the RDC Zone. Based on review of available data and

correspondence with key informants, we selected BRRI dhan 28, 29, 50 (Boro Varieties), Binadhan 7,

BR 23, BRRI dhan 34 and 49 (Aman Varieties) for primary investigation. Rationale for selection of

these varieties is provided in Annex C of this report.

1.3.3 Primary Investigation

The primary investigation was conducted in two stages. The first stage involved interviews with

different stakeholders of the rice market i.e. farmers, traders, rice millers, seed suppliers, institutional

buyers, and key informants (exporter, wholesalers, retailers, government officials) in the RDC region.

The second stage involved in-depth interviews with major buyers to identify the consumer preference

of different rice varieties and to assess the opportunity to intervene.

The tools and questionnaires for the primary investigation were developed after careful analysis of the

findings from the literature review. For the facilitation of accurate and prompt data collection, seven

sets of questionnaire guides were developed for Farmers, Traders (Faria/Bepari/Aratdar), Private

Sector Buyers/Rice Millers, Wholesales and Key Informants. Questionnaire guides were used to

assist with in-depth probing as and when required. The questionnaires are attached in Annex 3. A

total of 83 respondents were interviewed during the study period. Respondents were selected through

snowballing so as to facilitate in-depth analysis of networked challenges and opportunities. Table 2

shows the distribution of respondents for this study. The list of respondents is provided in Annex B.

Table 2: Distribution of Respondents

Actors Number of Respondents

Farmers 25

Traders 14

Rice Millers 13

Wholesaler/Retailers 16

Institutional Buyers 3

Key Informants 12

Total Respondents 83

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Highest Producing

2nd Highest Producing

3rd Highest Producing

4th Highest Producing

5th Highest Producing

1.3.3 Geographical Coverage

To select the investigation areas, the study team looked at the data of area under cultivation of the

five selected varieties in the RDC Zones (Jessore, Khulna, Barisal and Dhaka regions).

Table 3: District level area under rice production in RDC region

Legend Source: DAE, 2016

As can be observed in Table 3, the major production areas for the selected rice varieties in the RDC

zone are Jessore, Jhenaidah, Satkhira, Khulna, Bhola and Barishal districts.

Table 4: Major productions hubs for the selected varieties in the RDC zone

Production Hub Most Produced Vareities

Jessore BRRI dhan28, BRRI dhan50, BRRI dhan49, Binadhan-7

Jhenaidah BRRI dhan50, BRRI dhan49 & Binadhan-7

Satkhira BRRI dhan28 & BRRI dhan50

Khulna BRRI dhan28 & BR dhan23

Barishal BRRI dhan29 & BR dhan23

Bhola BR dhan23 & BRRI dhan34

The major nearby rice milling hub is in Kushtia, which does not fall under the working area of RDC.

However in-depth interviews were carried out at the miller level in Kushtia as they procure a large

volume of paddy from the RDC working area. Thus the investigation was carried out in Jessore,

Jhenaidah, Satkhira, Khulna, Bhola, Barishal and Kustia.

BRRI dhan28 BRRI dhan29 BRRI dhan50 BR23 Binadhan-7 BRRI dhan49 BRRI dhan34

Jessore 49,715 750 10,860 1,590 14,325 14,375 475

Jhenaidah 29,550 1,195 8,850 1,750 9,610 17,454 25

Magura 16,879 2,157 830 450 13,855 3,305 -

Chuadanga 22,050 280 2,475 - 1,570 2,950 -

Meherpur 12,680 130 468 - 1,128 940 -

Khulna 31,391 298 151 29,536 799 - 175

Bagerhat 20,129 502 300 6,422 108 - 31

Satkhira 50,233 181 2,320 11,710 7,933 - 30

Narail 21,275 1,190 1,005 45 5,100 - -

Barishal 5,779 13,899 554 6,027 1,010 1,000 315

Pirojpur 1,035 2,765 38 523 289 141 20

Jhalokathi 1,540 1,925 130 1,050 310 150 40

Patuakhali 592 296 - 11,081 512 3,072 149

Barguna 102 77 - 4,135 225 90 60

Bhola 7,428 3,932 350 20,775 3,110 2,080 3,260

Faridpur 6,796 15,935 428 10 6,226 3,901 98

Madaripur 4,013 27,315 85 - 1,350 60 81

Gopalganj 8,707 16,759 317 2 520 149 38

Rajbari 5,262 8,926 947 - 10,733 4,319 12

Shariatpur 2,150 17,143 300 - 208 90 -

297,306 115,655 30,408 95,106 78,921 54,076 4,809

Dhaka

Region

AMAN Season

Jessore

Region

Khulna

Region

Barishal

Region

BORO Season

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1.3.4 Data Analysis and Report Preparation

Data analysis was based on the triangulation of data collected using different methods/sources during

the data collection phase. That is, data collected from different sources and using different methods

were compiled, analyzed and synthesized/triangulated. Triangulation was applied to increase the

credibility and validity of the results, and cross-checking of information was done to the extent

possible in order to minimize any bias.

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2. STATUS OF RICE PRODUCTION IN BANGLADESH

2.1 Background

Bangladesh agriculture involves food production for 163.65 million people from merely 8.75 million

hectares of agricultural land (Salam et al., 2014). Rice is the staple food of the millions of the

population in the country providing about 70% of direct human calorie intake. Rice sector contributes

one-half of the agricultural GDP and one-sixth of the national income in Bangladesh (Sultana, 2012).

There has been more than three-fold increase in rice production in Bangladesh since independence

from nearly 10 million ton in 1971 to about 34 million ton in 2013 (Ricepedia, 2015). On the other

hand, the population of Bangladesh increased from around 65 million in 1970 to nearly 161 million in

2015 ((Worldometers.info, 2017). This indicates that the growth of rice production was much faster

than the growth of population in the country. As a result, the country has not only earned self-

sufficiency in rice production, but also gradually entering into the export regime. According to

FAOSTAT (2017), Bangladesh is the fourth largest producer of rice in the world.

The continuous growth in rice sector has been possible largely due to combined efforts of farmers,

rice scientists, extension personnel and Government of Bangladesh. Since the 1970s Bangladesh

Rice Research Institute (BRRI) and Bangladesh Institute of Nuclear Agriculture (BINA) have

conducted research and have successfully released several varieties of rice seeds which

accommodate the agro-ecological conditions. The two rice research institutes have made high

yielding varieties available to farmers. Thus farmers are inclined towards cultivating the new variety of

rice which promises profitability. In Bangladesh 15% of the rice produced is hybrid rice. Rice is

produced in three seasons: Aus, Aman and Boro. The Aus rice is seeded during April, rain fed in the

pre-monsoon shower and harvested between July and August. The Aman varieties are rain fed during

the monsoon season. They are directly planted in June or transplanted between July and August.

Both types of Aman rice are harvested during November to December. This type of rice is prevalent

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along the coastal areas. Lastly, Boro is dry season irrigated and seeded during December to January

and harvested between April and May.

Figure 1: Rice Production and Harvesting Seasons in Bangladesh

Source: Rice Cultivation in Bangladesh: Present Scenario, Problems, and Prospects, 2016

The different growing seasons are exposed to different stresses such as flash flood, draught, low and

high temperature. For Aus season, the major production areas are: Comilla, Naogaon, Barguna,

Chittagong and Patuakhali. For Aman season, the major production areas are: Dinajpur, Naogaon,

Mymensingh, Chittagong and Bogra. Mymensingh, Naogaon, Dinajpur and Netrokona produce the

highest during the Boro season.

2.2 Production Performance

Rice is cultivated in more than 78% of the cultivable area in Bangladesh with a production area of

around 11.37 million hectares (BBS, 2016). The land available for rice production has increased less

than 10% from 10,571,000 Ha in 2006-07 to 11,421,000 Ha in 2014-15. In contrast, the production of

paddy has increased significantly over the time period. It reached 34,861,000 metric tons in 2014-15

from 27,318,000 metric tons in 2006-07. The higher rate of increase in production in comparison to

expansion in area under production is attributed to improvement in cultivation methods and adoption

of improved varieties.

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0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Hectare MT

Figure 2: Rice Production Trend (in ‘000)

Source: DAE 2016

Among the varieties chosen, BRRI dhan 29 has the highest yield at 7.5 tons per hectare. This is

followed closely by BRRI dhan 28. BRRI dhan 28 is suitable for flood prone regions as it can be

harvested before flash flood. BRRI dhan 29 has been designed to be leaf and sheath resistant which

helps to lower crop loss. BRRI dhan 50 and 34 are aromatic varieties. BRRI Dhan 50 is known as

Banglamati as it resembles the imported Basmati rice. BRRI Dhan 34 has medium yield (3.5 t/ha).

However, this variety is not photosensitive and has lower level of insect-pest tolerance. Binadhan-7

has the shortest duration of maximum 120 days and relatively high yield (5 t/ha).

Table 4: Characteristics of the selected rice varieties

Rice type Crop duration

(days)

Yield

(t/ha)

Special Features

BRRI

dhan28

140 5.0 -6.0 The duration is 3 weeks shorter compared to BRRI dhan29. This

makes the variety convenient to harvest in flood prone regions where

matured paddy may get submerged with the onset of the rainy season.

BRRI

dhan29

160 7.5 Leaf and sheath blight resistant

BRRI

dhan50

155 6.0 Aromatic parboiled rice

BR23 150 - It is photosensitive. It can be planted late in the Aman season and has

satisfactory yield compared to other Aman varieties. This variety is

preferable in the southern region as it can be planted late and can

withstand moderate salinity.

Binadhan

-7

110-120 5.0-5.5 More resistant to leaf, sheath blight and stem rot compared to other

Aman varieties. It matures early and allows farmers to plant other crops

after harvest.

BRRI

dhan49

135 5.0 It is non-photosensitive. Field findings revealed that farmers are facing

problems as the variety is susceptible to false smut.

BRRI

dhan34

135 3.5 It is an aromatic variety which has nearly double yield compared to

local aromatic varieties.

