Price volatility in kitchen markets has been a pressing issue for Bangladesh ofr a while. Despite the previous government’s efforts, public perception of their sincerity in addressing this issue remains questionable. In contrast, the current administration appears more earnest; yet, market volatility persists, exposing the limitations of traditional strategies employed to manage agricultural markets.
Conventional market theories in agricultural economics—grounded in microeconomic principles of perfectly competitive markets—often fail to reflect the realities of kitchen markets. According to these theories, price is determined by the interaction of demand and supply: the demand curve typically slopes downward, while the supply curve slopes upward. Hence, an increase in commodity prices should theoretically reduce consumer demand and incentivise producers to increase supply, leading to a new equilibrium at a higher price but with a lower quantity (Mankiw, 2021).
However, empirical observations indicate that such theoretical models often falter in practice, particularly when applied to essential food commodities. The low price elasticity of demand for staple foods—such as potatoes—intensifies price volatility (Kreps, 2019). This volatility is predominantly driven by two key supply-side factors: the seasonality of production, which is vulnerable to climate and disease, and the exploitative dynamics of supply chains in urban markets (Bhaduri et al., 2013).
Market imperfections are frequently rooted in weak law enforcement and systemic corruption involving a range of actors, including businesspeople, law enforcement agencies, and political figures. The entanglement of these interests suggests that attempts to address market failures are likely to be ineffective unless underlying institutional issues are simultaneously tackled (Jha and Sharma, 2015).
To illustrate this, consider the potato market in Bangladesh. For instance, assume that the farmgate price of potatoes is TK 35 per kilogram, which covers production costs and the price paid by wholesalers. However, various transport and marketing costs can significantly inflate this figure by the time the product reaches consumers, potentially raising the retail price to around TK 80 per kilogram. This discrepancy implies an inflated marketing margin of TK 45 per kilogram, pointing to severe volatility in the kitchen market, which remains unmitigated despite government interventions (Rahman, 2022).
Given these circumstances, agricultural economists must devise innovative policy responses. A revised approach would focus on two key research areas: farm management and agribusiness. Firstly, enhancing potato production through improved extension services—particularly those related to pest control—and ensuring fair farmgate pricing is vital. Secondly, developing efficient supply chains for the storage and transportation of potatoes is essential to meet consistent retail demand (Wiggins et al., 2016).
One promising strategy is to revisit the concept of farmers’ cooperatives, which have historical roots in early social movements. The establishment of agricultural marketing boards, as seen in countries like Canada, serves as a potential model. These boards act as collective marketing agents for specific crops, helping ensure fair prices for producers while maintaining price stability for consumers (Fulton, 2014).
In Bangladesh, while existing cooperatives primarily focus on production, integrating marketing functions could greatly enhance their effectiveness. This integration may involve collaboration with local NGOs such as BRAC and Grameen Bank, both of which have established extensive rural networks and infrastructural capacity.
In conclusion, addressing the volatility in kitchen markets—particularly in relation to potatoes—requires a multifaceted policy framework. This framework should incorporate the foundational principles of agricultural economics while embracing cooperative marketing mechanisms. By leveraging existing networks and prioritising sustainable, inclusive practices, Bangladesh can chart a path towards greater market stability and food security.
Dr Mohammad Saidur Rahman is a Professor of Agricultural Economics at the Bangladesh Agricultural University and former Vice-President of Bangladesh Economic Association (BEA) and Bangladesh Agricultural Economists Association (BAEA).
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard
