Explained: How vegetable prices jump up as they head abroad
Tags: Consumer, Export, Bangladesh, UK, Vegetables

On a winter morning this month, S M Azad’s eyes were looking for a suitable vegetable. As a new migrant in the UK, he was bored of having local foods. He came to a grocery shop in the Coventry Road area of Birmingham to buy `Deshi’ vegetables, whose taste is well-known to him.

Azad’s phone rang as he was checking the quality and price of a bottle gourd. It was S M Shamim, his elder brother, who had just started working in his vegetable field in Khulna, a southwestern district of Bangladesh. Mr Shamim phoned to complain about the recent downward trend of prices of the bottle gourd he regularly produces commercially. This year, he is counting huge losses by choosing this popular vegetable as his primary crop in two acres of land.

A farmer holds Bottle Gourd. — Photo Credit: Krishi Poramorsho o kroy-bokroy kendra

It costs Mr Shamim around BDT12 (Bangladeshi currency namely Taka) for producing each bottle gourd. That very product is selling at the local market by BDT8–9 each. So far, he has sold this vegetable of around BDT170 thousand out of 400 thousand invested for bottle gourd cultivation this season.

Shamim, the only breadwinner of his 7-member family, don’t know how he can cover this loss to survive and prepare himself for the next season. He started crying when as he learnt Azad’s story: he is required to spend over £7 (British currency namely Pound Sterling to buy a bottle gourd), which is equal to about BDT850.

Khulna area, to which Shamim and Azad brothers belong, is one of the two biggest hubs in Bangladesh for vegetable production. They produce vegetables for the whole country. Meeting the local demands, vegetables are being exported to different regions of the world and Europe is one of their largest external markets.

Bangladesh, with some exceptions, is witnessing a rapid rise in terms of vegetable exports every year. As per the data from Export Promotion Bureau (EPB), a public body that oversees exports, Bangladesh has quadrupled its vegetables by a decade. It had exported vegetables worth over £35 million in 2009–10 fiscal year. The trends are always upward with an exception for three fiscal years after 2013–14 when the exports reach an all-time high of about £159 million.

In 2013, European Union (EU) issued a non-compliance notification, citing the presence of insects, diseases and excessive use of pesticides, that saw a ban of Bangladeshi vegetables. As a consequence, the amounts of vegetables exported from Bangladesh reduced dramatically, decreasing to over £105 million only in 2014–15 fiscal year. That downward trends were continued in the following fiscal year, reaching an all-time low in a decade of over £630.

Link of this bar chart: https://datawrapper.dwcdn.net/c3phG/1/

As the EU removed the non-compliance notification partially, Bangladeshi vegetable exports started showing a strong trend again from 2016–17 fiscal. Although the coronavirus pandemic has slowed down the recovery, the country saw an export of about £124 million in 2019–20 fiscal year, the latest data available from the EPB. The amounts of vegetable exports were only £75 million in the previous fiscal year when Bangladesh like the whole world suffered a lot due to the huge economic impact of the pandemic.

How export quality vegetables produced

At least 25 types of vegetables are now exported from Bangladesh. Bottle gourd, pointed gourd, pumpkin, cabbage, cauliflower, potato, arum-lobe, lady’s finger and green chilli, among others, have high demands in England and the primary consumers are the migrants from the Indian sub-continent, say exporters from Bangladesh and importers in the UK.

Taking the advantage of high demands, the Bangladeshi government have taken an initiative to encourage farmers to grow these crops. The so-called “SAFAL” (Sustainable Agriculture Food Security and Linkages) project has garnered supports for some southern farmers to cultivate vegetables in a way that meet international standards.

There are over 40,000 farmers alone in Jessore district, a part of the Khulna division, now under this contract farming system who grow vegetables and other crops that maintain high quality.

Farmers sell vegetables at a local market. Dumuria, Khulna Bangladesh. — Photo: Saddam Hossain

“The covenanted farmers are trained as part of the project so that they can produce export quality vegetables, meeting the high standards set by the buyers from countries like England”, says Touhid Islam, who is a Project Director to the SAFAL in the Jessore region.

He claimed that the farmers get more profits if they are engaging themselves in the SAFAL project. They are not only getting different types of assistance from the government, he said, but also can sell the products at a higher price. Also, he pointed out, they are not required to spend money to hire labourers as the products are sold directly from the fields as part of a direct selling method initiated by the SAFAL project.

According to the farmers involved with the project, producing export quality vegetables involves more spending than the traditional ones. As for example, SAFAL project farmers are required to spend around BDT10–12 to produce a bottle gourd whereas others produce the same vegetables by around BDT7–8. The wholesale price of a quality bottle gourd at a local market this December is BDT10–12, which fluctuates depending on various aspects like production season, early or late sale and production/demand ratios. The SAFAL project farmers usually get BDT3–4 more than the gross local market price.

Abdul Alim, a farmer from Jessore, acknowledged that they were being benefited by involving with the project. For example, he said, they are getting the pre-decided prices of their products, meaning they have the guaranty to make profits, albeit not too much, whereas others have the anxiety of when the local market prices fall down drastically, counting huge losses.

However, Mr Abdul does have some specific recommendations so that the project becomes more successful and farmers like him who are working under the project can be benefitted more.

