“Supply and
Demand for Cereals in Bangladesh: 2010-2030”
Citation: Ganesh-Kumar, A., S. K. Prasad and
H. Pullabhotla. 2012. “Supply and Demand for Cereals
in Bangladesh: 2010-2030”. Report prepared for the Cereals System Initiative
for South Asia (CSISA), Discussion Paper 01186, International Food Policy
Research Institute, Washington D.C.
Abstract:
Bangladesh
remains a net importer of rice despite significant progress in improving yield
and production levels. With growing population, planning for future cereal
production to meet food security challenges would require projections of future
supply and demand for cereals. In this study we attempt to provide forecasts of
the demand and supply of cereals in Bangladesh for the period 2015–2030,
focusing on rice the main staple in Bangladeshi diets and also the most
important crop in Bangladesh’s agriculture. A detailed model of the supply of
rice in the three main rice growing seasons—aman, aus, and boro—is
built up through separate acreage and yield functions, which are estimated with
data from the Bangladesh Bureau of Statistics. On the demand side, the
projections made here consider both direct demand by households and also
indirect demand. Household direct demand for 13 food items, including rice and
wheat, has been modeled using the quadratic almost
ideal demand system specification, whose parameters are estimated using the
Household Income and Expenditure Survey, 2005. Both the supply and the demand
models have been validated for their forecast performance using past data. The
validation exercise shows that the average supply forecast error is just 0.8
percent, while in the case of demand models the forecast error for rice is less
than 5 percent in absolute terms. These low forecast errors give a sense of
reliability and confidence in the projections carried out here.
Supply and
demand projections are made for the years 2015, 2020, 2025, and 2030 under various
scenarios. Under alternative conditions that capture land availability
constraints facing rice cultivation in Bangladesh, rice supply in 2015 is
expected to be in the range of 31.2 to 35.2 million tons, and it is likely to
grow to 39 million tons by 2030. Household direct demand projections are made under three scenarios on the growth of real per capita
income— 4.2 percent, 3.6 percent, and 3.0 percent. Assuming constant prices,
per capita household demand for the year 2030 for rice are projected to be in
the range of 183.7 to 192.3 kilograms (kg) per capita per year. The
corresponding forecasts for wheat are in the range of 6.5 to 7.1 kg per capita
per year in 2030. Combining these with alternative population forecasts from
the government of Bangladesh and the United Nations Department of Economic and
Social Affairs, the total direct demand for rice in 2030 is projected to be in
the range of 31.3 to 42.0 million tons, up from 26.8 to 29.2 million tons in
2015. For wheat, the projection for 2030 is 1.1 million to 1.5 million tons.
Adding indirect demand requirements to this, the total demand for rice in 2030
is expected to be in the range of 34.8 million and 52.5 million tons.
The supply
and demand projections for rice are then compared, to assess the likely
surplus/deficit situation. The estimates show that Bangladesh can face either a
surplus or a deficit in rice, depending upon the prevailing supply and demand
scenario and intermediate demand requirements. The surplus in 2030 could be
about 4.2 million tons, while the deficit could be as high as 13.7 million
tons. Our projections also show that surpluses, if any, could increase until
2020, after which they are likely to become smaller, which can be attributed to
land availability constrains that will increasingly begin to affect production
growth under current technologies. In contrast, deficit projections show a
steady rise over time, reflecting the sharp rise in demand under the high
population growth scenario.