Value chain of Rice Marketing in selected areas of Jamalpur District

VALUE CHAIN ANALYSIS OF RICE MARKETING IN
SELECTED AREAS OF JAMALPUR DISTRICT
MS THESIS
MD. SHAMIM MIAH
DEPARTMENT OF AGRIBUSINESS AND MARKETING
BANGLADESH AGRICULTURAL UNIVERSITY
MYMENSINGH
JUNE, 2013

VALUE CHAIN ANALYSIS OF RICE MARKETING IN
SELECTED AREAS OF JAMALPUR DISTRICT
A THESIS
Submitted to
Bangladesh Agricultural University, Mymensingh
In partial fulfillment of the requirements for the degree of
Master of Science
In
AGRICULTURAL ECONOMICS (AGRIBUSINESS AND MARKETING)
MD. SHAMIM MIAH
Examination Roll No. JJ-02/2011
Registration No. 33554
Session: 2006-07
Semester: January-June, 2013
DEPARTMENT OF AGRIBUSINESS AND MARKETING
BANGLADESH AGRICULTURAL UNIVERSITY
MYMENSINGH
JUNE, 2013

VALUE CHAIN ANALYSIS OF RICE MARKETING IN SELECTED
AREAS OF JAMALPUR DISTRICT
A THESIS
Submitted to
Bangladesh Agricultural University, Mymensingh
In Partial Fulfillment of the Requirements for the Degree of
Master of Science
In
AGRICULTURAL ECONOMICS (AGRIBUSINESS AND MARKETING)
By
MD. SHAMIM MIAH
Examination Roll No. JJ-02/2011
Registration No. 33554
Session: 2006-07
Semester: January-June, 2013
Approved as to style and content by
...........................................................
Prof. Dr. Md. Idris Ali Mia
Supervisor
…………............................................
Dr. Mohammad Jahangir Alam
Co-supervisor
............................................
Md. Moniruzzaman
Chairman, Examination Committee
and
Head, Department of Agribusiness and Marketing
Bangladesh Agricultural University
Mymensingh
JUNE, 2013

vi
CONTENTS
CHAPTER TITLE PAGE
ABSTRACT iv
ACKNOWLEDGEMENTS v
CONTENTS vi
LIST OF TABLES x
LIST OF FIGURES xi
ACRONYMS AND ABBREVIATIONS Xii
I INTRODUCTION 1
1.1 Background of the Study 1
1.2 Importance of the Study 2
1.3 Value Chain 3
1.3.1 Value Chain Techniques 4
1.4
1.4.1
Rice Value Chain
Functions of Value Chain Actors
5
7
1.5 Justification of the Study 7
1.7 Objective of the Study 9
1.8 Limitation of the Study 9
II REVIEW OF LITERATURE 11
2.1 Introduction 11
2.2 Supply Chain 11
2.3 Value Chain 12
2.4 Conclusion 15
III METHODOLOGY OF THE STUDY 16
3.1 Introduction 16
3.2 Selection of the Study Area 16
3.3 Selection of Period of Study 18

vii
CONTENTS (Continued)
CHAPTER TITLE PAGE
3.4
3.5
3.6
3.7
3.8
3.8.1
3.8.2
3.9
Sample Size
Preparation of the Survey Schedule
Method of Data Collection
Data Collection
Analytical Techniques
Gross Return and Net Return of the Farmer
Margin Received by Marketing Actors
Processing and Analysis of Data
18
18
19
20
20
20
21
21
IV VALUE ADDITION BY DIFFERENT ACTORS IN RICE
MARKETING
22
4.1 Introduction 22
4.2 Marketing Channels 22
4.3 Value Chain Map of the Study Area 23
4.4 Cost and Return of Paddy Farmer and Value
Addition
24
4.4.1 Cost of Production 25
4.4.1.1 Total Variable Cost 25
4.4.1.2 Total Fixed Cost 25
4.4.1.3 Gross Cost 26
4.5 Yield and Return from Paddy Farming 27
4.4.5.1 Gross Return 28
4.5.2 Gross Margin 28
4.5.3 Net Return 28
4.6 Value Addition by Farmer 29
4.7 Paddy Trader 30

viii
CHAPTER TITLE PAGE
4.7.1 Marketing Cost of Traders (Faria and Bepari) 30
4.8 Rice Miller 32
4.8.1 Total Cost of Rice Miller 33
4.8.2 Value Addition by Rice Miller 33
4.9 Rice Trader 35
4.9.1 Total Cost of Rice Trader 36
4.9.2 Value Addition by Rice Traders (Bepari and retailer) 36
V VALUE ADDITION ACTIVITIES PERFORMED BY
ACTORS
37
5.1 Introduction 37
5.2 Value Addition Activities of Paddy Producers 38
5.2.1 Drying 39
5.2.2 Storing 39
5.2.3
5.3
5.3.1
5.3.2
5.4
5.4.1
5.4.2
5.4.3
5.4.4
5.5
Marketing
Value Addition Activities of Paddy Traders
Faria
Bepari
Value Addition Activities of Rice Millers
Value Addition due to Marketing Cost
Value Addition due to Milling Cost
Value Addition due to Selling Cost
Net Marketing Margin or Profit of Miller
Value Addition Activities of Rice Trader
40
40
40
41
41
41
42
43
43
43

ix
CHAPTER TITLE PAGE
VI THE CONSTRAINTS AND OPPORTUNITIES
OF RICE VALUE CHAIN
44
6.1 Introduction 44
6.2 Constraints in Rice Value Chain 44
6.2.1 Farmer’s Constraints 44
6.2.1.1 Production Related Constraints 44
6.2.1.2 Value Adding Constraints 46
6.2.2 Paddy Trader 47
6.2.3 Rice Miller 47
6.2.4 Rice Trader 49
6.3 Opportunities 50
6.4 Conclusions 51
VII SUMMARY AND CONCLUSION 52
7.1 Summary 52
7.2 Conclusions 56
REFERENCES 59-63

x
LIST OF TABLES
Table TITLE Page
3.1 Sample Size of Different Actors 18
4.1 Percentage Share of Different Cost Items 26
4.2 Cost and Return of Paddy Farmers 27
4.3 Value Addition by Farmer in Different Forms 29
4.4 Average Marketing Costs of Paddy Traders 30
4.5 Marketing Cost, Margins and Value Addition of Paddy Traders 32
4.6 Products Obtained from One Quintal Paddy 32
4.7 Costs and Margins (Value Addition) of Rice Millers 34
4.8 Value Addition from One quintal Rice by Rice Miller 34
4.9 Cost, Return, Margin and Value Addition of Rice by Rice Traders 35
5.1 Cost, Return and Value Addition of Rice by Rice Miller 42

xi
LIST OF FIGURES
Figure TITLE Page
4.1 Rice marketing channels of alternatives 23
4.2 Jamalpur district rice value addition map 24
4.3 Comparison among various Marketing Costs 31
4.4 Products Obtained from One Quintal Paddy 31
5.1 Rice value chain map 37

xii
ACRONYMS AND ABBREVIATIONS
BBS Bangladesh Bureau of Statistics
DAM Department of Agricultural Marketing
et al. et alia (and others)
etc. et cetera
i.e.
MOA
That is
Ministry of Agriculture
MS Master of Science
m. tons Metric Tons
No. Number
pp.
Rs.
Pages
Indian Rupee
SSC Secondary School Certificate
Tk. Taka (Bangladeshi currency)
% Percentage

iv
ABSTRACT
This study was conducted to analyze the value chain of rice in selected areas of
Jamalpur district. The objectives of the study were to estimate value addition of rice by
different actors, to examine the activities related to value addition and to identify the
constraints and opportunities of rice value chain. Two Upazilas namely Dewangonj and
Islampur were selected purposively for collecting data. To serve research objectives 10
farmers, 15 paddy traders, 10 rice millers and 10 rice traders were selected by purposive
sampling. Data were collected during mid January to mid April 2012. The study found
that the value chain actors were farmers, paddy traders (Farias, Beparies), rice millers
and rice traders (Beparies and retailers). Value chain started from harvesting paddy and
ended when rice was sold to the ultimate consumers. Farmers could earn on an average
Tk 10053/hectare by cultivating paddy. The farmers disposed their production for
family consumption, gift and kind payment to relatives, seed and sold to markets. They
added value of Tk. 1050, Tk. 1005 and Tk. 1000 for per metric ton paddy by drying,
storing and selling, respectively. Most of the farmers did not realize the value adding
opportunities due to constraints such as high marketing cost due to poor transportation
system, lack of market information etc. Paddy traders collected paddy from the farmers
and supplied to the rice millers. Also some of the large farmers stored paddy for higher
prices in future (speculation). The traders added value of average Tk. 1176.7/metric ton
paddy. Rice millers had to incur marketing cost, milling cost and selling cost. These
costs were Tk. 769, Tk. 673.8 and Tk 367.3 per metric ton paddy, respectively. Rice
millers added about 23% value of which only 9% was added for total marketing and
milling. Rice traders were the final value chain actors and added about 6.11% value
with rice purchase price. Since, this study was done only in Jamalpur district, the policy
makers should be very careful for any policy decisions based on the findings of this
study. However, this study helps to identify the scenario in the rice value chain in
Jamalpur district.