Page | 18

3. REVIEW OF THE RICE OUTPUT MARKET VALUE CHAIN

IN THE RDC ZONES

3.1 End Market Analysis

The market for rice varies with respect to the variety. Our findings show that with exception of BRRI

dhan 34, which is mostly consumed as subsistence crop, the varieties are being sold primarily in the

local market. BRRI dhan 28, 29, 50, 49 and Binadhan 7 are primarily sold in the local market.

Regional markets constitute the second largest share of the market for these varieties. In this context

it should be noted that local market is defined as the market where the rice is produced or processed.

The regional markets constitute surrounding districts. The national markets constitute the markets

outside FTF zone.

Table 5: End market distribution of the selected rice varieties

Source: Primary Investigation

Variety Subsistence consumption

Local Consumption

Regional Consumption

National

BRRI dhan 28 10% 40% 30% 20%

BRRI dhan 29 15% 50% 20% 15%

BRRI dhan 50 10% 50% 15% 25%

BRRI dhan 34 75% 10% 5% 10%

BRRI dhan 49 20% 50% 15% 15%

Binadhan 7 15% 40% 15% 30%

The growth opportunities of the selected varieties vary with respect to the competition from imported

rice, production in other regions and the suitability of the variety for production with respect to climate

change and other natural or environmental conditions. Following is a snapshot of the growth

opportunities of the selected varieties.

Page | 19

Snapshot: Review of the Growth Opportunities of the Selected Varieties

BRRI dhan 28: This variety faces a direct competition from the Indian variety Miniket because

these two varieties are produced in the same Boro season. According to traders in the region,

demand for Miniket is high amongst the high end consumers in comparison to BRRI dhan 28

even though the price for Miniket is higher than BRRI dhan 28 (about TK40-50 per mound). It

has been reported that often BRRI dhan 28 is mixed with Miniket by the traders (farias,

wholesalers, millers) since Miniket fetches higher price even though the two varieties look

almost similar. Our findings show that the area under production of BRRI dhan 28 is almost

static. It is unlikely to grow further in the near future because of the competition from Miniket

variety.

BRRI dhan 29: It is mainly cultivated in greater Barishal, Gopalganj, Madaripur region in Boro

season as its productivity is higher. Also the consumers of those regions like coarse rice. This

variety will not be expanded in greater Jessore region as its duration is 3 weeks more than BRRI

dhan 28.

BRRI dhan 50: This new variety which was released in 2008 is identified as a variety with high

growth prospect even though the area under production of this variety is still low and the

production is primarily concentrated in Jessore district within the FtF zone. Several factors

contribute to its growth prospect. Demand in the local market is high as it is a fine grain

parboiled aromatic rice. It is marketed as Banglamoti as a suggestion to its similarity to the fine

grain Basmati rice from India. Within Jessore, production of BRRI dhan 50 has increased from

10860 ha in 2015 to about 16888 ha in 2016 (Source: DD Office of DAE Jessore).

BRRI dhan 34: It is the leading aromatic variety in national market but due to lack of extension

services and milling facilities the production of this variety in the FtF zone is still low. Currently,

the production of this variety is mostly concentrated in the Northern region in Bangladesh.

Within the FtF region, it is being produced in small areas mostly for self-consumption. The

variety has high demand in the national market and in the export market (primarily serving the

Non-Resident Bangladeshis). Production could grow in the FtF region if the national buyers are

attracted to source from the FtF zone. Further to that to increase production of this variety,

extension services are needed in addition to establishing processing units that could serve the

national buyers. A new processing unit is being established in Jessore for aromatic rice. This

provides an opportunity for RDC to promote the variety in the FtF zone.

BRRI dhan 49: Few years back, the variety was expanding rapidly as it is fine grain rice in

Aman season. Recently it has become susceptible to disease (False smut). The false smut

disease makes the grain discolored which reduces the market price. The Upazila Agriculture

Officer of Jessore Sadar expressed his unwillingness to promote this variety.

Binadhan 7: It is a short duration fine grain Aman variety which is potential to increase cropping

intensity in rice based cropping pattern. The rice becomes sticky if it is cooked few days after

harvest. It thus fetches a lower market price in comparison to other fine grain Aman varieties (for

instance 49 and 28). However, the problem with stickiness does not exist after 2-3 months of

storage. Often traders purchase this variety at a lower price right after harvest, store it for

several months and sell it as BRRI dhan 28 for higher price. The variety is suitable variety for

puffed rice and is being sourced by puffed rice manufacturers in the region.

Page | 20

3.2 Varietal Preference and Profitability Analysis

3.2.1 Varietal Preference

Several factors contribute to the varietal preference of the farmers. This includes availability of land,

market demand, environmental suitability, yield and price of the variety. Farmers who own or have

access to around 66 decimal land generally cultivate two varieties of rice, one for own consumption

and another for commercial sales. The yearly demand for rice for a 5-member household is around

600 kg, which can be milled from 960 kgs of paddy. To grow 960 kgs of paddy, the household needs

to have at least 40 decimals of land. When the farmer has a small amount of land (usually around 20-

40 decimals), he only cultivates the rice for his household’s consumption.

The varietal preference is also dependent on the demand of

a specific variety in the market. For instance, farmers in the

Dacope upazila of Khulna prefer to cultivate the BR 23 as

the demand for the variety is high in the local market and

the farmers enjoy good yield compared to other vareities.

High demand does not necessarily translate to higher

prices, as the variety is mostly consumed by the poor.

Farmers also prefer to cultivate varieties with high yield

however in some cases, indigenous varieties with low

yields such as Subollota/Kajollota are preferred especially

where there is waterlogging.

Along with these factors, the price of the variety is a prime consideration for the farmers. Wherever

the farmers get good price of a specific variety, they tend to cultivate the same variety the following

year in the hope of getting a higher return. The interest however declines following up to depression in

price in one season. The price of rice and in turn the price of paddy depends on a number of factors.

The government plays a strong role in regulating rice prices as they want to keep the price of rice at a

reasonable level at the consumer level and also tries to ensure a fair price at the farmer level. The

government also procures rice through its procurement channels and set the price of coarse rice

according to the cost of production at the farmer level. As this is the lowest value rice, it sets the price

of other medium varieties of rice. If the production of rice suffers from natural calamities such as flood

or draught, the government imports rice itself or permits the import of rice through private importers.

The production of rice also determines the price of rice, if there is excess production, the price falls

and if there is shortage, the price increases.

3.2.2 Profitability Analysis

The cost of production is almost same for varieties which are grown in a particular season. For

example, BRRI dhan 50, BRRI dhan 28 and BRRI dhan 29 are grown in Boro season and the cost of

production ranges from BDT 76,000/Ha to BDT 81,000/Ha. Cost of production of BR 23, BRRI dhan

49, BRRI dhan 34 and Binadhan-7 which are grown in the Aman season ranges from BDT 59,000 to

BDT 65,000. The lower cost of production during the Aman season is attributed to the low irrigation

cost and the reduced labor cost (the duration of rice in Aman season is shorter than Boro season and

requires less fertilizer, weeding and pesticide application). The differences in cost of production

various from the different seed, irrigation and post- harvest costs. The yield of the selected varieties

are around 5-6 MT/Hectare with the exception of BRRI dhan 34 the yield for which is around 3.5

MT/Hectare.

“I can only cultivate BR 23 as my

field is low lying and other varieties

do not give good yield. I have tried

some local varieties but the yield is

much lower than BR dhan 23 (5.5

MT/Ha).”

Md. Asadur Rahman,

Labonchora, Khulna Sadar, Khulna

Page | 21

The prices for the varieties vary significantly; subsequently this affects the profitability. The profitability

is highest for BRRI dhan 50 (33,000 BDT/MT), followed by BRRI dhan 34 (32,000 BDT/MT) and BRRI

dhan 28 (26,000 BDT/MT). However, the farmers in the RDC zone are not very interested to cultivate

BRRI dhan 50 and BRRI dhan 34 as the demand is not that high compared to varieties such as BR

23 and BRRI dhan 28. As BRRI dhan 50 is a long grained rice and BRRI dhan 34 is aromatic rice, the

local population do not consume these rice on a regular basis. It is mostly consumed by people with

higher income who usually reside in urban areas. The local demand of rice comes primarily from the

rural population who do not consume these varieties rather prefer medium or coarse rice such as BR

23 and BRRI dhan 28.

Table 6: Variety wise Cost Benefit Analysis (BDT/Hectare)

Source: Primary Investigation

Boro Aman

Items BRRI Dhan 50

BRRI Dhan 28

BRRI Dhan 29

BR 23 BRRI Dhan 49

BRRI Dhan 34

Binadhan 7

Seed Cost 1,034 770 770 704 682 1,210 682

Seed Bed Cost 2,100 2,100 2,100 1,950 1,950 1,950 1,950

Land preparation Cost 6,175 6,175 6,175 5,775 5,775 5,775 5,775

Fertilizer 24,200 23,000 24,000 19,250 19,250 19,250 17,250

Irrigation Cost 13,600 12,000 14,000 6,000 5,000 5,000 4,000

Pesticide cost 4,000 4,000 3,600 3,745 3,745 3,745 3,045

Labor cost (before harvesting) 17,000 16,200 17,000 15,000 14,000 14,000 13,500

Post-harvest cost + Marketing Cost (Labor+Transport)

11,000 12,000 14,000 13,200 13,000 9,000 13,000

Total Production cost / Hectare 79,109 76,245 81,645 65,624 63,402 59,930 59,202

Revenue and Profit

Total Production/Hectare (MT) 5.0 6.0 6.3 5.5 5.3 3.5 5.0

Selling Prize/MT 22,500 17,000 15,750 14,500 13,750 26,250 13,750

Revenue/MT 112,500 102,000 98,910 79,750 72,875 91,875 68,750

Total Profit 33,391 25,755 17,265 14,126 9,473 31,945 9,548

Page | 22

3.3 Review of the Output Market Value Chain for the Selected Rice

Varieties

3.3.1 Channels of distribution and value addition

Farmer to Trader

Small farmers usually sell to farias whereas medium and large farmers sell to beparis and paikers

directly. Depending on the variety of rice, two chains can be observed between farmers and traders:

Figure 3: Farmer to Trader Channel

Channel 1: Farmer-Faria/Bepari/Paiker

In this channel, farmers sell to either faria or bepari or paiker. This channel can be observed for BR

dhan23, BRRI dhan28, BRRI dhan29, BRRI dhan49, BRRI dhan50, Binadhan-7. This is most

common channel between farmer and traders. As these rice varieties are popular among the

consumers, there are many actors involved in the trading of paddy of these varieties.

