Supply and Demand for Cereals in Bangladesh, 2010-2030

Type Working Paper - IFPRI Discussion Paper 01186
Title Supply and Demand for Cereals in Bangladesh, 2010-2030
Publication (Day/Month/Year) 2012
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.

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