January 17, 2014
Bangladesh shrimp farmers incur losses due to price monopoly
Bangladesh shrimp farmers are paid well below the value of their produce, and spiral into debt due to a monopoly on prices held by Bangladesh's shrimp exporters, claimed Environmental Justice Foundation (EJF) in its new report.
"The cash-rich minority are able to maximise profits by being in control, and the low prices that reach the farmers have knock on effects of poor labour conditions, and bad product quality," said Steve Trent, executive director of EJF.
Farmers have reported the price of shrimp has dropped in recent years following an increase in supply, and the syndication of many shrimp processing plants, said EJF in its report, entitled 'Impossibly Cheap: Abuse and Injustice in Bangladesh's Shrimp Industry'.
The Bangladesh Frozen Foods Exporters Association (BFFEA), which holds a monopoly over the national market, uniting 96 of the country's 145 processing factories, is apparently dictating prices on today's market.
The BFFEA did not respond to requests for comment. It has responded very little to EJF attempts to talk to it as well, said Trent.
In Khulna, all factories certified for export to EU markets are members of the BFFEA. Occupying the lower end of the supply chain, farmers feel a disproportionate impact of this monopolisation, said the report. A lack of competition between processing factories, coupled with an inability to access other markets, means that farmers, sub-suppliers and depot owners have very little choice of where they sell their shrimp.
EJF pointed to one small-scale farmer who, after initial years of success, is now losing his business. As a result of price fixing by large companies, the amount he is paid for his shrimp has halved over the course of one year, said the NGO.
Meanwhile, the price of shrimp fry is on the rise and the depot owners who sell his shrimp for him owe him half of his profit from last year. The depot owners, in turn, are waiting to be paid by the large processing and export companies, who often claim that shipments are rejected or cancelled, and refuse to pay those further down the chain, despite receiving significant government subsidies.
To be able to compete in important markets, Bangladesh needs to keep its prices low as around 97% of the country's shrimp goes to export, with over two thirds of that being sent to the EU, notably Belgium, the UK and the Netherlands.
He added that measures would be needed in Bangladesh to make sure this did not simply maximise profits for the exporters. Responsible retailers and vertical integration, so that the whole value chain is taken care of, is needed.
Bangladesh's shrimp industry is heavily supported by the government through credit and export subsidies, which disproportionately benefit the large processing plants and exporting companies, according to the report.
These companies receive the payments even if an order is cancelled or rejected; however they rarely pass this on to depot owners or farmers. Therefore, when a shipment is cancelled or rejected or the processing plant delays a shipment to fill a quota, farmers may find themselves waiting for more than a year to be paid.