Channel 2: Self consumption

In this channel, farmers do not sell to traders rather they mill the paddy themselves and consume the

rice. This channel can be observed in the case of BRRI dhan34 and for other varieties where the main

reason for growing the paddy is subsistence. As the cultivation of BRRI dhan34 is not very popular,

the farmers generally cultivate the variety for own consumption and they directly take the paddy to

local mills and consume the rice themselves.

Trader to Miller

Generally, the large traders (paikers) sell to millers. They supply to semi-auto mills and auto mills. The

medium traders (beparis) usually sell to semi-auto and husking mills as they cannot supply the

volume needed by the auto mills. The small traders (farias) sell to husking mills as they deal in very

small quantity of paddy. However, with the variety of paddy, such linkages also change.

Page | 23

Figure 4: Trader to Miller Channel

Channel 1: Trader-Husking Mills/Semi Auto Mills/Auto mills

In this channel, the traders supply to husking mills, semi-auto mills and auto mills. This channel is

most prominent for BRRI dhan28 and BRRI dhan29. As these varieties are very popular, all rice mills

(husking, semi-auto and auto) mill such varieties and they procure either through small, medium or

large traders depending on the availability of paddy and their requirement.

Channel 2: Trader-Husking/Semi Auto

In this channel, the traders sell to either husking mills or semi-auto mills. This channel can be

observed for BR dhan23, BRRI dhan49 and Binadhan-7. As these varieties are mostly consumed in

the locality, the husking mills and semi auto mills generally mill these varieties. The auto mills do not

generally mill these varieties as there is no demand for such varieties in large markets such as Dhaka

and Chittagong.

Channel 3: Trader-Husking Mill-Semi Auto Mills

In this channel, the traders sell to husking mills, the husking mills dry the paddy and supply to semi-

auto mills. This channel can be observed only for BRRI dhan50. As BRRI dhan50 is a long and

slender rice, the paddy needs to be dried properly before it can be milled properly. Thus the husking

mills dry the paddy and supply to semi auto mills who mill the paddy.

Miller to Consumer

The husking mills generally sell to local and sometimes regional markets. They sell directly to

wholesalers or retailer in the local and regional markets. The semi auto mills generally sell to regional

markets as they deal in larger volumes than husking mills but they also sell in local markets. The auto

mills generally sell to Dhaka and Chittagong as the demand for rice is very high and they can sell in

large volumes. Only Binadhan-7, out of the selected varieties, is sold directly to the government

procurement channel (Directorate General of Food) by the millers.

Page | 24

The generic forward market value chain of rice in the RDC zone is as follows:

Figure 5: Generic Rice Forward Market Value Chain*

*The generic value addition has been calculated by using BRRI dhan28 as it is one of the most prominent varieties in the fTf

region.

Page | 25

The value addition at the different levels of the value chain for different varieties is as follows:

Table 7: Value Addition for Selected Varieties

Variety Purchase Price of paddy at Trader Level (BDT/MT)

Purchase price of paddy at Miller level (BDT/MT)

Selling Price of rice at Miller level (BDT/MT)

Selling price of rice at wholesaler level (BDT/MT)

Purchase price of rice at consumer level (BDT/MT)

Purchase price of rice at consumer level (BDT/Kg)

BR dhan23 14,500 14,875 34,423 35,423 37,423 37

BRRI dhan28 17,000 17,375 39,800 40,800 42,800 43

BRRI dhan29 15,750 16,125 37,800 38,800 40,800 41

BRRI dhan34 26,250 26,625 62,045 64,045 67,045 67

BRRI dhan49 13,750 14,125 33,269 34,269 36,269 36

BRRI dhan50 22,500 22,875 55,227 57,227 60,227 60

Binadhan-7 13,750 14,125 34,600 35,600 37,600 38

From the table it can be seen that the most significant value addition occurs at the miller level. For

majority of the varieties, the value addition at the miller level is almost 50%.

3.3.2 Review of the Value Chain Functions in the Output Market

Post Harvest Processing

The post-harvest processing of rice entails drying, thrashing, transporting and storing of rice. The

drying is done to reduce the moisture content of paddy. After harvest, the moisture content of paddy is

around 21-24% and after drying for 2-3 days (depending on sunlight), the moisture content comes

down to 15-18%. During harvest of Boro Season, the farmers need to dry the paddy for longer as

there is high humidity. After drying, thrashing is done mechanically (paddle thrasher) or manually

(thrashing the paddy against a drum or wooden log). After thrashing the paddy is cleaned, transported

and stored.

Traditional forms of storage include Gunny bag and Plastic/Polythene bags which are used for short

term storage or for transporting rice over short distance. For long term storage Dole, Berh, Gola,

Motka, Steel/Plastic drums are used as containers. On average, farmers store rice for around five and

a half months. Some of the rice is stored for own consumption and the rest is stored to be sold later at

a higher price. Large farmers stored rice for the longest time during Boro season (6.59 months)

whereas small farmers stored for the shortest period (3.52 months) during Aus season. Usually

farmers need to store rice for the longest time during Boro season; this is followed by Aman season

storage time. The in-store losses experienced by farmers in the three harvesting seasons are 3.68%

in Aus, 3.8% in Aman and 4.12% in Boro (Abedin et. al., 2012). In-store losses occur due to poor

storage systems and natural calamities.

Table 8: Rice Storage Period for farmers Farmer Category Average Storage Period (Month)

Aus Aman Boro Average

Large 3.97 (1.61) 5.57 (3.71) 6.59 (4.46) 5.79 (3.95)

Medium 4.02 (2.25) 5.84 (3.22) 6.22 (3.31) 5.75 (3.22)

Small 3.52 (1.43) 5.49 (2.85) 6.18 (3.04) 5.53 (2.91)

Marginal 3.61 (1.65) 5.08 (2.26) 6.09 (2.88) 5.26 (2.59)

Average 3.75 (1.82) 5.49 (2.93) 6.21 (3.25) 5.55 (3.05)

Source: In-store losses of rice and ways of reducing such losses at farmers’ level: An assessment in selected

regions of Bangladesh, 2012 (Parenthesis figures show standard deviation)

Marginal - less than 1.0 acre (<0.4 hectares)

Small - 1.0-2.49 acres (0.4-0.99 hectares)

Medium - 2.50-7.49 acres (1.0-3.0 hectares)

Large - 7.50 acres (>3.0 hectares)

Page | 26

The average storage period for rice farmers is around 5.5 months, with storing period being shorter in

Aus season (3.75 months) compared to Boro Season (6.21 months). Constructing of common outdoor

storage structure is a popular suggestion. However, the cost of constructing such storage facility is

significant (BDT 40,000 to 100,000) for small and medium farmers (Abedin et. al., 2012). Large and

medium farmers tend to store rice for longer period compared to small and marginal farmers.

The post-harvest processing practices of farmers depend

on a variety of factors. The farmers in Jessore region

generally store the paddy for 2-3 months whereas the

farmers in Barishal and Bhola generally sell the paddy

from their fields. Majority of the agriculture lands in

Jessore are double-cropped (the agriculture lands do not

get submerged during the monsoon as the lands are not

low-lying) whereas the lands in Barishal are only single

cropped (the agriculture land gets submerged during the

monsoon as the lands are low-lying). As the farmers can

cultivate two crops in Jessore region, they can earn more

from the same land compared to farmers in Barishal as

they can only cultivate one crop. Majority of the farmers

purchase the seed and fertilizer on credit from input

sellers and pay them back by selling the paddy. When the

farmers do not have enough cash in hand, they sell their

paddy from the field and pay back the input sellers. Since

in Barishal, the farmers can cultivate only one crop they

are forced to sell the paddy from their fields. Thus the

farmers in Barishal generally do not dry the paddy.

The post-harvest processing and storing decision is also dependent on the cultivable land. If the

farmer has large amount of land (more than 160 decimals), they sell a certain portion of the paddy to

pay back the input sellers if they have bought seed or fertilizer on credit and store the rest. Depending

on the need for cash, they sell the rice. Farmers with small cultivation areas cannot keep a significant

amount of paddy in storage as they need to sell the paddy to pay for their expenses.

Trading

The trading functions include collection, aggregation, storage and transportation of the paddy. Paddy

traders can be classified as small, medium and large traders.

The small traders (farias) usually have around BDT 500,000 as working capital. They purchase paddy

either directly from farmers’ house or from local huts. After buying the paddy, they sometimes sell the

paddy to medium traders or husk the paddy in local husking mills and sell the rice in the local markets.

These traders work in a small locality for both procuring the paddy and selling the rice.

The medium traders (beparis) have investment of around BDT 500,000 to BDT 3,000,000. They

generally do not procure the rice from farmers’ house rather buy from local hats or small traders.

These traders also sell the paddy to larger traders or husk the paddy and sell the rice in local markets.

The procurement and selling network of these medium traders are larger than small traders.

The larger traders (Paiker) invest more than BDT 3,000,000 and procure paddy in large quantities.

These paikers/arotdars buy from local and regional huts and sell to mills. They also sometimes work

as commission agents of larger rice mills. These traders change their nature of business according to

I buy the inputs i.e. seed and

fertilizer, on credit from the input

sellers, I need to pay back the input

sellers by selling my harvest. When I

do not have enough money at hand,

I sell the paddy from the field and

pay back the input seller.

However, if I have cash in hand, I

can afford to pay back the input

sellers and store the paddy.

Usually I sell around 20% of the

paddy during harvest to pay back the

input seller and sell the rest of paddy

in the course of the next 3 or 4

months.