v
ACKNOLEDGEMENT
The author expresses his heartfelt gratitude and respect to his honourable teacher and research supervisor
Dr. Md. Idris Ali Mia, Professor, Department of Agribusiness and Marketing, Faculty of Agricultural
Economics and Rural Sociology, Bangladesh Agricultural University, Mymensingh for his guidance,
suggestion, instructions and encouragement for successful completion of the research work and preparation
of this thesis.
The author expresses heartfelt gratitude and respect to his respected teacher and co-supervisor Dr.
Mohammad Jahangir Alam, Associate Professor, Department of Agribusiness and Marketing, Faculty of
Agricultural Economics and Rural Sociology, Bangladesh Agricultural University, Mymensingh for his
kind hearted cooperation, advice, constructive criticism and constant inspiration to carry out the research
and preparation of this thesis.
The author also humbly desires to acknowledge his heartiest appreciation and cordial thanks to Mr.
Mohammad Moniruzzaman, Head of the Department of Agribusiness and Marketing, Professor Dr.
Sankar Kumar Raha, Professor Md. Ali Akbar and all other respected teachers of Department of
Agribusiness and Marketing, Faculty of Agricultural Economics and Rural Sociology, Bangladesh
Agricultural University, Mymensingh for their cordial help and valuable suggestion during the entire
study period.
The author expresses heartfelt gratitude and also humbly desire to acknowledge heartiest appreciation to
the Ministry of National Science and Information Technology for awarding a scholarship to conduct this
study.
His cordial thanks are for the farmers and traders of the study areas for their kind hearted cooperation in
providing him with necessary data by spending their valuable time and energy.
The author also gives his special thanks to his friends Lira, Mispe, Nurunnabi, Bappi, Sobuj, Shanu,
Muna, Shimu for helping him in providing necessary research materials and encouragement and also he
thanks his friends Josim, Reza, Saki, Rony and Mominul for help during data collection period.
He likes to pay his special thanks to the Liberians of Shamsul Islam Memorial Library, Faculty of
Agricultural Economics and Rural Sociology, Bangladesh Agricultural University, Mymensingh for their
kind help in providing essential books and papers in preparing this thesis.
Finally, the author owes his deep and boundless gratefulness to his parents and whole family who inspired
and sacrificed a lot in the process of building his academic career which can never repaid.
The Author
May, 2013

CHAPTER-II
REVIEW OF LITERATURE

CHAPTER-III
METHODOLOGY OF THE
STUDY

CHAPTER-V
VALUE ADDITION
ACTIVITIES PERFORMED
BY ACTORS

CHAPTER-IV
VALUE ADDITION BY
DIFFERENT ACTORS IN RICE
MARKETING

CHAPTER-VI
THE CONSTRAINTS AND
OPPORTUNITIES OF RICE VALUE
CHAIN

CHAPTER-VII
SUMMARY AND CONCLUSION

1
CHAPTER I
INTRODUCTION
1.1Background of the Study
Rice is the staple food and is synonymous with food security. Rice is also a wage
commodity in Bangladesh. Rice is vital for the nutrition of many of the people in
Asia, as well as in Latin America and the Caribbean and in Africa; it is central to
the food security of over half of the world population. Developing countries
account for 95 percent of the total production, with China and India alone
responsible for nearly half of the world productions.
(https://en.wikipedia.org/wiki/Rice)
Agriculture plays an important role in the overall economic performance of
Bangladesh. Agriculture contributes 19.29% of national GDP and provides about
65% employment of the country’s population. Moreover, the livelihood of about
70% rural people in Bangladesh depends on agriculture. Agricultural research
and development in Bangladesh has contributed tremendously to meet the food
requirements of approximately 160 million populations.
Total rice production in Bangladesh was about 10.59 million tons in the year 1971
when the country’s population was about 70.88 millions. However, the country is
now producing about 33.2 million tons to feed about 160 million people of this
country. This indicates that the growth of rice production was much faster than
the population growth. This increased rice production was possible largely due
to the adoption of modern rice varieties. The population of Bangladesh is still
growing by two millions every year and may increase by another 30 million over
the next 20 years. Thus, Bangladesh will require about 27.26 million tons of rice
for the year 2020. During this time total rice area will shrink to 10.28 million
hectares as because of rapid increasing population will need more land for
housing. Rice yield therefore, needs to be increased from the present 2.74 t/ha to
3.74 t/ha. (Bangladesh Rice Research Institute, http://www.knowledgebank-
brri.org/riceinban.php)

2
Moreover, political government is very concern about the production and price
of rice in Bangladesh as their popularity and stability depend on the rice price
due to its importance. So, in the context of Bangladesh rice plays a vital role
indeed.
But an alarming situation is so far foreseen in Bangladesh due to rapid reduction
of agricultural land unless there is no initiative to stop this. Another important
reason is that the paddy producers are moving to other beneficial crop
production. Due to very high cost of production and lower price, farmers incur
loss in many areas in the country.
1.2 Importance of the Study
Agriculture is the single largest producing sector of the economy and it
contributes about 19.29% to the total Gross Domestic Product (GDP) of
Bangladesh. This sector supplies raw materials to other sectors. As per
Agriculture Census of 2008, the total number of agricultural farm households is
14.72 million which accounts for 51.33% of the total households in Bangladesh.
Agriculture is the main income source of 77% people living in rural areas. The
total export value of agricultural product is 12% of total export of Bangladesh.
The general price levels of other food and non-food commodities are related to
rice price. Income of farmers and their food security depends on rice price, so
changes in price of rice are highly sensitive to the lower and middle classes of
consumers those who live below or on the poverty level. Rice price fluctuates and
changes throughout the year due to various reasons. From the beginning of
production process there are a large number of value adding steps associated
with rice production and marketing. The value of rice and also its bi-products i.e.
broken rice, husk, bran etc. increases due to adding values at each steps of its
marketing. A large portion of consumers` money spends for purchasing rice goes
as extra value added by various value chain actors. If there is an inefficient value
chain consumers have to pay higher prices than the prices in efficient value
chain. Also in case of inefficient value chain the actors do not get reasonable
profit margin due to extra marketing cost. Rice price is very important for all
including producers, traders and ultimate consumers. Rice is considered as a

3
political commodity. For these reasons it is obvious that rice value chain should
receive serious attention by the actors involved in rice vale chain further
improvement of it. In brief value chain is a tool for understanding the dynamics,
opportunities and constraints of promising product markets.
Given this backdrop, this study has been conducted on rice marketing value
chain which has important policy implications for farmers, traders, and the
policy makers in Bangladesh.
1.3 Value Chain
The value chain concept was developed and popularized in 1985 by Michael
Porter, in “Competitive Advantage,” a seminal work on the implementation of
competitive strategy to achieve superior business performance.
A broad definition of value addition is to economically add value to a product
and form characteristics more preferred in the market place. There are two main
types of value addition. The one is innovation and the other is coordination.
Innovation focuses on improving existing processes, procedures, products or
services. The enhancement added to a product or service by a company before
the product is offered to customers. Different economist defined value chain in
different ways. Some of the definitions are given below.
Humphrey (2002) maps out a concise description of the value chain approach
based on few basic ideas:
• Products pass through a value chain or sequence of activities, with value
added in each stage from design to transforming inputs, reaching to final
market;
• Increased globalization has contributed to the dispersal of these activities
over greater distances; and
• In chains dominated by the increasing concentration and clout of retailers,
value is increasingly derived by product differentiation and innovation
that reduces cost and enhances the importance of reliable supply.

