September 21, 2012

Bangladesh: egg import and its price hike dilemma

Shahiduzzaman Khan

The government has, of late, allowed the local importers to import 'as much eggs as they can'. No permission will be required from the Ministry of Commerce (MoC) to import the poor men's protein. On earlier occasions, the MoC did never use such words while giving permission for egg import. The government had given 'limited' permissions for egg import earlier.

What's going to happen this time is anybody's guess. Despite granting repeated permissions, local traders did not show any great enthusiasm for egg import. What's the reason? Overseas markets for egg were overheated. The importers looked for eggs from China, Thailand and Myanmar.

Although egg prices are not prohibitive in China and Thailand, import cost from those countries is very high and thus not cost-effective. Import from Myanmar is a good option but a recent outbreak of bird flu has caused a substantial damage to its poultry industry and the egg price there went up.

The most suitable option for the local traders is to import egg from India. Indian eggs are, in fact, entering the Bangladesh territory through informal channel for long. In India, egg production is relatively low this season due to various reasons and as such, its price has gone up to some extent. It hovers around INR4.0 (US$0.074) per unit of egg now. With import and transportation cost added, per unit of Indian egg may cost BDT6.0 (US$0.073) in the local market. It is still cheaper as the cost of per unit of locally produced egg is Tk10 to Tk10.50 (US$0.122-0.129). If the local traders go for second grade (smaller size) egg import, it will be cheaper further.

Reasons behind local importers' reluctance to import egg are not really understood. Even though they were given opportunity to import eggs for a number of times, either they remained inactive, or went for scanty import of the same from India. Experts see two logics here. One, they are playing the same old game of going for under-invoicing or over-voicing while opening Letters of Credit (LCs). Secondly, the importers might be influenced by the local cartel that wants to dictate egg price as per their own whims.

Existence of a powerful cartel in the local poultry sector is being heard in recent times. Many multinationals and some big local firms have entered the poultry business with substantial funds recently. They have started buying the small farms closed down earlier due to lack of supporting funds and outbreak of bird flu. The presence of big players is so strong that they are now dictating the prices of eggs and chickens. Like pharmaceuticals, those have taken most control of the poultry sector and want to establish total command over the industry. Poultry experts say if proper business ethics are followed, the price of four units of egg (hali) should not go beyond BDT20 (US$0.245). But this will never happen due to domination of such big farms in the sector. The government is just unable to curb their dominance in the absence of proper guidelines.

Bangladesh Poultry Industries Association refuted the allegation of obstructing egg import from their end. It said the egg producers are in no way powerful than the importers. The association accused the government of being responsible for the price hike and said it (the government) has intentionally stopped permission of parent stock and vaccine import resulting in 50% fall in production of eggs during the last few months. It said price hike of poultry feed by nearly 40% in recent times has also contributed to egg price hike.

Local producers, however, are also optimistic about a fall in egg price within a month or two as chickens of many major farms have grown up and will start laying eggs shortly. They say the supply of eggs will increase by 2.5 million in next 5/6 weeks. The price may even go down due to the decline in production cost within a month or two, they added.

Former commerce minister Faruk Khan of the present government tried his best to bring down egg price. He forced the local producers to sit at the ministry for several times and persuaded them to lower the price. The producers gave him assurances that they would do it, but later they backtracked. Some outlets were opened in the city to sell eggs at fair prices in a bid to cool down the overheated market. In the face of failure of these measures, the then commerce minister ordered egg import from the neighbouring countries. Adequate import did cool down the market then.

In fact, local producers, including the Breeders Association of Bangladesh (BAB), did never keep their promises. They always tried to promote their own interest. Citing the cause of bird flu, they raised the prices of chickens and eggs at random. This year, the country did not see any massive outbreak of bird flu and random culling of chickens elsewhere. Even the local newspapers seldom reported such outbreak of bird flu. So, bird flu excuse does not stand now.

One wonders as to why the Indian eggs are relatively cheaper. The bottom line is that the Indian farmers have managed to address bird-flu attack effectively. In spite of the government banning bird flu vaccination for poultry flocks in India, farmers there routinely use locally-manufactured bird flu vaccines. The Bangladesh farmers have no such option. They can only compete with the Indian farmers if they are given access to vaccines.

Even when an initiative for egg or chicken import is taken, a known circle propagates that local poultry industry will be destroyed if chickens and eggs are imported from bird flu affected countries. How far is this logic tenable when they say local poultry is also hit by bird flu? Last year, the BAB said the local production was enough to meet the country's demand. It even boasted that local production had surpassed the demand for egg that year. However, its claim could not be substantiated due to absence of accurate data. Many tend to believe that BAB's claim is not based on facts as egg price remained high last year. If production surpassed the demand, egg price should have come down then.