Md Ismail,

Shamolgachi, Sharsha, Jessore

Page | 27

the supply of the paddy in the market. When there is abundant supply, these traders focus on paddy

trading rather than husking. However, when the supply of paddy becomes low, these traders start

husking the paddy and selling them in the local market as they cannot make a good profit with the

reduced volume of paddy trading.

Processing/Milling

Rice processing in Bangladesh includes parboiling and milling activities. Parboiling is hydrothermal

treatment of paddy before milling. There are mainly three types of mills in Bangladesh: Automatic,

Semi-Automatic and Husking. Automatic rice mills are machine-intensive and produce whole grain

polished rice. The automatic and semi-automatic rice mills can separate the cleaned rice, husk, bran

and broken rice automatically. The main difference between automatic and semi-automatic rice mills

is the extent of automation.

The automatic rice millers tend to cater to the fine rice market (Miniket, and BRRI dhan28) rather than

coarse rice as the profit margin is higher for fine rice. The investment for establishing an automatic

rice mill with a daily capacity of 50 MT-80 MT is around BDT 150,000,000-200,000,000. The working

capital needed for a medium sized automatic mill is around BDT 30,000,000-50,000,000. The working

capital is usually generated by availing the cash credit from commercial banks and the rate of interest

ranges from 11-13%. The banks enforce a limit on cash credit and the mills cannot take out loans

exceeding the limit. There are usually 5-10 technical personnel on automatic mills depending on the

size of the establishment and the labor requirement is also around 20-70. The automatic mill runs at

around 50-60% capacity utilization. As the mills can source a fixed amount of working capital from the

commercial banks, they cannot procure and mill additional quantity.

These automatic mills procure from both the locality and the Northern regions of the country

depending on the availability of paddy. These automatic rice mills procure (10-15 MT of Paddy per

day during production) and store the rice for two or three months. They usually procure through 20-50

arotdars/commission agent and do not procure at the beginning of harvesting as the moisture content

in the paddy is higher and the equipment (conveyer) cannot handle the weight of the paddy. Thus

they wait for two or three weeks after the farmers harvest the paddy so that the paddy becomes dry

within this period. After milling the rice, they wait for two-three months before supplying their rice in

the market. These automatic rice mills mainly target Dhaka and Chittagong as these cities have high

demand for fine rice and with the huge production at automatic mills, they need to sell in bulk amount.

The semi-automatic rice mills mill all kinds of rice (coarse and fine) and usually supply in the regional

markets. The investment for establishing a semi-automatic mill is around BDT 50,000,000-70,000,000

and they need around 10,000,000-12,000,000 as working capital, depending on size. They usually

procure through 10-15 arotdars. Their procurement starts right at the beginning of the harvesting as

they can dry the paddy in their chatal. The semi-automatic mills can procure paddy at a cheaper price

compared to auto mills as they buy the wet rice. The semi-automatic mills usually employ 3-8

technical personnel along with 20-40 labourers. These mills usually source their working capital

through the cash credit facility of the commercial banks. The automatic mill runs at around 50-60%

capacity utilization. The semi-automatic mills sell both in the local, regional and Dhaka markets.

Husking mills operate manually. They use steel dehusker or Engelberg huller which produces more

broken and under-polished rice. The bran and husks need to be separated manually (Custodio et. al.,

2015). Husking mills generally mill coarse rice (BR 23, Shorna, Binadhan-7) and sell in local bazaar.

The investment for establishing a husking mill is around BDT 6,000,000-10,000,000 and they need

around 1,000,000-3,000,000 as working capital, depending on size. The working capital is sourced

either through availing cash credit facility of commercial banks or through own savings. They usually

procure through 5-7 arotdars. Their procurement starts right at the beginning of the harvesting as they

Page | 28

can dry the paddy in their chatal and can procure paddy at a cheaper price compared to auto mills as

they buy the wet rice. The semi-auto mills usually employ 1-2 technical personnel along with 10-15

labourers. These mills generally sell in local markets and sometimes take out subcontracts from larger

mills to supply rice. Such subcontracting happens especially in the case of Binadhan 7 which are

supplied to the government by the millers. These husking mills usually are more active in the Aman

season as they need sunshine to dry the paddy before milling which is not abundant after harvest

during the Boro season as the monsoon starts. The husking mills run at around 40-50% capacity

utilization.

The milling industry in Bangladesh has been adapting technology progressively. The number of semi-

automatic rice mills has increased from 457 to 650 between 2007 and 2012. During the same time the

number of automatic rice mills increased from 142 to 350. Automatic mills are three times more

profitable than husking mills and twice as profitable compared to semi-automatic mills. This is due to

lower labor costs and ability to sell rice at higher price (Food Planning and Monitoring Unit, 2014).

Faced with such competition, many husking mills have closed down and many have reduced their

volume of business. Husking mills having their own land and equipment and access to large amount

of working capital, can procure large volume of paddy during harvest season and can supply the rice

in local market. Husking mills usually do not store the rice and sell their rice within 2-4 months. Many

of the husking mills which were rented out have been closed down as they could not compete with

semi-automatic and automatic rice mills.

Wholesaling

The wholesalers are large rice traders generally situated in large population centers. These

wholesalers buy rice from millers and supply to retailers. These wholesalers cater to both regional and

local markets. They buy rice in large volume directly from the millers and supply to retailers. The sales

agents of different mills usually bring samples to the wholesalers and the price of rice is decided

through negotiation between the millers and the wholesalers and depends on the current market price

of rice at the consumer level. The wholesaler buys both in cash or credit depending on the credit

facility provided by the millers.

Retailing

Retailers cater exclusively to the final consumer of rice in the vicinity of their working area. They are

part of the downstream value chain of the rice market value chain. Modern retailers are now more

prevalent and include supermarkets and convenience store chains. The market share of higher quality

rice (i.e medium and fine) has been increasing over the share of coarse rice; especially in urban

markets like Dhaka. The market share of coarse rice in the urban wholesaler market in Dhaka

declined from 45% in 1999 to 28% in 2009. On the other hand, the market share of fine rice in the

respective market increased from 18% to 29% over the time period. (Minten, Murshid and Reardon,

2012). The price premium at the retailer end is significant. The quality premium of a shift from coarse

to medium was 15% while it was 69% for fine rice. These price premiums are realized in urban retail

markets exclusively.

3.4 Support Functions

3.4.1 Access to Finance

The primary source of finance for the farmers is supplier’s credit. Farmers avail such financing from

input sellers. During cultivation, the farmers buy the required input i.e. seed, fertilizer and pesticide on

credit from the input sellers and pay back when they harvest the produce. The input sellers charge the

farmers an interest rate of around 10-20% on the credit they provide. The farmers also lend money

Page | 29

from informal sources such as local money lenders, friend and relative to bear the expenses. The

local money lenders charge around 80-100% interest on the loan they provide. Some of the farmers

also source the working capital from micro credit organisations such as Grameen Bank and ASA

Bangladesh. The rate of interest ranges from 10-20%. However, the NGOs do not provide additional

loans if the borrower already has an existing loan. Thus the farmers tend to borrow from NGOs during

the Boro season where the cost of production is higher. As they already have availed the loan facility

from the MFIs, they cannot take another loan from the NGO during the Aman season and have to rely

on other sources of loan.

The credit requirement for establishing a mill is quite large and ranges from BDT 10,000,000 to BDT

350,000,000 (includes cost of land and capital machinery) depending on whether it is a husking mill or

automatic mill. The millers usually take out loans from commercial banks to establish the business

and the interest rate varies from 12-15%. As reported in earlier sections, the mills also need working

capital to run their business. The working capital needed for a medium sized automatic mill is around

BDT 30,000,000-50,000,000. During the field investigation, it was revealed that the millers use both

cash credit facility of commercial banks and their own saving to come up with the working capital.

However, this limits the millers’ ability to mill the rice as they can only buy a certain amount of paddy

with the limited capital.

As the share of automatic rice mills is increasing in the market, many husking mills are being closed

down. This is due to the high labor costs associated and low profitability of husking mills. During the

filed investigation it was revealed that the husking mills make an average profit of BDT 0.80-1/kg

whereas for automatic mills the profit is around BDT 1-3/kg. The revenue generating capability of

husking mills is much lower due to the low quality of rice produced by them. In order for husking mills

to graduate to semi-automatic husking mills they need to have access to credit. However as there has

been increased establishment of semi-automatic and automatic mills, there is a chance of saturation

of mill in the market which might decrease the profitability of the miller. All three types of mills borrow

from banks; however, only 2% of husking mills borrowed from traders (Raha et al., 2013).

Research

Bangladesh Rice Research Institute (BRRI) and Bangladesh Institute of Nuclear in Agriculture (BINA)

are involved in new rice variety development and trials. BRRI has released a number of saline tolerant

varieties (BRRI dhan 53, 61, 67, 73 etc.). However, these varieties are yet to reach the farmers due to

lack of extension services. So far BINA is focused on aman varieties and Binadhan 7 is playing a

significant role in increasing cropping intensity in rice based cropping pattern. Also, BINA recently

developed Binadhan 16 which is 8-10 days shorter than that of Binadhan 7 variety. Again the variety

is still not available with the farmers due to lack of extension services.

Machineries Supply

The machinery used by automatic and semi-automatic rice mills are imported into the country. There are various importing agents who supply machinery to the mill owners. The agents also cater to maintenance and repair of the machinery.

Extension Services

The Department of Agricultural Extension (DAE) provides information of variety dissemination and technology transfer at farmer level. However, the outreach of their programs is found to be low because of lack of demonstrations and trials. This can be attributed to lack of manpower of DAE and adequate planning for the purpose. In the project region it was found that many farmers prefer to use retained seeds. The farmers have reported varying degree of performance of the retained seeds. Farmers in Jessore region reported that they are satisfied with the retained seeds. However, farmers

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in the other FtF regions reported that the yield of retained seeds is low in comparison to commercially marketed seeds by BADC. This can be attributed to improper retention practices which should be further investigated.

Standards and Testing

The standards and grades of milled rice were established in 1986 by Bangladesh Standard and

Testing Institute (BSTI). The milled rice is ranked into four grades: (i) extra well milled (ii) well milled

(iii) reasonably well milled and (iv) under milled. These classifications are utilized for both white and

parboiled rice. There has been no further revision of the standards to date. The Directorate General of

Food (DGF) follows a separate standard for procurement of paddy and milled rice. The standard is

similar to the one followed by BSTI.