4
In case of agricultural commodity e.g. rice value chain focus on various value
adding opportunities to ensure better price as well as demand supply
equilibrium. Various actors namely farmers, Farias, Beparies, rice milers always
concerned about their fair price beside improvement of rice quality.
(http://www.en.wikipedia.org/wiki/valuechainmanagement)
A series of value generating activities associated with product marketing from
farm level to the ultimate consumer is referred to as value chain. Mainly the
value chain activities of rice are carrying paddy from field after cutting,
threshing, cleaning, bagging, storing, carrying to the markets, selling to the
traders (e.g. Faria, Bepari), selling to the millers then millers convert paddy into
rice maintaining various quality and grading. Rice millers are the starting actors
in milling, bagging, transporting to different market, then rice traders do the job
of selling to the ultimate consumer.
1.3.1 Value Chain Techniques
Robert Fries and Banu Akin (2004) in order to carry out a value chain analysis,
the literature used mostly the following techniques:
I. Mapping: Mapping is a central element of value chain analysis, using
diagrams to show the flow of transformations and transactions from
sourcing raw material and inputs, to production, to further processing, to
marketing and final sale. The maps can also illustrate costs, value added
at each stage, secondary services (such as finance or communications
infrastructure) important to each stage, critical constraints, and the
relative clout of players along a value chain. In rice value chain different
value adding steps, costs of production, processing costs, marketing
channels, value added with paddy and rice in each stage etc. will be
included into value chain maps.
I. Participatory approach: Because each player along a value chain impacts
the value earned, and because players performing different functions and
exerting different levels of clout often have very different perspectives on
critical opportunities, bottlenecks and the potential and feasibility of

5
different interventions, value chain analysis demands the participation of
the full range of stakeholders. This range includes buyers (i.e.in case of
rice value chain Faria, Bepari, wholesaler, rice miller, retailer etc.),
processors, producers, input suppliers, public agencies and associations
that impact industry, trade, labour and commercial regulations and
practices. Value chain maps diagram downstream and overseas players,
interviews and strategic sessions. It also taps the range of actors along the
chain. The perspective, buy in and participation of stakeholders increase
the chances that the most critical bottlenecks and opportunities will be not
only identified, but successfully overcome.
1.4 Rice Value Chain
The value chain of rice is the sequence of events from its production
to processing, then down to its marketing and consumption. The rice input
suppliers, rice producers, and the marketing channels usually compose the basic
value chain processes for a rice subsector. The variety of seed is the most
important input of the rice industry. Rice, the important food grain, is supplied
mainly to retail markets, groceries, and to public markets to cater the consumers.
The industry’s value chain uses wide-ranging labour. Upon paddy production,
a pre-requisite to a good and efficient marketing system is the ability of the
producers to decide on the best way to store and move their products down to
their market destinations.
Rice value chain concentrates on the linkages between each of the actors (rice
miller, Faria, Bepari, wholesaler, retailer, and consumer) along with the value
chain, from input supplies up to the ultimate consumers including actors
associated with marketing and processing. It also concentrates on a detailed
breakdown of the costs, profits and margins, the key constraints and linkages at
each level of the chain.
A long value chain and huge costs and margins derived by the actors are one of
the main causes for its price instability. This is why it is very important to
analyze the value chain of rice for identifying the value chain activities of

6
different actors. The value chain analysis would help make appropriate
marketing strategy and pricing policy of rice in the country.
Rice value can be changed by the value chain actors in different ways. Some of
the ways are as follows:
I. Storing product (Time utility change): By storing for some days, weeks or
months even years to create some extra value during the crisis season of the
particular product. For example farmers or traders store paddy or rice when
supply is plenty in the peak season until when supply is scarce. Farmers and
the traders expect the higher price of paddy or rice in the off-peak season.
II. Form change (Form utility change): By changing the form of the product
and or by processing. For example, paddy change into rice and rice can be
changed into cooked rice, fried rice (Muri in local name), flour, cake etc.
Different forms of rice with the value chain actors deal are as follows:
• Paddy is non husked rice as harvested from the farmers.
• Brown rice (husked rice): Paddy from which only the external and non-
edible husk has been removed. The bran layer remains, making it more
nutritive than white rice. Frequently, green kernels are found with the
brown rice as grain maturation is not homogeneous.
• White rice: Milled and polished kernel is produced by husking the
brown layer. White rice adds higher value than other kinds of rice. It is
polished two or three times more than normal rice to change the shape
and remove brownish color of rice. Generally in some automatic rice
mill white rice is produced without any manual touch.
• Aromatic rice (naturally aromatized) has more flavor than the other
varieties. Basmati rice such as Kalizira, Katarivog, Chinigura, Muktamala
etc. cultivated in Bangladesh, India and Pakistan, are the best known
and most appreciated. These rice varieties have naturally aroma but
there is also artificially flavored rice in market. Aromatic rice generally
adds highest value which is about 18%-20% than normal rice.
• Parboiled rice: Parboiled rice is created by steeping or soaking the rice
in water of 60-80 Celsius and steaming it at 100° Celsius and drying it.

7
Parboiled rice has a harder grain. Parboiled rice is processed by the
millers due to some nutritious values associated with. It adds about
8%-10% value than normal rice.
iii. Place change (Place utility change): By moving rice from one place to
another. To move product value some extra costs are added for product
marketing and cost of the value chain actors.
iv. Grading and standardization: Value can be added to a commodity by
grading, sorting, cleaning, etc. Mainly grading and standardization are done
to categorize product according to the size, shape, quality, texture and other
attributes. Paddy and rice can be standardized by varieties, moisture
content, presence of spoil rice etc.
1.4.1 Functions of Value Chain Actors
Common actors in rice value chain in Bangladesh are farmers, paddy traders
(Faria, Bepari, Aratdar, and Wholesaler), rice millers and rice traders (Bepari,
Aratdar, wholesaler, retailer). Different value chain actors have different activities
but all of them add some values in every steps of marketing channel. Preceding
actors add value as cost of marketing and profit. With the cost of marketing every
actor add some extra value which called profit or net margin. Each actor takes the
ownership of paddy and adds some value for transferring ownership to the next
actor and ultimately consumer purchase rice from the retailers.
1.5 Justification of the Study
Value chain analysis of rice is an important area for value chain research in
Bangladesh. As because a considerable amount of consumers Taka goes to
different value chain actors in recent few years value chain analysis received
serious attention by the researchers. As a matter of fact since the existing works
are not sufficient to understand the rice value chain. .
The rice market is so perfectly competitive due to various government
interventions in the market and also potentially existence of some price makers in
the paddy and rice marketing system. Paddy producers are mainly subsistence

8
and semi-subsistence in nature. Most farmers sell paddy immediately after
harvest for immediate cash needs. But profit margins vary in the rice value chain
due to market imperfections, unequal bargaining power among different actors,
and unavailability of timely market information etc. If the actors were known the
benefit of participation in the value chain system actors would be benefited.
Because participation in improved value chain ensures the optimum quality of
paddy and rice, this in turn increase both actor`s as well as ultimate consumer’s
welfare.
However, this study would first enlarge the volume of value chain research in
Bangladesh. Findings of this research for example the efficiency or inefficiency
level of value chain and the factors affecting value chain efficiency in different
marketing stages will be useful for researchers, policy makers, and development
practitioners and most importantly for actors in the rice value chain in
Bangladesh. The research would help to formulate recommendation to reduce
the marketing cost of rice, institutional constraints to solve problems in whole
rice value chain. .
Value chain analysis would help understand how to improve the farmer’s
performance in every value adding steps. Therefore this study will provide an in-
depth understanding how to increase farmer’s share on rice price and reduce the
share of middlemen. Efficient value chain means efficient rice marketing. The
understanding of the efficient market chain would facilitate to formulate how the
country`s food security can be ensured. Thus this study might be of importance
to the policymakers, individual farmers, consumers i.e. both macro and micro
level.
Moreover, this kind of study has not been conducted in any of the research
institutions or government organizations in Bangladesh. Although this study was
an attempt for an academic purpose and due to lack of time, man power, and
resources, small number of samples uses, this could still provide a shed for
understanding the rice value chain in Bangladesh. This study can as proto-type
study to explore further research scope and opportunities for the future research
works.

9
1.6 Objective of the Study
The primary objectives of the study are to find out and analyze the value
addition of rice in various marketing stages. However the specific objectives of
the study are as follows:
i) To estimate the value addition of rice by the different actors
ii) To examine the activities related to value addition of rice by different
actors.
iii) To identify the constraints and opportunities in rice value chain and to
recommend measures for improvement.
1.7 Limitation of the Study
Almost all the research works have some limitations. The present study is not an
exception to those studies done before. The study suffers from the following
limitations:
i. The first limitation of this study was the shortage of time. The primary
data and other necessary information were collected within a short period
of time and hence could not cover wider area.
ii. Paddy producers did not keep proper records of their farm business.
Because of illiteracy and hidden business interest no written records were
maintained by the respondents (producers, and traders). As a result, the
accuracy and the reliability of data mostly depend on their memories. This
situation may have caused a built in limitation of the data used in the
analysis.
iii. Paddy traders, rice millers and traders had records of transaction and
price in many cases but they were reluctant to disclose their records due to
fear of any adverse situation for example imposition of tax. They were
reluctant to disclose the actual figures on purchase price, sales price,
production, monthly sale, income, profit etc.

