Bangladesh Agribusiness Report Q3 2009

Bangladesh is set for a bumper rice harvest in 2009, up by a forecast 14.1% from the 2008 level. In the Bangladesh Agribusiness Report for Q3 2009, we introduce the new Sugar Outlook. As with many sectors of Bangladesh's agricultural sector, sugar production is blighted by inefficiency. Average sugar cane yields at 38.49 tonnes per hectare (tonnes/ha) in 2008 are among the lowest of any significant sugar producing country, only just over half of the world average of 71.72 tonnes/ha and well below the 65.76 and 53.00 tonnes/ha achieved in neighbours India and Pakistan, respectively. Sugar cane production has been on a long-term downward trend and in 2008 production fell to its lowest level since 1963.

Farmers have been abandoning the meagre rewards on offer for cane and moving to other, more profitable crops.

The processing sector is also struggling. The country has 15 state-run mills active in cane crushing. The mills make an annual loss running into millions of dollars. Plans to privatise the sector have been slow moving. The Bangladesh Sugar and Food Industries Corporation (BSFIC), which oversees the mills, has been consistently seeking more government protection for the domestic sugar production sector in the form of higher tariffs on sugar imports.

With sugar consumption in Bangladesh reaching 1.15mn tonnes in 2008, compared to production of only 175,000 tonnes, there is a large domestic market to supply if sugar can be produced profitably in Bangladesh. In 2009, however, sugar production is expected to fall sharply to little over 80,000 tonnes owing to a shortage of sugar cane.

There is no reason why Bangladesh should not be able to supply more of its sugar requirements from domestic production. Neighbouring India has produced a surplus in sugar for many years of this decade.

However, we do not see the country's sugar sector improving while it is still in state hands.

In other sectors, Bangladesh is set for a bumper rice harvest in 2009, up by a forecast 14.1% from the 2008 level. This has been achieved through an increase in the cultivated area and good weather conditions seeing yields rise. Unfortunately for the millions of Bangladeshi rice farmers, the large crop and poor economic conditions has seen prices fall to below the cost of production. While a government procurement drive will provide some relief, many farmers will still be hard pushed to turn a profit on their crops.

Helping to alleviate the difficulties caused by falling prices will be a BDT15.00bn (US$218mn) stimulus package announced for the agricultural sector in April as part of a total BDT34.24bn (US$495mn) package designed to help Bangladesh through the worldwide economic slump. The money will ensure that struggling farmers will have access to loans to help tide them over.