Development Assistance

The Rice Value Chain (RVC) project funded by USAID and implemented by IRRI worked on improving the rice market in the Southern region of Bangladesh. This was a 15 months pilot project where they piloted several interventions on seed supply, post-harvest processing, access to finance and procurement system of rice mills. USAID funded Agro-Inputs Project (AIP) is a five-year project implemented by AIRN which will end in 2017. It works in the Feed the Future (FTF) area in the Southern region of Bangladesh. The interventions include establishing agro-inputs retailers’ network, improving the efficiency and capacity of institutions and training agro-retailers and farmers about the use of high quality and safe agricultural inputs such as fertilizer, insecticide, pesticide and seeds of high yielding rice varieties (BRRI 28, 29 and 47).

USAID’s Bureau for Food Security commissioned a study examining the scaling up of agricultural machinery services through commercial pathways in the FTF zone from 2012 to 2016. The study was conducted in partnership by CIMMYT and iDE Bangladesh. The study resulted in several early adopters of the machinery among farmers and private supply chain actors.

Blue Gold program is a cooperation between the governments of Netherlands and Bangladesh which is being implemented in districts of Patuakhali, Khulna and Satkhira. The program duration is 6 years, from 2013 to 2019. It is implemented by the Bangladesh Water Development Board (BWDB), Department of Agricultural Extension (DAE) and a team of technical assistance consultants. The agricultural component of the program involves training of farmers to improve productivity in crops through better management of water resources.

3.5 Regulations

The government has strict regulation regarding the export of rice; in this case aromatic rice. This is

jointly monitored by the Department of Agricultural Extension (DAE) and Directorate General of Food

(DGF). DGF determines the demand for aromatic rice in the current year and DAE calculates how

much will be produced. If there are any excess of rice production that may reduce the price of rice at

the farmer level, export of rice is then allowed by the government. The government plays a large role

in ensuring price stability of rice and food security. A procurement price is announced at which the

government purchases rice for its store. Rice is usually purchased from regions which have excess

supply. The stocked rice is used to run government safety-net programs and for disaster relief. The

government also partakes in open-market sales at times of very high price. Imports are regulated by

government policies on tariff and import duties even though the government allows private sector

firms to import rice.

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The government also takes measures that boost the production of rice and benefits farmers. It

maintains subsidy for urea fertilizers to reduce the costs of production. Bangladesh Bank has a

directive for commercial banks to extend agricultural credit to small and marginal farmers to meet their

working capital needs. As commercial banks do not have branches that can reach out to the farmers

they channeled funds through NGO-MFIs to extend credit to farmers.

3.6 Region Specific Findings

As the study was carried out in 6 districts of the RDC zone, some of the findings are region specific.

The following illustration gives a snapshot of the region specific findings.

Figure 6: Region Specific Findings

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4. OPPORTUNITY AND CONSTRAINT ANALYSIS

4.1 Opportunity Analysis

The market is dominated by Indian varieties (Shorna and Miniket) which are outside the purview or

scope of the RDC project. It is therefore essential for RDC to find out niche market opportunities for

the other varieties. From our findings we can observe that such opportunity lies mostly with BRRI

dhan 50 and BRRI dhan 34 varieties in the FtF zone. For the other varieties, the prospect is limited.

BRRI dhan 50

- The variety is mostly cultivated in the greater Jessore region and the area under cultivation is

gradually increasing. Around 75% of the national production comes from Jessore-Khulna region

(DAE, 2014-15)

- Profitability (BDT 33391/ha) is the highest for the farmers if compared to other cultivated varieties

in the FtF zone. Paddy price is higher by BDT 150-200/ mound for the farmers than that of other

rice varieties in Boro season.

- The variety is being increasingly popular with the consumers over Miniket and BRRI dhan 28 in

recent years. Demand for the variety among the millers is also increasing by 10-15% sales in the

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FtF zone. Traders in the wholesale market in Dhaka also expressed that a portion of Miniket

consumers are shifting to BRRI dhan 50 (Banglamoti).

BRRI dhan 34

- It is the most popular variety among the aromatic rice varieties in Bangladesh. The profitability for

the farmers (BDT 31945/ha) is higher if compared to other varieties. Demand for the variety is

increasing with the increased purchasing power of the consumers.

- Almost all the rice marketing companies and mills are engaged in trading BRRI dhan 34

(Chinigura). One kg packed chinigura (BRRI dhan 34) rice is also marketed in the FtF zone.

- The Government only permits export of aromatic rice. The variety has good export market

potential and currently tops the list of exported rice varieties from Bangladesh.

Other Varieties

- Our findings show that Binadhan 7 is beneficial for the farmers since it allows them to produce

Robi crops. The primary buyers are the local millers who stock the paddy for 2-3 months and sell

it as BRRI dhan 28 or as admixture with Miniket. Binadhan 7 is suitable for puffed rice and is

being procured by puffed rice manufacturers in the region. The price for Binadhan 7 was low in

the last season and therefore it is predicted that the production will decline in the next season.

- BR 23 is suitable for specific low lying land in the FtF zone where it takes time for the rain water to

reside. Our findings show that the opportunity for horizontal expansion is low for this variety. The

variety is mostly used for self-consumption. For the limited volume that is traded in the market, we

did not identify any bottleneck that could be addressed by RDC.

- Findings show that farmers who have received low price for Binadhan 7 are shifting to BRRI 49.

However, the variety has been affected by False Smut disease. DAE might not officially promote

this variety. The traders have also voiced their concern that it is difficult to sell the variety as it is

tainted from the disease.

- BRRI dhan 29 is being produced in Barisal and Gopalganj region. It provides the highest yield

amongst the selected varieties. However, since the grain is coarse, the market price for the

variety is comparatively lower than the other varieties. The variety is preferred for government

procurement. Because of the long duration of the production, the variety is susceptible to rain, hail

storm and flooding in the mature stage.

- During our assessment we identified production of two more varieties- BRRI dhan 63 and BRRI

dhan 67. BRRI Dhan 63 has similar characteristics to BRRI dhan 50 but the yield is higher by

about 1 ton/ ha. BRRI dhan 67 has been released recently for saline prone regions. Production of

these two varieties could benefit the millers by improving their productive output (increased

capacity utilization).

4.2 Constraint Analysis

BRRI dhan 50

Lack of awareness amongst the millers about the profitability and market prospect of the

variety; the millers apart from Jessore are not connected to the buyers of fine grain rice in the

national market: Apart from the millers in the Jessore district, millers in other FtF region (Madaripur,

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Gopalganj, Barishal etc.) are not aware about the market demand and market potential of the variety.

Without their engagement in procurement and marketing of the variety, the farmers in the other FtF

region are unlikely to adopt the variety for production. This in turn would require functional linkage

between the millers in the FtF zone and the buyers in the national market (super markets, gourmet

food stores, suppliers to restaurants) for fine grain or aromatic rice. Such linkages are currently

missing.

Wastage due to poor packaging: The poor packaging (loose textured gunny bag) are not attractive

to buyers though millers are worried about increased packing cost due to government order for gunny

bag. Sometimes wastage rate is higher (1-1.5 kg) from miller to consumer level due to poor

packaging. So consumers are getting lower quantity with the market price. The value for wastage rice

is higher than improved packaging cost.

Value chain actors are not aware about the proper drying method: Processing wastage rate of

BRRI dhan 50 is higher in traditional husking mill; the auto millers almost overcome the processing

lose (recovery rate 24-25 kg/40 kg paddy). Special care is required during drying of this paddy at

farmer’s and trader’s level. Need to stir the paddy frequently to dry it uniformly.

BRRI dhan 34

Large scale national food product processors and exporters are not active in the region: The

large scale national processing companies like PRAN, Ispahani have their processing facilities in the

Northern Region in Bangladesh. The exporters of aromatic rice varieties are also not active in the

region.

Lack of processing mills for aromatic rice varieties in FtF zone: The millers in the FtF zone do

not process aromatic rice varieties. During our field investigation we found one auto rice mill in

Jessore which has set up machineries to process aromatic variety. The mill is yet to make

procurement from the farmers.

Inadequate extension: DAE is yet to take up extension activities for promotion of BRRI dhan 34 in

the FtF zone. As a result farmers are yet not aware of the profitability of BRRI dhan 34 in comparison

to other varieties.

Generic Challenges

There are several market challenges that are generic to all the varieties in the FtF zone. These

challenges include the following:

Inefficient procurement channel of the rice millers: The rice millers, particularly semi-auto and

automatic rice mills, do not procure directly from the farmers. They rely on beparis and paikers

(medium and large traders) to supply the paddy they need. The millers sometimes procure directly

from farmers, especially during the harvest period when the farmers sell their paddy in the local haats.

The reason the millers procure the paddy through traders is that the individual farmers cannot supply

the quantity required by the millers and the miller will need to procure from large number of farmers to

even fill up a truck of paddy which the millers find tedious. The millers also buy the paddy from traders

on credit however in the case of buying from farmers; they need to pay in cash. As there is huge

capital requirement for procuring paddy during the harvesting period, the millers can roll their capital

by buying the paddy from traders on credit. However the millers reported that when they buy the

paddy directly from farmers, the quality of the paddy is usually better meaning that the paddy is

properly dried and one variety is not mixed with other varieties.

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Underutilization of capacity of the husking mills: The husking mills are mostly operational after the

Aman season i.e. during the winter months as they need sunshine to dry the paddy. Generally, these

husking mills cannot operate fully during the monsoon as they do not get enough sunshine to dry the

paddy. Such dependence on sunshine results in the husking mills operating for around 5-6 months of

the year. As the husking mills are facing increased competition from semi-auto and automatic rice

mills, improving the utilization of capacity can help boost the business volume of the husking mills.