10
iv. The researcher had to work with small samples because of time constraint.
However, the data were analyzed quite exhaustively but a large sample
might have strengthened the findings.
v. The findings of the study were based on the data of some selected areas of
Jamalpur district in Bangladesh. Therefore, the study may not be
representative of the whole Bangladesh.

11
CHAPTER II
REVIEW OF LITERATURE
2.1 Introduction
The purpose of this chapter is to review of previous studies, which are
related with the present study. There are some studies on value chain of
vegetables and fisheries in Bangladesh but studies on rice value chain in
Bangladesh are scanty. The review is presented and discussed below.
2.2 Supply Chain
Supply chain and value chain are often thought to be the same thing. In fact,
supply chain and value chain are two different concepts. Some research findings
on rice supply chain are presented and discussed.
Fanny et. al. (2008) defined supply chain as the integration of internal business
functions and the flow of materials and information from the point of entry into
the firm until they are delivered to the end-consumer.
Anna (2006) stated supply chain as the art and science of managing and
controlling the flow of goods, energy, information and other resources like
products, services and people, from the source of production to the marketplace.
It is difficult to accomplish any marketing or manufacturing activity without
supply chain network or logistic support. It involves the integration of
information, transportation, inventory, warehousing, material handling and
packaging. The operating responsibility of logistics is the geographical
repositioning of raw materials, work in process, and finish inventories where
required at the lowest cost possible.
Alam (2005) identified three distinct channels in the supply chain of rice mills in
Bangladesh. These are rice processing channel, imported machinery channel and
rice mill equipment production channel. In the rice processing channel raw
paddy from the farmers was bought by the Aratdars or commission agents and
supplied to rice millers. Sometime the rice mill owners themselves bought raw

12
paddy directly from the farmers through their own intermediaries. The milled
rice was then sold to the wholesalers of different districts and cities, sold to
consumers through retailers.
2.3 Value chain
Porter, (1985) defined value chain is a chain of activities. Products pass through
all activities of the chain in order and at each activity the product gains some
value.
The value chain categorizes the generic value adding activities of an
organization. The “primary activities” include inbound logistics, operation
(production), outbound logistics, sales and marketing, and service (maintenance).
The “support activities” include administrative infrastructure management,
human resource management, research and development, and procurement. The
costs and value drivers are identified for each value activity. The value chain
framework quickly makes its way to the forefront of management as a powerful
analysis tool for strategic planning. Its ultimate goal is to maximize value
creation while minimizing cost.
Minten et. al. (2011) found that the lack of availability of high yielding varieties of
the highest-quality (fine) rice leads to important costs in the rice value chain,
resulting from the conversion of high quality rice. If higher-yielding varieties of
fine rice were more readily available, it seems that farmers, if not directly then at
least indirectly, should be able to capture a larger share of consumers’ increasing
willingness to pay for quality, and these varieties would then also become
available at lower prices for consumers. The resulting price decreases at the end
of the value chain might then also make Bangladesh more competitive in rice
export markets.
Mustafa et.al. (ongoing) in their study on “Improving Food Security through Value
Chain Management: A Study of Rice Value Chain in Bangladesh“ intended to link the
concepts of value chain management and food security, a linkage that has
received little research attention, particularly in the context of Bangladesh. The
broad objective of the research is to analyze whether applying the concepts of

13
value (supply) chain management could improve the competitive advantage of
Bangladesh rice industry, and if so, how this could be achieved in practice.
Kapur (2003) identified value addition of raw rice (Grade-A) milling unit as
process cost which includes Rs. 69.6per quintal.(12%) for taxes and levies,
cleaning, loading and miscellaneous costs (Vat-4%, Arat-2.5%, market fee-2%,
process fee 2%, miscellaneous-1.5%), Rs. 9 per quintal for drying, Rs.20 per quintal
for de-husking and polishing, Rs. 2 per quintal for grading. After grading yield
of raw rice @ 67% accumulated value becomes Rs. 1015.8. Cost of rice bran (7%)
at 500 per quintal. Cost of rice husk (19%) at Rs. 100 per quintal. was Rs.19 .
Overall gross profit was Rs. 79.2 per quintal. The author also found that
percentage of gross profit on sale in respect of rice as 7.5% for raw rice and 6.2%
for parboiled rice. In view of the quantum of work load given by purchasing
agencies this profit margin appears to be rational. *Grade-A (Basmati rice and
superfine quality). (*Here exchange rate of Rupee (and Bangladeshi Taka was 1
Rupee= 1.49 Taka)
Alam (2005) found major value addition of husking mills as rice milling (51.59%),
retailing (26.58%) and wholesaling (13.49%) for parboiled rice. The profit margin
at husking mill was found about Taka 465.5 (28.65% of value addition at this
level). In semi-automatic mills, rice milling (47.62%), retailing (25.39%) and
wholesaling (13.49%) constituted the major value addition for parboiled rice. For
aromatic rice the major value additions were- rice milling (54.46%), retailing
(16.34%) and wholesaling (12.38%). The profit margins were identified as Taka
715.75/ton (47.72% of value addition at this level) and Taka 865.75/ton (62.96%
of value addition at this level) for parboiled and aromatic rice, respectively.
In case of parboiled rice the profit margins per ton for husking, semi-automatic
and automatic rice mills were found Taka 466/ton, 716/ton and 1190/ton,
respectively. The variation in profit margins was because of variable processing
different types of rice mills. The labour requirement per ton of rice processing at
husking mill (Taka 538/ton) was much higher than automatic (Taka 59/ton) and

14
semi-automatic (Taka 338/ton) rice mills. Moreover, high capacity and capacity
utilization of automatic rice mills provided an edge over processing cost of rice in
husking and semi-automatic rice mills.
Alvero. M. (2008) conducted a study on rice value chain in selected areas of
Abuyog, Leyte, Phillipines. The author presented a cost structure and paddy
production cost. The author considers the costs for purchasing inputs such as
seeds, water supply, pesticides, fertilizers, and transportation costs, and costs
for attaining labor for cultivation of land, planting, harvesting, and threshing of
paddy. The author also estimated costs in the post-production and marketing of
rice from the hands of the assemblers in Abuyog town to wholesaler-millers,
retailers, and consumers in Eastern Visayas. The author found that more than
half of its total costs are for laborers yet they only receive quarter of the total
production’s revenue where the rest are shared by the tenant and landlord.
Furthermore, farmers play a crucial role in rice production in Abuyog but they
are the ones who experience the highest level of social costs among the actors in
the rice sub-sector value chain. The author commented that to empower these
farmers, the government should initialize or reinforce programs that would
benefit them, such as comprehensive agrarian reform, agricultural and
cooperative education.
Stryker (2008) concluded that major advances were made in rice competitiveness
through liberalization of rice marketing and milling. This led to the introduction
of small rice hullers, which were able to process rice relatively inexpensively
compared with larger mills. There were also substantial savings in the cost of
transporting paddy and the value for animal feed of the hulling byproducts.
However, with rice prices having risen on world markets and with advances in
milling technology, it is time to revisit this question. The imported rice with
which domestic production competes is of a quality standard not met by most
small hullers, resulting in price discounts and lost profits. Evidence from Rwanda
and a few other countries suggests that milling technology currently exists that

15
allows for upgrading of quality without necessarily losing the advantages of
operating on a relatively small scale. Better milling should take care of the
problems of impurities, lack of uniformity, and high percentage of broken grains.
Complementary investment in storage should also ensure that adequate supplies
of local rice are available year round. This will not necessarily solve problems of
taste, storability, cooking time, water absorption and other characteristics that are
not apparent to the eye.
2.4 Conclusion
Value chain of rice is very important in the context of Bangladesh. Till now
sufficient research study had not been conducted in this important area. So, very
extensive and in-depth research works are urgently needed for providing
information for the policy makers so that better policies can be formulated.

