Profitability in farming on the decline: study

Farmers are registering reduced profitability from paddy cultivation due to tightening of the rural labour market and declining real prices for the cereal grain, according to a joint study by two international research organisations.

The study found that real agricultural wages have been rising gradually as people are moving out to non-farm sectors.

Between 2011 and 2018, the real agricultural wage soared 30 percent whereas real prices of paddy fell 29 percent, as per research of the International Food Policy Research Institute (IFPRI) and CGIAR.

CGIAR is a global research partnership working to provide a food-secure future, reduce poverty, and enhance human health through nutrition.

"Wage rates and paddy prices are moving in opposite directions," said IFPRI Research Fellow Ben Belton while presenting the preliminary findings of the study at a workshop on Tuesday.

IFPRI and CGIAR, with support from the Bill and Melinda Gates Foundation, organised the event at the Six Seasons Hotel in Dhaka.

Co-authored by IFPRI Research Fellow Mehrab Bakhtiar, the study on agricultural mechanisation found that profitability of paddy cultivation has been declining since 2011.

For example, the margin from cultivation of rice during Boro season was Tk 9,717 per acre in 2011, but fell fell to nearly one-third -- Tk 3,080 per acre -- in 2015.

In 2018, the margin turned negative, according to the findings of the study.

The researchers also found that most farm machineries are rented, with land preparation, irrigation, spraying, and threshing having become highly mechanised in Bangladesh. Researchers found that the rental market is key for small farmers to access to agricultural machinery.

As of 2018, some 98 percent of land is prepared by machines. In the same year, Rice farmers used pumps to irrigate 87 percent of their Boro land.

The extent of using machines for threshing Boro paddy has reached 87 percent as the machines provide convenience and speed while and enabling farmers to avoid drudgery.

However, there was an extremely low rate of mechanised planting and harvesting, according to the research.

It showed that 0.1 percent of Boro seedlings were transplanted by seed transplanters and 0.9 percent of the grains were harvested by machines in 2018, indicating the need for mechanisation in these labour-intensive areas.

"Mechanising harvesting and planting has the potential to reduce labour constraints, improve productivity, free-up labour and reduce costs," the study said.

The study also said there is limited scope for productivity gains and cost-saving from the high level of mechanisation in irrigation, land preparation, and threshing.

In another study presented at the workshop on the financial behaviour of midstream actors in the rice and potato value chains, it was found that the extent of value addition by large rice processors is higher than smaller processors and traders.

In the case of both rice and potato, transactions are overwhelmingly conducted through cash.

Many intermediary actors have limited access to digital financial accounts, it said, adding that digital technologies can enhance traceability, a process that helps trace the history, application or the location of an item or activity by means of recorded identifications.

It can also help understand the exact margin required by processors to make a profit.

"Well-crafted regulations can foster digital traceability," it said. "Digital transactions can also potentially make transactions and the value chain more efficient."

At the event, Akhter Ahmed, country representative of IFPRI in Bangladesh, said a recent IFPRI study found that agriculture-led growth is three times more effective in alleviating poverty than growth in other sectors of the economy.

He said farm mechanisation could play a critical role in improving farmers' profitability, particularly amid rising rural labour wages.

Md Mahmudur Rahman, joint secretary of the agriculture ministry, said the government focuses on thorough programme evaluations and evidence-based policymaking.