Lack of good quality seed: Farmers cultivate rice using two types of seeds - purchased seeds (from

private seed suppliers and BADC) and retained seeds. Field investigation revealed that nearly 80% of

seed used in production is retained seeds. This is because of a supply shortage of good quality seed

from seed retailers and BADC in the RDC region and farmers are not satisfied with the yields of

purchased seeds. However, the retained seeds used by farmers are not of good quality and the

farmers do not follow correct procedures to retain seeds for future cultivation. Usually up to 10% of

retained seeds become cross-pollinated naturally and need to be sorted out (Roughing). Seeds also

need to be selected for retention based on its health (weight and size). It is important to test the

germination rate of the seeds at least once a year. These steps are often ignored by the majority of

farmers in the RDC region due to a lack of awareness which often leads to lower yields.

Insufficient extension services: Farmers rely on their own expertise to tackle any cultivation related

issues, they also consult the input sellers for any cultivation related problems. The extension services

at the Department of Agriculture Extension (DAE) are limited and their major focus is on establishing

demonstration plots which is also inadequate (only 30 demonstration plots established in Khulna

region). The farmers find it difficult to access information especially on new varieties such as BRRI

dhan34. Such limited extension services results in poor productivity and profitability at the farmers’

end.

Poor post-harvest: After harvesting, paddy needs to be cleaned, threshed and dried properly before

being stored or sold. It was found that farmers in Barishal and Bhola do not follow such post-harvest

activities properly. As a result, millers are not very keen to buy paddy from these regions as the paddy

is often of inferior quality (not properly cleaned or dried). As the demand of paddy is low, the farmers

also get lower price for the paddy compared to other regions in the RDC zone. The rice is generally

milled through husking mills. There is only one auto rice mill (Tasnim agro and auto rice mill) in Bhola

which reported that they are facing shortage of good quality paddy from the region.

Limited varietal choice: Farmers face restrictions in the choice of rice varieties due to geographical

characteristics of land. Coastal areas in Bhola, Satkhira and Khulna have moderate to high salinity

and not all varieties of rice can be cultivated in those areas. The farmers in these regions only

cultivate BR 23 which is popular as late aman variety. However the supply of BR 23 seed by BADC is

very low compared to the requirement of the farmers and the farmers need to rely on retained seed.

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5. RECOMMENDATION

5.1 RDC Vision for the Rice Output Market in the FtF Zone

To build on the niche market opportunities and address the relevant market systems challenges for

the output market value chain of the selected rice varieties in the FtF zone we propose the following

vision for the RDC project:

‘Facilitate establishment of a vibrant high value rice market characterized by increased

production, processing and marketing of fine grain parboiled and aromatic rice varieties from

the FtF zone in Bangladesh.’

5.2 Recommended Interventions

To achieve the vision, we propose that RDC works on the following two strategic intervention areas:

- Strengthen the forward market linkage between the auto rice mills in the FtF zone and the

national buyers to stimulate demand for high value rice varieties from the FtF zone

- Strengthen the backward market linkage between the auto rice mills and the rice producers to

stimulate increased production and appropriate post-harvest processing of high value rice

varieties in the FtF zone

Under each intervention area, we propose RDC to undertake the following specific interventions in

line with the relevant market opportunities and systemic challenges.

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Strategic Intervention I: Strengthen the forward market linkage between the auto rice

mills in the FtF zone and the national buyers to stimulate demand for high value rice

varieties from the FtF zone

Relevant market opportunity: Of the total national market production of BRRI dhan 50, about 75% is

currently being produced within the FtF Zone. BRRI dhan 34 is demanded in the national and export

market as an aromatic variety. The new variety BRRI dhan 63 could also be promoted in the region

since there is a prospective market demand for the variety in the national market and its yield is higher

than BRRI dhan 50. If intervened now, the region could achieve a first mover advantage and secure

the national market for both varieties which will subsequently lead to comparative advantages of

production in the region. Currently the supply is limited to wholesalers at the national markets which

include Dhaka. Given that the demand for fine grain rice varieties is increasing in the national market,

the project could stimulate national agro food companies and exporters to assess the branding and

marketing prospect of BRRI and undertake trial procurement and marketing which could demonstrate

the market potential to the buyers as well as to the farmers.

Relevant Systemic Challenges: This intervention is relevant to the following systemic challenges

that we have underscored:

- Low awareness amongst the millers about the profitability and market prospect of the variety; the

millers apart from Jessore are not connected to the buyers of fine grain rice in the national market

- Weak presence of the national food product processors and exporters in the FtF region

- High volume of wastage due to poor packaging by the millers

- Lack of processing mills for aromatic rice varieties in the FtF zone

Specific Interventions: To build on the opportunities and to address the systemic challenges, we

propose that the project undertakes the following intervention activities:

- Facilitate national buyers to undertake trial procurement and demonstration of the proposed

varieties: The project should initiate dialogue with national agro food companies, online retail shops

and exporters of fine grain aromatic rice varieties to assess their demand and preferences. A joint

consultative meeting could be organized between the prospective buyers and the auto rice mills in the

project area. This should lead to plan of action for trial procurement and demonstration which the

project could undertake in partnership with selected national buyers and auto rice mills from the

region. Prospective national buyers include online stores (Direct Fresh, Chaldaal), agro food

companies (PRAN, Ispahani).

- Support establishment of local brands: In the Northern Region in Bangladesh, auto rice mills are

marketing their own branded rice which are helping to secure the high value market. We are yet to

see such trends in the FtF region apart from Kushtia where Rashid Auto Mill is marketing their own

branded rice (Rashid Rice). The project could work with the auto rice mills in the region to assess the

impact of branding on expanding the market for high value rice locally and regionally. This can then

lead to technical support for launching branded high value rice to selected auto rice mills that are

interested to invest on such initiative.

- Improved packaging: In conjunction to the interventions on facilitating linkage between the auto rice

mills and the national buyers and supporting auto rice mills to introduce local brands, the project

needs to work on improving the packaging used by the auto rice mills to reduce wastage and increase

attractiveness to the buyers. In this context, the project needs to assess the packaging used by the

mills in the Northern region since it is reportedly more functional and attractive than the packaging

used by the mills in the FtF zone. This should then lead to technical and financial support to selected

auto rice mills to adopt the improved packaging.

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Prospective Impact: The intervention will lead to increased capacity utilization and revenue for the

auto rice mills, improve overall efficiency and value added in the output market chain of the selected

rice varieties in the FtF zone. The rice farmers are expected to benefit from higher income since the

selected varieties have higher profitability. In the national market, the supply of these varieties are

expected to serve the increasing demand for high value rice varieties which will in the long run

improve the trade competitiveness of the varieties for both national and export market.

Strategic Intervention II: Strengthen the backward market linkage between the auto

rice mills and the rice producers to stimulate increased production and appropriate

post-harvest processing of selected high value rice varieties in the FtF zone

Relevant market opportunity: With the establishment of new rice mills, especially semi-auto and

automatic rice mills, the competition for procurement is increasing. The rice millers are competing to

procure the paddy to sustain their operation for 4-6 months. The large automatic rice mills procure

almost 50-60% of the paddy during harvest seasons. To meet the need, the large automatic rice mills

also procure from the Northern Region at the start of the harvesting season. Besides, new auto rice

mills that have been established in Barishal, Bhola, Gopalganj and Madaripur districts are trying to

establish procurement channel involving traders and large farmers. RDC could build on these

opportunities to facilitate more efficient procurement channels that could stimulate production of the

selected varieties in the FtF Zone.

Relevant Systemic challenges: For this intervention, RDC will have to address the following

systemic challenges that we have underscored under constraints analysis:

- Inefficient procurement channel of the rice millers

- Poor post-harvest practices by the small farmers and the traders

- Limited varietal choices for the farmers and dependency on poor quality retained seeds

- Inefficient extension services

Specific Interventions: To avail the market opportunities and address the systemic challenges in the

backward linkages of the output market chain, we propose the following interventions for RDC:

- Facilitation of Deep Procurement Channel of the Millers: With such procurement channels,

the millers can get good quality paddy directly from the farmers and ensure a stable supply of

paddy. As the millers find it difficult to procure directly from farmers, the project can take up the

collection point model developed by the RVC project and promote such a model to the millers.

The project can set up farmer groups and establish a collection point where the farmers will bring

the paddy and the miller will send their agents to procure the paddy directly from the collection

point. The project can also tag farmers group of DAE with the millers. To make such a model

work, it has to be ensured that the quality of the paddy is up to the standard of the millers

(properly dried and sorted). One of the caveats of the approach will be to address the financing

requirement of the farmers and millers as the farmers sell on cash while the millers procure on

credit. The project needs to engage technical experts on supply chain management and

procurement to address such issues.

- Improvement of technical expertise of the millers: There is scope for improving the technical

expertise of the millers. As the husking mills cannot operate during the monsoon for lack of

sunshine, the project can work with the husking mills to install solar driers which can dry the

paddy more effectively within a short period of time. The project can work with the Bangladesh

Agriculture University where the university will provide the technical expertise and the project can

provide small grants to establish the solar drier at the husking mills.

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- Promotion of improved post-harvest practices: The intervention on establishing deep

procurement channels for the auto rice mills could be leveraged to promote improved post-

harvest practices amongst the farmers and the traders. It is expected that the increased demand

from the auto rice mills will stimulate and incentivize farmers and traders to adapt such practices

since it would be a pre-requisite to secure orders from the auto-rice mills.

- Promotion of good quality seeds and demonstration trials: The project will have to work with

selected distributors of quality rice seeds for the selected varieties to ensure supply of good

quality seeds. The project will also have to support demonstration trials so that the farmers are

aware of the profitability of the promoted varieties and the quality of the seeds.

Probable Impact: The intervention will improve the overall productivity and profitability across the

output market chain for the selected rice varieties. It will contribute to increased revenue for the

farmers, traders and auto rice mills and contribute to increased jobs in the transportation, post-harvest

processing and marketing activities. Further to that, it will ensure local comparative advantages for the

production of the varieties.

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Bazar District. African Journal of Agricultural Research, 7(45), pp. 5995-6004.

Tulachan, P., Bashar, M., Islam, M., Chanda, D. and Portal, C. (2013). Value chain analysis of rice

seeds in Bangladesh: A case of three southern districts (Jessore, Khulna, and Barisal). Technical

Bulletin, No. 17. Dhaka: IRRI, Bangladesh.