16
CHAPTER III
METHODOLOGY OF THE STUDY
3.1 Introduction
This chapter presents a detail methodology adopted in this study which includes
the selection of study area, selection of sample, preparation of survey schedule,
data collection method, period of survey, editing and tabulation of data and
analytical techniques to be used. These are discussed below.
3.2 Selection of the Study Area
The area of the study was Jamalpur district. Two specific upazilas, namely,
Dewangonj and Islampur are chosen for this study.
The reasons for selecting the Jamalpur district for the present study are as
follows:
i. Jamalpur is one of the widely rice producing district of the country.
ii. The researcher was familiar with the local farming, local culture, belief and
other characteristics of the area.
iii. Rice mills were available mainly in the two upazilas selected and also
produce about 40%-45% of paddy of total production in Jamalpur district
because these two upazilas cover about 40% of the land area of the district.
iv. No such study was conducted earlier in this area. So value chain analysis
of rice was a new study conducted in the research areas.

17
Fig 3.1.: Study Area (Dewangonj and Islampur Upazila of Jamalpur District)

18
3.3 Selection of Period of Study
The present study covered six months period that started from January 2012 to
July 2012. Data were collected during the period from February 2012 to April
2012 through direct interviews with farmers, paddy traders, rice millers and rice
traders using a structured survey schedule. For collecting supplementary data
such as cost and return from paddy, cost of marketing, cost of transportation,
cost of milling, cost of selling, transportation system etc. the researcher
personally visited the area several times.
Data were collected on the production of Aman season which was already
harvested. Due to some limitations such as time constraints, shortage of fund and
personnel only Aman season was selected for the study.
3.4 Sample Size
Paddy growers, paddy traders, rice millers and rice traders of Dewangonj and
Islampur upazilas were considered as the population of the study. Considering
the limitations such as time and resources, it was not possible to include all the
farmers, traders and millers. So, the sample included 10 farmers and 35 other
value chain actors (15 paddy traders, 10 rice millers and 10 rice traders). Farmers
and other value chain actors were not classified into any specific categories based
on age, education, and size of activity due to researcher’s limitations and
possibility of increasing the dimensions of the present study which are beyond
the scope. Sample size has been shown in table 3.1.
Table 3.1 Sample Size of Different Actors
Value chain actors Sample size
Farmer 10
Paddy trader (Faria, Bepari, Aratdar) 15
Rice miller 10
Rice trader 10
3.5 Preparation of the Survey Schedule
In order to collect data, keeping the research objectives in mind, the

19
interview schedules were prepared. Different interview schedules were
prepared for different actors. There prepared 15 schedules for farmers, 10 for
paddy trader, 10 for rice millers and 10 for rice traders and total number of
schedules was 45. .Farmer’s interview schedule included questions related to
various aspects of production, marketing and various value adding activities
at farm level.
Trader`s schedule included questions related to volume of sales, place of
sales, price and the marketing cost and various value adding activities.
Miller`s survey schedule included the cost structure of paddy collection,
milling costs, disposal cost of finished products (i.e. rice, bran, husk, broken
rice) etc.
Rice traders` survey schedule included cost of rice collection, operating
costs of business, sales cost, price of rice etc. During pre-testing of the
survey schedules, attention was paid to include of any aspect which was
not included in the draft schedule and to exclude which was not
redundant. Thus, the draft schedules were rearranged and modified in the
light of the actual and practical experiences gained during pre-testing of
the survey schedules. Later, the survey schedule was finalized and printed
out.
3.6 Method of Data Collection
The researcher himself collected the data through face to face interview. Before
starting actual interviews the purpose of the research was clearly explained to the
sample farmers, traders and consumers. Initially, they hesitated to answer the
questions but when they were assured that the study was an academic research,
so it would not affect them adversely in any way, they fully cooperated in giving
information.
During interview, the researcher asked questions systematically and explained
the questions whenever it was felt necessary. Farmers were used to provide
correct data as far as possible. If there were such items, which were overlooked or
contradictory, were corrected by another interview. In order to minimize the

20
errors, the quantitative data were collected in local units but later on they were
converted into standard units.
In addition to primary data, secondary data such as country’s agricultural
production, farm family related data e.g. number of family members, farmer’s
educational status, farm size of the farmers etc. were also collected from various
secondary sources such as books, journals, newspapers, different organizations
and webs.
3.7 Data Collection
Most of the respondents did not keep written record of their farm and business
activities. So the researcher had to collect primary data by interviewing them
with a questionnaire. To get the correct data, repeated visits to the respondents
were made to stimulate their memory.
3.8 Analytical Techniques
Data were analyzed with the purpose of achieving the objectives of the study.
The following techniques were used to analyze data in the present study:
3.8.1 Gross Return and Net Return of the Farmers
• Gross return was calculated by multiplying the total volume of output of an
enterprise by the average price of the product. It consisted of sum of the
volume of main product and by product.
The following equation was used to estimate gross return was:
GR=ΣQP.PP + ΣQs. Ps
where,
GR = Gross return from paddy/rice (Tk/acre)
QP= Quantity of paddy (quintal/acre)
PP= Average price of paddy (Tk/quintal)
Qs= Quantity of straw (quintal/acre)
Ps= Average price of straw (Tk/quintal)

21
• Net Return was calculated by deducting all costs (variable and fixed) from
gross return.
π = Gross return - (variable cost + fixed cost)
Here, π = Net return (profit)
3.8.2 Margin Received by Marketing Actors
Marketing margin is the difference between the producer and consumer prices.
Marketing margins and net margins of different intermediaries were estimated
by using the following formula:
Market margins
• Gross marketing margin (Tk/quintal) = Sale price (Tk/quintal) - Purchase
price (Tk/quintal)
• Net margin (Tk/quintal) =Gross margin (Tk/Quintal) - Marketing cost
(Tk/quintal)
• Value addition (%) x 100
3.9 Processing and Analysis of Data
The filled up interview schedules were scrutinized and edited in order to remove
any ambiguities and inconsistencies of collected data. The collected data were
then transferred to Excel-sheets, compiled and summarized. Qualitative data
were converted into quantitative ones by means of suitable scoring. A list of
tables was prepared in accordance with the objectives of the study. Mainly
descriptive statistics were applied for the analysis of data to obtain the results.

22
CHAPTER IV
VALUE ADDITION BY DIFFERENT ACTORS IN RICE
MARKETING
4.1 Introduction
Value addition activities are mainly concerned with the changes of utilities.
In economics, the sum of the unit profit, the unit depreciation cost, and the unit
labour cost is the unit value added
(http://en.wikipedia.org/wiki/Value_added).
In the context of macroeconomics, it refers to the contribution of the factors of
production, i.e. land, labour, and capital goods, to raising the value of a product
and corresponds to the incomes received by the owners of these factors. The
national value added is shared between capital and labour (as the factors of
production), and this sharing gives rise to issues of distribution. Value added
refers to the additional value of a commodity over the cost of commodities used
to produce it from the previous stage of production. The value added to any
product or service is the result of a particular process.
(http://www.encyclopedia2.thefreedictionary.com/valueaddition).
Hence this chapter is concerned with the estimation and analysis of costs, returns
and value addition of rice in different value adding stages by farmers, traders,
rice millers and rice traders.
4.2 Marketing Channels
The study has identified different marketing channels of paddy, rice and
associated by-products. Two different marketing channels were found most in
the study areas. First, paddy marketing channel which was - paddy producers
(farmers) to rice millers. Second, rice marketing channel was - millers to ultimate
consumers. Actors in paddy marketing channels included Farias, Beparies and
Rice millers and actors in rice marketing channel included rice miller, Bepari or
wholesaler and retailer.

23
Various types of marketing channels are shown in the fig: 4.1. About 50% paddy
and rice were marketed by identified second and third marketing channels out of
seven channels shown in fig. 4.1. Mainly Faria and Bepari were common actors in
the study areas.
All the channels identified are shown below:
1. Farmer Rice Miller Rice Retailer Consumer
2. Farmer Faria Rice Miller Rice Retailer Consumer
3. Farmer Faria Bepari Rice Miller Rice Retailer Consumer
4. Farmer Faria Bepari Rice Miller Bepari Rice Retailer Consumer
5. Farmer Faria Rice Miller Bepari Rice Retailer Consumer
6. Farmer Bepari Rice Miller Bepari Rice Retailer Consumer
7. Farmer Bepari Rice Miller Rice Retailer Consumer
Fig 4.1.: Rice Marketing Channels of Alternatives
4.3 Value Chain Map of the Study Area
Paddy traders collected paddy from local farmers of Islampur and Dewangonj
upazila and supplied it to the rice millers located in the same upazilas. Major part
of paddy was assembled for selling in local markets such as Guthail, Aamvodra,
Battazor Modon etc. On top of that some large rice millers were found who
collected paddy from Dinajpur, Rangpur, Naogaon, Bokshigonj etc.