Stunned by the information of high price for a bottle gourd in the UK stores he said,

“we the farmers know how much times, money and efforts are required to produce vegetables. We take care of the vegetable fields just like our offspring. However, we never get fair price of our hard-earned products.’”

As the consumers abroad are paying more, the farmers should get more prices at least for the exported vegetables, he said

Iron hands for standards

As part of the SAFAL project around one and half a million farmers from Khulna and Jessore districts are producing safe vegetables under the contract farming system. Under the project and with the financial assistance of the Dutch government a “Village Supermarket” has been established in the Dumuria area of Khulna. Local business firms like R R Enterprise are exporting vegetables from this Village Supermarket to different European countries including England.

An employee from the SAFAL projet is sorting the export-grade Pointed Gourd. Village Super Market, Dumuria, Khulna, Bangladesh. — Photo: Saddam Hossain

Shahed Alam, a regional manager to the R R Enterprise, told that they collect the vegetables directly from the fields. Then, they are taken to the local collection point in the Village Supermarket for packaging. Then, the packed-up vegetables see the real start of their formal long journey to abroad. At first the vegetables are travelled to Shambazar, Dhaka where there is a Central Packing House by the Department of Agricultural Extension (DAE) to check the standard of the products.

The three-story building on 1.50-acre land has different facilities like checking standards, cleaning, washing, drying and packaging of the vegetables. Further, it has housed five cooling rooms that can preserve vegetables at 4–6 degree Celsius/Fahrenheit temperature. It is mandatory to take Phytosanitary Certificate (PC) from the Agricultural Ministry before the final wrap-up of the vegetables at the Packing House.

A busy moment at the Shambazar Packing House, Dhaka, Bangladesh. — Photo Credit: Bangla Tribune

As vegetables go forward, price increases

From collection point at fields onwards, every step involves costs, increasing the prices of the vegetables more or less and sometimes, however, there are prices jumps without any valid reasons, this investigation has found.

The business firms like R R Enterprise are required to spend labour cost of around BDT 2 to collect a bottle gourd from the field. At the collection point like Village Supermarket in the Dumuria, the packaging process takes away another BDT2 to buy paper, Carton and bag. The transportation costs from Khulna or Jessore to Shambazar, Dhaka involves BDT4 per bottle gourd. These are the cost before the start of the packaging there, as estimated by people involved in vegetable exports.

From Shambazar, vegetables start their real journey to be exported elsewhere in the Asian markets or in the EU’s. Representatives of buyers from European countries open up vegetable packets to check quality even though they are packaged at the facility with the presence of a Quality Control officer to maintain high quality. Then Deputy Director (Export) from the EPB provides the final clearance certificate before the vegetables started their way towards the airport.

For the packaging process at Shambazar and for transportation from there to Shahjalal International Airport in Dhaka, BDT10 (5+5) more is spent for each bottle gourd. Exporters from Bangladesh bear the cost till this point.

Vegetable exports are exempt from customs duties or any other Bangladesh govt. tariffs. Then comes one of the biggest reasons for price jumps: plane fare. For a bottle gourd, weighted one kilogram, the fare is around BDT150 for any European destination, says Shahed Alam, the exporter.

Apart from plane fare, this report has found two major points where price hike sees big jumps: exportes and importers. They are pocketing large amounts of money as a profit.

The primary importers of the vegetables from Bangladesh are the European businessmen who have their origins in Bangladesh. Among them is Choton Chowdhury, who are involved in this business for the last 13 years. His business firm, namely CK International Link Ltd, mainly buys vegetables from Bangladeshi exporters and supply them to the local wholesalers in Birmingham. The importers like Choton usually are required to spend around £3.5 to buy a bottle gourd as they are the person who all the time pay the plane fare, the biggest reason for prices jump, and other shipping costs here in the UK.

Link of the table: https://datawrapper.dwcdn.net/cTVCg/3/

Mr Choton, however, informed that plane fare is fare more than the amount mentioned by exporters in Bangladesh.

“Nowadays, we are required to pay around BDT280 for one-kilo vegetables”, he says.

The reason behind this, he pointed out, is the reluctance of different airliners to transport Bangladeshi vegetables as the EU is yet to remove the embargo on Bangladeshi vegetables fully. Also, he said, most of the scanners at the Bangladesh airport have gone out of order and they are kept in such useless conditions for years, fuelling the airliners’ reluctant mood further.

“That is why the importers are only relying on a few airliners who are charging fare according to their wishes”, he alleged.

Choton Chowdhury is frustrated with the inactivity of the Bangladesh govt. to convince the EU to remove the embargo. He also recommended that the packaging and quality checking process in the Bangladesh should be much easier and swifter so that both time and money can be saved.

The importers sell a bottle gourd at a wholesale price of around £4, earning 50 pence as a commission per bottle gourd. The wholesalers then supply these vegetables to the local grocery stores like Mohammad Selim’s Bangla Machh Bazar at the Coventry Road in the Small Heath area of Birmingham, where S M Azad’s eyes were hovering around a Bangladeshi bottle gourd. Mr Salim earns a profit of £1.50 per bottle gourd from the customer like Azad, who have always a question in mind: why he is required to spend £7 to buy a bottle gourd sold by his brother Rahim by only BDT8?