Worldometers.info. (2017). Bangladesh Population (2017) - Worldometers. [online] Available at:

http://www.worldometers.info/world-population/bangladesh-population/ [Accessed 26 Apr. 2017].

PLEASE USE APPROPRIATE IMAGE

Page | 42

ANNEXURE

Page | 43

ANNEX A QUESTIONNAIRE

Question Guide for Private Sector Buyers/Millers

General Information:

Name of Interviewee:

No of employees

Name of Business:

Contact Details:

Business Background:

1) How long has the entity been in business?

2) What varieties of rice do you sell and what varieties of rice do you procure?

Rice Sold Variety of each rice procured

Buying Operations

1) How much do you purchase per year (variety wise)

2015 2016

BRRI dhan50

BRRI dhan28

BRRI dhan29

BRRI dhan47

BR dhan23

BRRI dhan49

BRRI dhan34

Binadhan-7

2) Which months do you purchase and in which months do you face shortage in supply?

Normal Supply Shortage

Month Procurement Location Month Procurement location

BRRI dhan50

BRRI dhan28

BRRI dhan29

BRRI dhan47

BR dhan23

BRRI dhan49

BRRI dhan34

Binadhan-7

3) What percentage of your procurement comes from different regions?

BRRI dhan50 Location

Share of Procurement

BRRI dhan28 Location

Page | 44

Share of Procurement

BRRI dhan29 Location

Share of Procurement

BRRI dhan47 Location

Share of Procurement

BR dhan23 Location

Share of Procurement

BRRI dhan49 Location

Share of Procurement

BRRI dhan34 Location

Share of Procurement

Binadhan-7 Location

Share of Procurement

4) Who supplies you and where are they located? Please estimate the number of suppliers

Number of Suppliers

Location Supplied amount of each supplier

BRRI dhan50

BRRI dhan28

BRRI dhan29

BRRI dhan47

BR dhan23

BRRI dhan49

BRRI dhan34

Binadhan-7

5) How much of these varieties do you purchase (either directly or indirectly) from small

scale farmers?

6) Do you have any interest or opportunities to expand your purchases (either directly or

indirectly) from small scale farmers in South-Western Bangladesh?

7) Describe how your procurement network operates?

8) Do you offer premium price to farmers or intermediaries for different varieties that meets

specific grades and quality standards?

Page | 45

9) Do you provide any credit, information or technical support to your suppliers (farmers or

intermediaries)

10) What opportunities exist for farmers in South-Western Bangladesh to increase their

sales? Is there seasonal market windows where farmers can generate greater profit?

11) Is access to finance or working capital a constraint for you? Do you provide finance to

your suppliers?

12) How do you store rice? What conditions are needed to ensure proper storage? Is

storage a constraint for you?

13) Are there any challenges in selling rice that you source from the South-Western region?

14) What types of investments or initiatives have you made (or are you planning to make) to

improve and/or expand your rice purchases from small-scale agricultural producers

and/or intermediaries (in RDC target area)?

15) What initiatives would you like to undertake to expand your purchases of rice from small

scale agricultural producers (in RDC target area) in the next two years if you could?

16) Do you know of any large buyers of rice who source from small scale farmers in South-

Western Bangladesh? Details

Page | 46

Checklist for Key Informants

Name of Interviewee:

Location

Type of Activity:

Contact Details:

1) Who are the major end market buyers (firms that purchase the largest quantities) that

drive demand in the market system in the targeted areas?

2) What are the market trends and opportunities for different rice varieties?

Trends and Opportunities

BRRI dhan50

BRRI dhan28

BRRI dhan29

BRRI dhan47

BR dhan23

BRRI dhan49

BRRI dhan34

Binadhan-7

3) What is the growth potential of the selected rice varieties?

Page | 47

4) From what regions (districts) in the FTF zone rice sourced?

5) What are the total (particular rice varieties) regional traded (in and out) over the last five

years and projections for the future? During what seasons do shortage exist?

Traded Rice (MT), if specific quantity is not available please collect annual percentage growth

2012 2013 2014 2015 2016 Future Growth Shortage

BRRI dhan50

BRRI dhan28

BRRI dhan29

BRRI dhan47

BR dhan23

BRRI dhan49

BRRI dhan34

Binadhan-7

6) What is the role of the following entities in the sale of rice (varieties) in RDC area?

Government agencies:

Professional Association: (Ask name of professional associations):

Private companies:

Projects/NGOs/other development organizations: (List the names of projects/NGOs)

7) Which of the rice varieties are most profitable for the farmers? Why and how much?

What drives the cultivation decision of farmers?

Page | 48

8) In the whole channel do women play any role? If so, is there any scope for

improvement?

Question Guide for Rice farmer

Name of Farmer Contact Details

Address Date

Name of Interviewer

1) What is the size of your farm (annual/seasonal including lease land)?

2) What varieties of rice do you cultivate in different seasons and how much land do you

utilize in the cultivation of each variety?

Aman Variety

Land Utilized (Decimal)

Aus Variety

Land Utilized (Decimal)

Boro Variety

Land Utilized (Decimal)

3) What factors affect your variety selection and how?

4) What is your source and reason for sourcing?

Purchase:

Retained:

5) Will you cultivate the same varieties in next time, if yes/no then why?

6) Where and to whom do you sell rice? Are you able to sell all of rice varieties in the local

market?

7) Does price differ for the same variety? What are the reasons?

Page | 49

8) Do you get any credit, information or technical support? Who are the sources? Are these

available during need?

9) Do you use mobile transaction? If yes, for what purposes?

10) How do you store your rice? Is storage a constraint? Do you know of any improved

storage technique?

11) What are the greatest problems that you face in producing and selling (market access,

cost of production, improved technology etc.)?

12) What are the market trends and opportunities for different rice varieties?

Variety 1:

Item Amount used (Kg/ml) Cost (BDT)

Seed Cost

Seed Bed Cost

Land preparation Cost

Organic fertilizer (cowdung/compost/others)

Urea

TSP

MoP

DAP

NPKS (Mixed fertilizer)

Lime/Dolochun

Gypsum

Magnesium

Sulphur

Zinc (Hepta/Mono/Chelated)

Boron (Boric acid/Solubor)

Irrigation cost

Pesticide cost

Labor cost (before harvesting)

Harvesting cost (Labor + transport)

Post-harvest cost

Marketing cost

Others

Total production cost

Variety 2:

Item Amount used (Kg/ml) Cost (BDT)

Seed Cost

Seed Bed Cost

Land preparation Cost

Page | 50

Organic fertilizer (cowdung/compost/others)

Urea

TSP

MoP

DAP

NPKS (Mixed fertilizer)

Lime/Dolochun

Gypsum

Magnesium

Sulphur

Zinc (Hepta/Mono/Chelated)

Boron (Boric acid/Solubor)

Irrigation cost

Pesticide cost

Labor cost (before harvesting)

Harvesting cost (Labor + transport)

Post-harvest cost

Marketing cost

Others

Total production cost

Variety 3:

Item Amount used (Kg/ml) Cost (BDT)

Seed Cost

Seed Bed Cost

Land preparation Cost

Organic fertilizer (cowdung/compost/others)

Urea

TSP

MoP

DAP

NPKS (Mixed fertilizer)

Lime/Dolochun

Gypsum

Magnesium

Sulphur

Zinc (Hepta/Mono/Chelated)

Boron (Boric acid/Solubor)

Irrigation cost

Pesticide cost

Labor cost (before harvesting)

Harvesting cost (Labor + transport)

Post-harvest cost

Marketing cost

Others

Total production cost

Variety 4:

Item Amount used (Kg/ml) Cost (BDT)

Seed Cost

Seed Bed Cost

Land preparation Cost

Organic fertilizer (cowdung/compost/others)

Urea

Page | 51

TSP

MoP

DAP

NPKS (Mixed fertilizer)

Lime/Dolochun

Gypsum

Magnesium

Sulphur

Zinc (Hepta/Mono/Chelated)

Boron (Boric acid/Solubor)

Irrigation cost

Pesticide cost

Labor cost (before harvesting)

Harvesting cost (Labor + transport)

Post-harvest cost

Marketing cost

Others

Total production cost

Revenue and Profit:

Total Production (MT)

Selling price/MT

Revenue/MT Total Revenue

Total Profit

Variety 1

Variety 2

Variety 3

Variety 4

Page | 52

ANNEX B LIST OF RESPONDENTS

SL. No.