24
4.4 Costs and Return of Farmers and Value Addition
Costs, returns and value addition of different value adding actors were estimated
separately. Main cost items were production cost, marketing cost, processing cost,
miscellaneous cost etc. Returns were calculated by multiplying the total output
with per unit price of products and byproducts. Value addition was simply the
difference between the prices of two conjugating value adding steps.
RICE BEPARI
(WHOLESALERS)
RICE RETAILER
REMOTE DISTRICT
MARKET
Chittagong, Sylhet,
Dhaka, Narayangonj )
LOCAL
CONSUMER
BEPARI FARIA
RICE MILLER
Fig 4.2 Jamalpur District Rice Value Addition Map
LOCAL PADDY HAAT
(Dewangonj,Islampur,Guthail,Molomgonj,Mondolbazar,
Battazor,Noimmia,Mahmudpur, Aaamvodra)
PADDY
PRODUCER
PUBLIC STOCK
(GOVERNMENT
PROCUREMENT)
CONSUMER
JAMALPUR DISTRICT

25
4.4.1 Cost of Production
All the costs items related to paddy production constituted the costs of
production. Production costs were mainly of two types i.e. variable costs and
fixed costs.
4.4.1.1 Total Variable Cost
• For One Acre Land: Sum of the costs of variable inputs for cultivation of one
acre land made total variable costs, which was Tk. 21250.00 (Tables 4.1). Total
variable costs were 75.22% of total costs. Labour cost constituted the highest
and was about Tk. 14850.00 which was 52.57% of total cost.
• For One Quintal Rice Production: Total variable costs were the sum of the
costs of variable inputs for cultivation of one acre land which was Tk. 1062.50,
and was 71.13% of total cost (Tables 4.1). Labour cost was the highest and was
Tk. 742.50 per acre, which was 52.57% of total cost.
Labour cost was very high due to unavailability and seasonality of labour.
Generally small farmers used family labour to reduce the cost of hired labour. In
calculating labour costs-farmer’s family labours were considered. But small and
marginal farmers could save about 30-40% labour cost by using family labour in
rice production.
4.4.1.2 Total Fixed Cost
Fixed cost is the cost which is permanent in nature and last longer. Fixed costs
are those, which do not change and are incurred even when there is no
production activity. Fixed cost includes the rental value of land and interest on
operating capital. The study found that the rental value land was on an average
Tk. 7000.00 per acre of land. Interest on operating capital was 16%-25% depending
on types of lending authority. Land rent and interest on operating capital together
was about 24.78% of total costs.

26
4.4.1.3 Gross Cost
Gross cost was the sum of total variable cost and total fixed cost. Gross cost was
Tk. 28250 for one acre land and it was Tk. 1412.50 for producing one quintal paddy
(Table 4.1).
Table 4.1: Percentage Share of Different Cost Items
Cost Items Tk/acre Tk/quintal % of total cost
of production
Land preparation 915.75 31.67 2.48
Seed bed 747.91 24.95 2.02
Transplantation of seedling 4582.08 178.46 12.41
Weeding 3836.16 148.60 10.39
Irrigation 919.08 31.80 2.49
Fertilizer application 1844.82 68.86 4.99
Harvesting 4811.85 187.66 13.04
Threshing, winnowing 1684.98 62.46 4.56
Power tiller/ draft power 2830.50 108.33 7.67
Seed/Seedlings 999.00 35.00 2.71
Fertilizer and manure cost 2801.20 107.16 7.59
Insecticides 196.47 2.87 0.53
Irrigation 1631.70 60.33 4.42
Rental value of land 9423.90 372.33 25.53
Total cost of production 37225.40 1485.51 100
(Here, 1 acre= 100 decimals, 2.47 acre= 1 hectare and 1 quintal= 100 kg.)
Source: Field Survey 2012

27
Table 4.2: Costs and Returns of Paddy Farmers
Particulars Quantity
(unit)
Price
per unit
(Tk.)
Total value
(Tk./ acre)
Cost or
Return
(Tk./quintal)
% of
total
cost or
return
Variable
costs
Human labour
(Man-day)
55 270 14850.00 742.50 52.57
Land preparation
(Power tiller or
draft power)
2 times 1000 2000.00 100.00 7.08
Seed/seedlings
(Kg)
30 30 900.00 45.00 3.19
Fertilizer and
insecticide
2000.00 100.00 7.08
Irrigation 1500.00 75.00 5.31
Total variable
costs (TVC)
21250.00 1062.50 75.22
Fixed
costs
Rental value of
land
(per paddy
season)
7000.00 350.00 24.78
Total fixed cost
(TFC)
7000.00 350.00 24.78
Gross cost
(GC=TVC+TFC)
28250.00 1412.50 100
Return
and
margin
Paddy (quintal) 20 1400 28000.00 1400.00 86.634
Straw (1 aati=3kg) 1440 3 4320.00 - 13.37
Gross return (GR)
xii = x + xi
32320.00 - 100.00
Gross margin
(GM)
xiii = xii - vi
11070.00 - -
Net margin
(xiv = xii –
ix)
4070.00 - -
(Here, 1 acre= 100 decimals, 2.47 acre= 1 hectare and 1 quintal= 100 kg.)
4.5 Yield and Return from Paddy Farming
Paddy farming is still at subsistence level in the study area. Farmers who
produce paddy as tenant can hardly cover their cost of production. Considering

28
some exceptional cases the study found that farmers were not getting satisfactory
return. But about 60% large farmers mentioned that they got good return as they
were acquainted with modern farming. Small farmers could appoint extra family
labour but other technological supports were not available for them. As a result
they could not manage good return as the large farmers. They thought they only
receive the reward for their personal and family labour. Total return is calculated
by multiplying the average price per unit (quintal) paddy and total yield. It was
calculated by adding the total return from paddy and straw (bi-product). If
paddy was only considered there was no profit at all.
Generally it was found that about 20 quintal paddy and about 43 quintal straw
were obtained from one acre land. Most of the farmers were not acquainted with
modern technology. They did not use optimum dozes of fertilizer or other
intercultural operations. Therefore, the outputs of the farmers were not
satisfactory.
4.5.1 Gross Return
Gross return was calculated by multiplying the total amount by average sales
price. Gross return of one acre land from paddy and straw was Tk. 32320. Gross
return was the sum of return from paddy and straw where return from paddy was
Tk. 28000 per acre and return from straw was Tk. 4320 per acre.
4.5.2 Gross Margin
Gross margin is the gross return over variable cost. Gross margin was obtained
by deducting total variable cost from gross return. Table 4.1 shows that gross
margin of one acre land was Tk. 11070 and gross margin was Tk. 4070 per
quintal.
4.3.3 Net Return (profit)
Net return (profit) was calculated by subtracting total cost of production from gross
return. Table 4.1 shows that the net margin or profit of one acre land by producing
paddy was Tk. 4070. Average net return was very small indicating that the farmers
can hardly cover their cost of production and got a small return. So the real
situation of farmers shows the ability of farmer to act as a value adding actor.

29
4.6 Value Addition by Farmer
The input costs were high in one hand and both the yield and output prices were
not sufficient on the other. Moreover, most of the farmers have large family with
limited alternative income sources. Small farmers could not store paddy but large
farmers added extra value with paddy by storing for average of three months.
Some large farmers generally added about Tk 100.5per quintal paddy by storing
for few months in the study area.
Table 4.3: Value Addition by Farmer in Different Forms
Items Price Value addition
(TK/quintal)
Value
addition
(%)
Value addition
due to drying
Wet paddy Price 1317.5
Dry paddy price 1422.50
Drying cost 47.50
Marketing margin (value
addition)
105.00 7.97
Net marketing margin 57.50
Value addition
due to marketing
Farm gate price of paddy 1310.00
Market price of paddy 1410.00
Marketing cost 52.25
addition)
100.00 7.64
Value addition
due to storing
paddy
Price before storing paddy 1447.50
Price after storing (average
3 months)
1548.00
Storing and marketing
cost
65.25
addition)
100.50 6.94
It was found that most of the farmers were not aware about the benefits of value
chain. The matter of fact that they were engaged with some traditional value
adding activities e.g. drying, cleaning, storing etc. But they had no idea about

