September 19, 2023

Russian-Ukrainian war sets alarm bells ringing for Bangladesh’s agricultural sector

The heavy dependence on imports means that Bangladesh’s economy is feeling the heat of the war in Ukraine which could trigger the food crisis in Bangladesh. The magnitude of the impacts can last even after the war

Ukraine and Russia, known as “the breadbasket of Europe”, are the main exporters of basic foodstuffs in the world. The two countries export around a quarter of the wheat, more than three quarters of the sunflower oil and a sixth of the maize.

Since the start of the war on February 24, 2022, now in the third month, the invasion of Ukraine has caused food price inflation following the economic downturn triggered by the Covid-19 pandemic. The disruption of international trade has mainly affected importing countries in Asia, the Middle East and Africa. War will have a ripple effect, leading to “cascading risk”.

How war will trigger Bangladesh’s food crisis

The war in Ukraine has already shocked Bangladesh’s commodity market. Disruption in the supply chain in the international market has caused soybean oil prices to rise in Bangladesh, although the country mainly imports soybean oil from the United States, Brazil and Canada.

The price of wheat flour has risen sharply as Bangladesh imports wheat mainly from the Black Sea region. According to the Observatory of Economic Complexity (OEC), more than half of the wheat was imported from these two countries.

For example, in 2020, Bangladesh imported $1.28 billion worth of wheat, which was the top import (2.65%) among traded foodstuffs. The highest share was imported from Russia (31.8%) for $409 million and from Ukraine (23%) for $295 million.

Similarly, in 2020, a significant share of dried pulses, corn, onions, rapeseed, apples and pears were imported from these countries.

Fertilizer prices have increased due to the conflict. Russia and Belarus supply around 40% of the world’s potash. Soaring fertilizer prices could cause serious problems for Bangladesh’s arable crops.

Due to high world oil prices linked to the invasion of Ukraine, the country is already feeling the increasing pressure of diesel prices. This price increase could create uncertainty about the government’s policy of transitioning to conventional mechanization since there is currently no cost-effective substitute for diesel engines.

The heavy dependence on imports means that Bangladesh’s economy is feeling the heat of the war in Ukraine which could trigger the food crisis in Bangladesh. The magnitude of the impacts can last even after the war. The war in Ukraine could be a wake-up call for Bangladesh’s agricultural sector.

Ways forward for Bangladesh’s arable sector

From birth to the first three decades, the overriding objective of Bangladesh’s political economy was to ensure ‘food security’. However, over the past two decades, Bangladesh has extended its attention to “food and nutrition security” by prioritizing crop diversification.

To realize the vision of the Ministry of Agriculture (i.e. safe, profitable and sustainable agriculture), the Government of Bangladesh has developed several policies such as National Agricultural Policy 2018 and National Agricultural Mechanization Policy 2020 .

Given the current problems of subsistence agriculture in Bangladesh, with the economic shocks of the Covid-19 pandemic and the war in Ukraine, Bangladesh needs an evolutionary policy rather than a revolutionary one. To achieve the objectives of the arable sector, Bangladesh should consider the following seventh prescriptions:

First, to overcome the food crisis, Bangladesh should guarantee the immediate import of wheat, maize and soybeans to meet domestic demand at reasonable prices. Government support systems based on income class should be strengthened and expanded.

Second, in the coming growing seasons, to reduce dependence on staple crop imports, the government should promote diversification, incorporating wheat, maize and oilseed production. To achieve this diversification, agricultural research, education and extension organizations should help farmers identify crops and production practices that will be practical and profitable on their farms.

In the short term, the government can help stabilize the output market and provide subsidies for fertilizers, fuel and other inputs, but in the long term, crop choices for diversification should be self-sufficient. same.

Third, conventional agricultural mechanization may not bring paradigm shift in the booming global economy due to the shortage of agricultural labor, negative feelings of younger generations towards the agriculture, requiring the consolidation of farms and the exacerbation of the environmental footprint of agriculture. Therefore, the government should avoid the drawbacks of conventional agriculture by skipping some steps to increase land productivity with precision agriculture in the current agricultural landscape of small sizes of fields, trees along fields and villages rural.

Fourth, the arable sector needs farm management analysis with different equipment options and different cropping patterns. The analysis should go beyond rice monoculture to consider crop rotations with polyculture, catch crops and intercropping in relays, strips or plots to achieve social, economic and environmental sustainability.

Fifth, agricultural policies should protect the interests of smallholders by exploring size-neutral agricultural productivity innovations, including digital applications for outsourcing and sharing agricultural equipment, as well as autonomous electric-powered machines. . This would simultaneously open windows of entry for the younger generation with potential for “agriculture as a service” machinery contracting and rental businesses and opportunities in the agricultural robotics industry with a market potential global.

Sixth, the arable sector should shift from a production-centric infrastructure to a market-centric infrastructure through digital innovation. Smallholders and young entrepreneurs could use mobile phones, internet and social media to market these diverse agricultural products.

Seventh, universities and research organizations should be the center of innovation with the support of government and industries, where industries could avoid the fixed costs of research and academics could apply theoretical knowledge. A side effect of this approach is that academics with practical experience would be better teachers.

In summary, Bangladesh should embrace Industry 4.0, especially Agriculture 4.0. In this process, upgrading existing machinery, supporting new digital technologies, and promoting domestic industries and startups could be potential solutions for sustainable intensification.

The authors are, respectively, Elizabeth Creak Fellow at Harper Adams University in the UK, Elizabeth Creak Professor of Applied Agri-Tech Economics at the university and Professor of Agricultural Economics at Bangladesh Agricultural University.