Type of Actor Name Cell Phone Address Remark Interview Date

1 Producer Hafiqur Rahman

1704064426 Machna Khanpur, Monirumpur, Jessore

29/01/2017

2 Producer Golam Rasul Shamalgachi, sharsha Jessore

29/01/2017

3 Producer Horichad Ray

1911915813 Borokholisha, Chalna, Jessore

29/01/2017

4 Producer Kurban Ali 1752867073 Sarapul Bazaar, Kotoyali, Jessore

30/01/2017

5 Producer Md. Moshiar 1758269960 Soyasoni, Tala, Tetulia, Satkhira

31/01/2017

6 Producer Dipok Ray 1946554185 Borokholisha, Ward No-1, Chalna, Jessore

29/01/2017

7 Producer Ripon Mondol

1767911550 Borokholisha, Ward No-1, Chalna, Jessore

29/01/2017

8 Producer Md. Ismail 1997247534 Shamalgachi, sharsha Jessore

29/01/2017

9 Producer Md. Aminul Islam

Lobonchora, khulna 01/02/2017

10 Producer Kuddus Morol

1743759685 Kakur Para, kanchonpur, Majuraguna-6, Dumuria, Khulna

02/02/2017

11 Producer Babul Akter 1725226364 Rajganj, Jhapa, Monirumpur

29/01/2017

12 Producer Mokrul Islam 1731353038 Shuvashini Gram, Tetulia, Tala , Satkhira

31/01/2017

13 Producer Md. Asabur Rahman

1911587736 Lobonchora, khulna 01/02/2017

14 Producer Ali Ahsan 1930572918 Ghatali Dakop, Khulna

31/01/2017

15 Producer Faruk gazi 1924633848 Sharapol Bazaar, Kotoyali, Jessore

29/01/2017

16 Producer Jafrul Hasan Nizam

1814720920 Police station, Sarha, Jessore

30/01/2017

17 Producer Abu Sattar Morol

1713903401 Kanchanpur, Dumuria, Satkhira

31/01/2017

18 Producer Sahinul Islam

1728395946 Chatpasha, Babugong, Barisal

01/02/2017

19 Producer Mofazzol Hossain

1985134802 Kismot, Goriyala, Jhenaidah

31/01/2017

20 Producer Sadar Uddin Lashkar

1743901623 Noldanga, Kheda para, Jhenaidah

31/01/2017

21 Producer Ekser Ali 1937558334 Rajnagar, Sarsha, Jessore

30/01/2017

22 Producer Md. Alauddin Gazi

1926947312 Monohorpur Rajganj, Monirumpur

30/01/2017

23 Producer Md. Siddik 1722718956 Ilisha, Pongshia, Bhola Sadar

02/02/2017

24 Producer Md. Mosharaf Hossain

1758677385 Chodurchar, Malkanda, Bhola Sadar

02/02/2017

25 Producer Abdur Rahman

1627157801 Chodurchar, Malkanda, Bhola Sadar

02/02/2017

Page | 53

26 Bepari Md. Amir Hossain

1726477502 Ali Ahmad Rice Mill, Vabta, Bhola sadar

Seasonal Output trade from Barishal

31/01/2017

27 Bepari Pannu Mia 1760420065 Kismatchanpasha, Babuganj, Barishal

Trade in output market with different agri products

31/01/2017

28 Bepari Abu Sayed Mridha

1718597746 Babuganj Bazar, Barishal

Trade in output market with different agri products

31/01/2017

29 Arotdar Md. Nazrul Islam

1720522636 M/S Nazrul Treders, Lalon Shah College, Horiyana Kundo, Jhenaidah

He has a husking Mill too

31/01/2017

30 Arotdar Abdul Malek 1736808081 Nipun Enterprize, Pulerhat, Benapol Road, Sadar Jessore

30/01/2017

31 Arotdar Md. Aminur Rahman

1963914596 Ashif Teders, Sarsha, Jessore

30/01/2017

32 Arotdar Md. Abdul Gafur

1712773392 Rajganj Road, Monirumpur, Jessore

Supply paddy to Automills

31/01/2017

33 Arotdar Abul Hosen Gorami

1741789436 Chatpasha, Bot-tola,Biman Bandor, Barisal

01/02/2017

34 Arotdar Atiar Rahman

1715851226 Tanvir Hasan Traders, sarapol Bazaar, Jessore

29/01/2017

35 Arotdar Md. Ahad Ali 1944844734 Kathaltola, Kashipur, Monirumpur

Supply paddy to large aratdar

31/01/2017

36 Arotdar Rofi Uddin 1718925874 Bishoykhali Bazar, Jhenaidah

Comission Agent

02/02/2017

37 Arotdar Shariful Islam

1712471315 Bishoykhali Bazar, Jhenaidah

Comission Agent

02/02/2017

38 Arotdar Robiul Islam 1717109849 Bishoykhali Bazar, Jhenaidah

Comission Agent

02/02/2017

39 Arotdar Md. Bazlur Rahman

1714850800 Sowad Traders, Navaron Bazar, Sharsha

Comission Agent also wholesaler

02/02/2017

40 Private Sector Buyer

Md. Mahatab Uddin

1912257597 COO, PRAN Agro Business Ltd

29/01/2017

41 Private Sector Buyer

Abdul Matin Sohel

1937900555 Ast. Manager, M M Ispahani

29/01/2017

42 Private Sector Buyer

Umme Salma

1977900410 Asst. Manager, M M Ispahani

29/01/2017

43 Miller Md Abul Kashem Mia

1711972851 Satata Khatdo Bhandar, Dakbangla, Jhenaidah

Semi Auto 30/01/2017

44 Miller Modon Ghosh

1724740785 R.N. Auto Rice Mill, Khoyer Tola , Kaligong, Jhenaidah.

Semi Auto 31/01/2017

45 Miller Ahsan Habib 1716950985 Habib Agro, Bollobpur, Poradoho, Jessore

Semi Auto 30/01/2017

46 Miller Abdul Kader Opu

1916297671 Johan Agro Food Products

Two Auto Mills (fine and Coarse)

30/01/2017

47 Miller Md. Saiful Alam

1711018432 Janani Rice Mill Auto 30/01/2017

48 Miller Md. Fazar Ali 1971951366 Mama Vaigna Rice Mill, Kustia

Chatal 30/01/2017

Page | 54

49 Miller Md. Bokul Hossain

1923405861 Mss Brothers Rice Mill, Kustia

Chatal 30/01/2017

50 Miller Muhammad Jahangitr

1715544451 Shorna Auto Rice Mill, Satkhira

Auto 01/02/2017

51 Miller Abdul Alim 1712999242 Elahi Auto Rice mill, Gouronodi Barisal

Auto 01/02/2017

52 Miller Tanziar Rahman, Manager Accounting

1780003697 Rashid Agro, Kustia Auto 30/01/2017

53 Miller Ehsanul Haque

1720004047 Tin Tara Rice Mill, Khulna

Semi Auto 31/01/2017

54 Miller Shahadat Hossain

1713926495 Allahr Dan Auto Rice Mill,Baliya Shisha Poradoho, Mirpur, Kustia

30/01/2017

55 Miller Ashif Chowdhury

1781400572 M/s Chowdhury Auto Rice Mill, Shyamola gachi, Sharha, Jessore.

30/01/2017

56 Miller Md. Anwar Hossain

1993302266 Tasnim Agro and Auto Rice Mill, Bhola

Only one auto in Bhola, Nabanno brand

30/01/2017

57 Miller Muhammad Joynal

1915460081 Khan Rice Mill, Kolaroya, Satkhira

Chatal 31/01/2017

58 Miller Md. Bashir 1726601137 Ali Ahmad Rice Mill, Vabta, Bhola sadar

Chatal 31/01/2017

59 Wholesaler Jamal Uddin 1712346471 Bismillah Rice, Bhola Bazar

02/02/2017

60 Wholesaler Jalal Uddin Montu

1732956474 Rahima Jabber Traders, Navaron, Sarsha, Jesore.

Also performing as a owner of Chatal & paddy comissioned Agent

30/01/2017

61 Wholesaler Abul Kalam Ajad

1711965642 Mss Kalam Enterprize, 13 Bagha-jotin Shorok, Jhenaidah.

31/01/2017

62 Wholesaler Md. Fazlur Rahman

1711061389 Mikail Al Mamun Traders, Navaran Rail Bazar, Sharsha

02/02/2017

63 Wholesaler sharup Shaha

1718849821 Shaha Chawl Bhandar, Baro Bazaar, Satkhira

01/02/2017

64 Wholesaler Debo Saha 1728854480 Ma Laxmi Vandar, Boro Bazaar, satkhira

01/02/2017

65 Wholesaler Hazi Muhammad Ali

1712559234 Hasan Store, Khalpar Road, Bhola

02/02/2017

66 Wholesaler Shopon Kumar Saha

1716723857 Ma Enterprize, East Side of K.C College, Jhenaidah.

31/01/2017

67 Wholesaler Abul Kalam 1716032615 Al Helal Rice Agency, Babu Bazar Dhaka

14/02/2017

68 Wholesaler Badal (Manager)

1765031050 Babu Bazar Rice Agency, Babu Bazar Dhaka

14/02/2017

69 Wholesaler Md Shahin 1965885163 Alek Chan Rice Agency, Babu Bazar Dhaka

14/02/2017

Page | 55

70 Wholesaler Sumon (Manager)

1942251614 Madaripur Rice Agency, Krishi Market,Dhaka

14/02/2017

71 Wholesaler Mozzammel Haque

1718071277 Shawon Enterprise, Krishi Market,Dhaka

14/02/2017

72 Wholesaler Mahbub 1682395213 Khulna Rice Agency, Krishi Market,Dhaka

14/02/2017

73 Retailer/Wholesaler Pradeep Saha

1730667325 Mukul store, Barobazar, Satkhira

01/02/2017

74 Retailer/Wholesaler Salauddin 1729818170 Baro Bazaar, Satkhira

01/02/2017

75 Key Informant Sushanta Kumar Tarafdar

1712195781 UAO, Monirampur, Jessore

25/01/2017

76 Key Informant Shuvash Chandra Sarkar

1712562757 (SAAO) DD Officce, Jessore

30/01/2017

77 Key Informant Md. Mosaddek

1716009098 UAO, Dakop, Khulna

01/02/2017

78 Key Informant S.M Ferdous 1711184475 Dist. Seed Certification officer, Narail

29/01/2017

79 Key Informant Mohammad Khalid

1712592991 UAO, Upazilla Agriculture Officer, Jessore

29/01/2017

80 Key Informant Tima Paul 1718546302 Sr. Assistant Director, BADC, Jessore

25/01/2017

81 Key Informant Ponkoj Kanti Majumder

1716953344 District Training Officer, DAE, Khulna

02/02/2017

82 Key Informant Hirok Kumar Sarkar

1721951941 UAO, Sharsha, Jessore

26/01/2017

83 Key Informant Dr. Md. Monjurul Alam

1752929024 Director, Bangladeh Agriculture University

31/01/2017

84 Key Informant Shah M. Akramul Haque

1716489919 DD, DAE, Jhenaidh 30/01/2017

85 BADC Dealer and Supplier

Md. Abdul Gafur

1711117016 Mss Nayan teders, Shuvashoni Bazaar, Tetulia,Satkhira

01/02/2017

86 BADC Dealer and Supplier

Afil Uddin Bepari

1720263125 Al Madinah Beej Vandar, Trimohoni, Dakbangla Bazaar, Jhenaidah

31/01/2017

87 BADC Dealer and Supplier

Nazimuddin 1712625034 Dada Beej Bhandar, Borhan Uddin, Bhola

02/02/2017