30
modern value chain activities. The transportation and infrastructure was not
developed. Therefore, paddy marketing by the farmers was expensive and in some
cases it was not beneficial at all when the farmers sold in small amount. Moreover
market information system was not adequate for the farmers to receive extra benefit
through various value chain activities. Mostly practiced value chain activities have
shown in the Table 4.3 with value addition in different forms.
4.7 Paddy Trader
Paddy traders are the second value chain actors in the rice value chain. In
Dewangonj and Islampur upazilas of Jamalpur district, there were two types of
paddy traders such as Faria and Bepari.
4.7.1 Marketing Cost of Traders (Faria and Bepari)
Different marketing costs items along with share of paddy traders are shown in
the table 4.4. Average cost was calculated for paddy traders (Faria and Bepari).
Table 4.4: Average Marketing Costs of Paddy Traders
Cost Items Tk. /quintal Tk. /kg % of total cost
Transportation 23.75 0.24 44.79
Loading and unloading 9.75 0.01 18.39
Bag/Sack, Sewing 1.425 0.01 2.69
Market toll 6.625 0.07 12.49
Weighing 3.25 0.03 6.13
Personal expenses 3.13 0.03 5.89
Un-official cost 0.975 0.01 1.84
Rent for shop 1.93 0.02 3.63
Interest for borrowed money 4.11 0.04 7.76
Total marketing cost 53.03 0.53 100
(Source: Field Survey, 2012)

31
Table 4.4 showing that the transportation cost of the paddy traders was heights
and it was Tk. 23.75 and 44.79% of total marketing costs. On an average for
moving 1 quintal paddy within a distance of about 1 kilometer Tk. 23.75 was very
high compared to other regions of the country.
It was seen that average purchasing price of paddy was Tk. 1425.00 per quintal
and average selling price of paddy was Tk. 1510.83 per quintal. Average value
addition by the paddy traders was only Tk. 85.83 per quintal which is 6.03% of
total.
9.50
3.90
0.57
2.65
1.30 1.25 0.39 0.77 1.65
21.21
Cost Items (Tk/quintal)
Cost Items
Fig 4.3: Comparison among Various Marketing Costs
In table 4.5 it has shown that the total marketing cost of paddy was 56.99 Tk. per
quintal which was about 57% of marketing margin (MM) or value addition.
Among the variable costs, transportation cost was the highest and was about Tk.
23.75 per quintal. Total variable cost and fixed cost was Tk. 48.91 (92.24% of total
cost) Tk. 4.11 (7.76% of total cost), respectively.

32
Table 4.5: Marketing Costs, Margins and Value Addition of Paddy Traders
Items (Tk. /quintal) % of marketing margin
Purchase price of paddy 1425.00
Sells price of paddy 1510.83
Marketing cost
Variable cost 48.91 56.99
Fixed cost 4.12 4.79
Total 53.03 61.78
Value addition (marketing margin) 85.83 100.00
Gross margin 36.92 43.01
Net margin 32.81 38.23
(Source: Field Survey 2012)
4.8 Rice Millers
Rice miller added value in three different steps i.e. marketing of paddy, milling
of paddy and selling of rice. Rice milling system is not developed in the study
area. Most of the rice mills in the study areas were husking mills except some
large semi-automatic mills. Table 4.7 showing that rice millers could add value of
total Tk. 313.78 for purchasing, conversion of rice and rice marketing. They
added 23.23% extra value for their whole activities. Value addition was
calculated based on 1 quintal paddy and final selling price was calculated
summing up the selling price of products produced from conversion of 1 quintal
paddy i.e. rice, bran, husk and broken rice.
Table 4.6 Products Obtained from One Quintal Paddy
Products Amount( Kg) % of total Per unit price Total value
Rice 66.54 66.54 26.71 1777.2834
Bran 6.33 6.33 15.24 96.4692
Husk 22.06 22.06 2.12 46.7672
Broken rice 4.08 4.08 17.60 71.808
Weight loss 0.99 0.99 - 19.50
Total 100.00 100.00 - -

33
Fig 4.4: Products Obtained from One Quintal Paddy
No automatic mills were found in the study area. Most of the rice millers were
not economically sound to realize the full benefit of value chain. There were some
other problems faced by the millers e.g. lack of electricity, unavailability of paddy
through the year round, bad transportation system with bad road and
infrastructure and the poor marketing system.
4.8.1 Total Cost of Rice Miller
Various costs items return and value addition has been shown in table 4.7. The
cost of rice miller has classified into three broad categories i.e. purchasing cost of
paddy, milling cost of paddy and selling cost of rice. Among these three-
marketing cost of paddy was the largest and was about Tk. 76.95 per quintal
which was 24.52% of total cost. Total milling cost was Tk. 67.38 per quintal of
which total variable cost was Tk. 51.88 per quintal and total fixed cost was Tk.
15.15 per quintal. Milling cost was 21.47% of total cost. Total selling cost of rice
was Tk. 36.73 per quintal which was 11.71% of total cost.
4.8.2 Value Addition by Rice Miller
Rice millers are the highest value adding actors in the rice value chain. On
average rice millers add value of about Tk. 313.78 per quintal paddy. Value

34
addition starts from purchase of paddy from the paddy traders for selling rice to
rice traders. The value adding items and the amounts of value adding are shown
in Table 4.6 below.
Table 4.7 Costs and Margins (Value Addition) of Rice Millers
Items Tk. /quintal Percent of total
Value Added (%)
Purchasing cost of
paddy (i)
Variable cost 51.88
76.94 24.52
Fixed cost 15.15
Milling cost of paddy (ii) 67.38 21.47
Selling cost of rice (iii) 36.73 11.71
Gross cost (iv)=(i)+(ii)+(iii) 180.05
Purchase price of paddy (v) 1659.93
Return from paddy (vi) 1992.28
Weight loss (vii) 19.50
Total return excluding losses (viii)=(vi)-
(vii)
1972.78
Marketing margin (value addition
(ix)=(iv)+(x)
313.78 23.23
Net marketing margin ((x) 132.73 14.54
(* NB: Here return from one quintal paddy was calculated by adding all the selling of
products and bi-products obtained from paddy i.e. rice, bran, husk and broken rice. Here
weight loss was deducted from total return.)
To obtain one quintal rice, millers used about 1.51quintal paddy which added
about Tk 366.83 (table 4.8).
Table 4.8 Value Addition from One Quintal Rice by Rice Miller
Items Amount (kg) Total value (Tk)
Required amount of paddy (ii) 150.28 kg. 2379.00
Obtained rice (i) 100.00 2745.83
Value addition (Tk.) (iii)= (i) -(ii) 366.83
Value addition (%) 15.414

35
4.9 Rice Trader
Only Beparies and retailers were available in the study areas. Sometimes Beparies
worked as retailers. In other areas of the country it was seen that rice millers sold
rice through Aratdar and or Bepari. But in the study areas rice millers sold rice
directly to the Bepari and retailer. Cost, return, marketing margin and value
addition have shown in table 4.9.
Table 4.9 Cost, Return, Margin and Value Addition of Rice by Rice Traders
Items Quintal
Marketing cost Transportation 21
Loading and unloading 10.68
Bag/Sac 9.88
Market toll (Security charge) 1.43
Weighing 4.03
Personal expenses 1.43
Rent for shop 2.22
Un-official cost 2.44
Electricity 3.65
Total cost Total variable cost 47.75
Total fixed cost 8.10
Total marketing cost 55.84
Margin Purchasing price of rice 2710.42
Selling price 2875.83
addition)
165.42
Value addition % 15.275
Gross margin 117.67

36
4.9.1 Total Cost of Rice Trader
Transportation cost of rice was the highest cost for all types of rice traders. The
average transportation cost was Tk. 21 per quintal. Total marketing cost of rice
was Tk. 55.84 per quintal. Costs and returns were shown as average costs of
Beparies and retailers.
4.9.2 Value Addition by Rice Traders (Bepari and retailer)
Value addition, the cost and return pattern of rice traders are presented in table
4.9. Rice traders have limited opportunity to add value among all other value
adding actors. They could add about Tk. 165.42 per quintal extra value with rice
price. Purchasing price of rice was on an average Tk. 2710.42 per quintal and
selling price was Tk. 2875.82 per quintal. Net margin or profit of rice trader was
Tk. 109.58 per quintal and the profit was Tk. 1.1 per kg rice.

