Global prices fell, so why are we still paying wartime prices?

At the height of the Russia-Ukraine war, the price of wheat peaked at $12.94 a bushel, an almost more than $5 increase.

The price rise heated up food markets across the world and the main sufferers were the low income consumers, especially in countries like Bangladesh.

Infographic: TBS

Now, although the prices have cooled and wheat has come down to $7.82 per bushel – the high prices of the staple did not. The prevailing dollar and gas crises are keeping the price of the must-have item out of reach for most.

Global fall in price doesn't help here

Imports of some major food commodities, wheat and sugar in particular, have slowed over the last few months when the global food price index fell steadily, meaning that consumers in Bangladesh missed out on the benefit expected from falling prices.

The period coincides with the restrictions imposed by the central bank on opening letters of credit (LC) after monthly imports almost reached $9 billion amid a dwindling reserve and falling earnings from exports and remittance.

Though the measures were taken to reduce non-essential imports to lessen pressure on foreign currency reserves, opening LCs for essential food items also slowed as banks said they did not have enough dollars in hand, food importers told The Business Standard.

Data shows that import of wheat almost halved in the May-October period this year compared to last year even though Ukrainian ports were allowed food grain shipments in July. Bangladesh imports a large part of its wheat from Ukraine. Sugar imports also dropped during the period.

The local market felt the effect of tight supply and consumer level prices of both wheat and sugar soared with the sweetener crossing the Tk100 mark per kg.

PM orders quick normalisation of imports

In Sunday's meeting with secretaries this week, Prime Minister Sheikh Hasina gave directives to take quick steps to normalise imports to keep the supply of daily commodities at a comfortable level.

Ordering that government stock of foodgrains not fall under 15 lakh tonnes in any way, she instructed that local production be increased and Open Market Sales (OMS) continue.

At the meeting, Senior Secretary of the Ministry of Commerce Tapan Kanti Ghosh presented a report which showed that the import of rice, wheat, raw sugar, onion and crude palm oil in the five months from May to October this year had decreased compared to the same period last year.

According to the data, the import of wheat during these five months was 17.20 lakh tonnes against 33.74 lakh tonnes in the same period of the previous year.

This fall of around 16 lakh tonnes has reduced supply in the market and increased prices.

Commerce Minister Tipu Munshi told TBS, "We are not getting the benefit of the products whose prices are falling in the world market. The main reason for this is the high value of the dollar. Again due to gas shortage local production cost has also increased."

He said, "We are trying to keep imports normal by eliminating various complications."

Infographic: TBS

Dollar crisis keeping things costly

Taslim Shahriar, senior assistant general manager of Meghna Group of Industries, said, "Due to the dollar crisis, imports are still being hampered. If it is not addressed, imports will not become normal."

Meghna had been importing 8-9 lakh tonnes of wheat annually, but this year's imports fell by more than half of that.

Since the Russia-Ukraine hostility that started in February this year, wheat exports of these two major suppliers to the international market had been disrupted.

According to the commerce ministry report, fall in imports of other commodities are also affecting the market. About 65,000 tonnes of raw sugar, 21,000 tonnes of onions and 4,50,000 tonnes of crude palm oil have been imported in these five months.

However, imports of crude soybeans and soybean seeds and lentils have increased during the period despite high prices.

After the start of the war, soybean oil prices in the international market reached a high of $0.820 per pound, which has now come down to $0.734 per pound. But this lowered price has not relieved the local market.

Market analysis by the Trading Corporation of Bangladesh (TCB) shows that a kilogramme of  bulk flour is selling at Tk60-63, which was Tk34-38 this time last year.

Similarly, the price of packaged flour rose by 58.82% percent to a maximum of Tk75.

Although there is no shortage of edible oil in the market, the price of bottled soybean oil has increased by Tk12 to Tk90 per litre, sugar is being sold at Tk110-120 per kg and lentils at Tk120-140 per kg.

Rice prices have also been hit by increased cost of fertilisers and drought and Aman selling for Tk1,300 per maund.

Coarse rice is being sold at Tk55 and miniket at more than Tk75 per kg.

15 lakh tonnes of private import allowed, actual import 2.62 lakh

According to the data of the Ministry of Food, about 15 lakh tonnes of rice has been allowed to be imported at the private level. Till November 27 of the current financial year, 2.62 lakh tonnes of rice has been imported, although the permission to import more was given three months ago.

The commerce secretary's report shows that rice imports were 3.05 lakh tonnes in the five months of May-October against 9.08 lakh tonnes in the same period last year.

Rice importers, despite having the facility of slashed import duty, imported less than one-fourth the amount the government had permitted leading to soaring prices of the staple in the local market.

On 30 August, the government, in a bid to rein in rice prices in the local market, authorised 415 private companies to import 17,02,000 tonnes of rice, of which only 3.86 lakh tonnes have been imported so far, according to food ministry sources.

Source countries stopped export

Safiul Athar Taslim, director of TK Group, told The Business Standard that besides the dollar crisis, restrictions in sourcing countries were also affecting the import amounts.

"For example, we used to import a lot of wheat from India. Now they have stopped exporting wheat," he said.

Safiul said LCs could be opened even if imports were stopped, but if the LCs aren't settled, then the imports don't ship.

A Food Planning and Monitoring Unit (FPMU) of the food ministry showed that LCs for 15.65 lakh tonnes of wheat were opened at public and private sectors from 15 July to 15 October this year.

Against these, only LCs amounting to 6.63 lakh tonnes were settled at the end of October, of which private import is slightly above four lakh tonnes.

The commerce ministry shows that till 23 November, 1.98 lakh tonnes of rice have been imported by the government so far. The government has signed an agreement to import 5.30 lakh tonnes of rice from India, Vietnam, Myanmar.

The government currently has 16.07 lakh tonnes of foodgrains in stock because of these steps.