37
CHAPTER V
VALUE ADDITION ACTIVITIES PERFORMED BY ACTORS
5.1 Introduction
Long and inefficient value chain directly influences the rice price. In the real
worlds situation rice price was very high compared to paddy price. Analyzing
the whole value chain of rice it was found that rice price was not consistent with
paddy price what farmers actually received. Farmers got comparatively lower
price of paddy. Farmers could not manage expected paddy price due to low price
of paddy in the harvesting season contrary rice price was more or less stable but
high. Rice value chain presented below shows the value adding activities by
different actors. The total value chain map and activities are shown in figure 5.1
below.
Bepari
Value Addition (5-6 %)
Value addition (6.03%)
Fig 5.1.: Rice Value Chain Map
Farmer
Faria
Rice Miller
Aratdar Wholesaler Retailer
Consumer
Producer
Trader
Processor
Final Product

38
5.2 Value Addition Activities of Farmers
Farmers were the first actor of value chain in rice marketing. It was found that the
paddy producers could hardly cover total cost of paddy production. Farmers
disposed off paddy in four different ways. They were as follows:
a) Kept as seed for next farming season (farmers keep about 18 kilograms of seed
for cultivating 1 acre of land in next farming season),
b) About 70% of paddy is sold,
c) Paid off debts in kind, and
d) Kept paddy for household consumption.
Most of the farmers preferred to sell paddy gradually, depending on how much
money they needed at the time of harvesting. Due to urgent cash needs they
could not store paddy.
In this study only Aman price of the crop year 2012 was considered. Because of
time and resource constraints researcher did not consider all paddy season. Only
BR11 variety of paddy was considered. Value adding activities of paddy have
observed in three different ways. These are as follows:
i. Value addition by drying paddy was 7.97%.
ii. Value addition by storing paddy was 7.64%. Average storing duration was
three months.
iii. Value addition by marketing paddy was 3.05%.

39
5.2.1 Drying
In the rice supply chain the logistic components are identified. These are drying,
transporting, milling, packaging, storage etc. An essential function that needed to
be performed before milling paddy was drying. The most popular method used
especially, during the dry season was sun drying in concrete pavements which
took place in farmyard and even some times in roads and highways. Sundrying
method had problems of mixing foreign materials and no uniformity of moisture
content. Financial constraints led the farmers to make use of such method. In this
case, farmer incurred costs about Tk 19.87 per quintal. But when farmers used the
mechanic drying method the cost could have much more than sun drying
method. Moreover, the mechanical dryers were not available everywhere in the
study areas. It was found that for drying total paddy from one acre, the farmers had
to use one labour and in doing this the cost was Tk. 49.72 per quintal.
5.2.2 Storing
Very few farmers had the capacity to store their paddy for more than a month
because they were in need of immediate cash to pay their outstanding credits. It
was found that, sometimes part time paddy traders and large farmers were stored
10-15% of their production but for relatively a shorter time for two or three months.
It was observed that storing paddy was not profitable because paddy price was not
increased with the farmer`s expected levels. Farmers generally used traditional
mode to store paddy. They stored paddy in sack/bag. Some farmers used box
(Berr/Gola/Dole in local name).
Average duration of storing paddy was three months. Average value addition by
storing was calculated by subtracting market price in the time of distorting and
price of the storing month (generally harvesting season). Storing cost was the sum
of cost of storing for three months and the associated marketing cost. It was found
that cost of storing was Tk 65.25/quintal and value addition was Tk 45.28/quintal
which was 3.05% of farm gate price.

40
5.2.3 Marketing
Marketing was an important stage of value addition. Marketing costs included
transportation cost, loading and unloading cost, market toll, weighing cost,
sweeping cost in the Haat (weekly market), personal expenses of the sellers,
unofficial cost like tips, donation etc. Value addition was calculated by subtracting
farm gate price from market price. Average value addition from paddy marketing
was Tk 100/quintal which was 7.64% more than the price in the time of storing.
5.3 Value Addition Activities by Paddy Traders
Paddy traders are the second value chain actors in the rice value chain. There
were two types of paddy traders were found in the study area such as Faria and
Bepari (wholesaler).
5.3.1 Faria
Faria was the first value chain actor. Number of Faria was very large. Farias
collected paddy from the farmers at farm gate, sometime they collected paddy
from local markets and sold to Beparies and rice millers. Generally Farias have
small amount of capital around TK 50,000-2, 00,000 to run their business.
Farias did not lend money because of high interest rate and complexity of getting
bank`s loan. Some Farias have taken loan from BRAC bank, Grameen bank,
Janata bank and Sonali bank. Interest rate was about 16-17%. Among these, the
Grameen bank charged highest interest rate and was found to be at 22 -25%.
Monthly average paddy transaction of Farias was about 570 quintal on an
average.
Average distance covered by the Faria for collecting and selling paddy was about
12 km on an average. Farias of Dewangonj Upazila purchased paddy from
Dewangonj, Mondolpara Noyapara, Noyeammia, Dangdhara of Dewangonj
Upazilla, Islampur, Guthait, Molomgonj Haat of Islampur Upazilla and Battazor
hat, Bakshigonj Haat of Bakshigonj Upazilla. Farias added about 7-8% value on
their purchased paddy. Farias, sometimes, added value without incurring any

41
marketing cost. They worked as middleman to transfer the ownership of the
product. Most of the time Farias completed their buying and selling at a Haat in
the same day. Their net margin varied from 10%-15% more than the Beparis.
5.3.1 Bepari
Beparies were the next actor after Farias. Beparies were the final trader to transfer
paddy to the rice miller. They collected paddy from Farias and large farmers in
the local markets and sold to the rice millers. Their average working capital was
about Tk. 450,000and monthly average transaction of paddy was about 100
quintal. The sources of capital of Beparies were same as Faria. But they have taken
more loan than Farias and they got the facility of taking CC (Cash Credit) loan
from the banks. Generally for large amount of credit, they took loan from Sonali,
Agrani, Janata etc. banks. Farias added about 5-6% value with the paddy they
purchased from the producers.
There were no Aratdars in the study areas. The main reason was the volume of
paddy transaction which was not large. Second plausible reason was the type of
the rice mills. Most of the rice mills were husking. Finally, the value chain actors
like Faria and Bepari were able to do business activities comparatively at a low
cost than the Aratdar.
5.4 Value Addition Activities of Rice Millers
Rice miller is the third actor in rice value chain. Rice millers performed the most
important activities in the rice value chain. They were mainly the processor of
paddy, converting paddy to milled rice.
5.4.1 Value Addition due to Marketing Cost
Rice millers purchased paddy from the farmers, Farias, Beparies and also from the
commission agents (Aratdars). The main marketing most items were the cost of
transportation, charges paid during paddy transport, loading and unloading,
market toll, cost of sack/bag, mobile bills, personal expenses, unofficial costs
(like donation, tips), etc. Total marketing cost was Tk 30.78/quintal and was
18.79% of total cost and added 4.63% value to the paddy price. Transportation

42
cost was the highest cost. Average transportation cost of rice millers was found
about Tk 15.83/quintal.
5.4.2 Value Addition due to Milling Cost
Milling cost includes cost of paddy unloading, cleaning and drying, boiling,
parboiling, husking paddy into rice, bran, husk and broken rice, bagging, etc.
After milling paddy rice was gotten as main product. Bran, husk and broken rice
were obtained as byproducts. Milling cost was found to be Tk 26.184/quintal.
Table 5.1: Cost, Return and Value Addition of Rice by Rice Miller
Items Tk/quintal Tk/kg Value addition (%)
Marketing cost (i)
76.94
0.77 4.64
Milling cost (ii) 67.38 0.65 3.80
Selling cost (iii) 36.73 0.37 2.08
Gross cost (iv) 179.13 1.80
Purchase price of paddy (v) 1582.99 15.83
Return from paddy (vi) 2011.79 20.12
Total return excluding losses (vii) 1992.28 19.92
Marketing margin (Value
addition) (viii)= ((vii)-(v)
409.30 4.10 23.23
Net marketing margin (profit)
(ix)=(viii)- (iv)
140.59 1.41 14.54
Source: Field Survey 2012.

43
5.4.3 Value addition due to Selling Cost
Rice selling cost includes the cost of loading product into transport, cost of bag or
sack, transport charge etc. Total selling cost of rice was Tk 36.73/ quintal and that
was 8.97% of total cost. Selling cost added 2.08% value with the rice price.
5.4.4 Net Marketing Margin or Profit of Miller
Rice millers added the highest value with paddy and rice. Net marketing margin
was Tk 140.59/quintal and added 14.54% value with the whole process of getting
rice from paddy. Total value addition by rice millers was Tk 409.30 /quintal and
that was about 23.23% more than the paddy purchase price.
5.5 Value Addition Activities of Rice Trader
Rice traders were the last actors in the Value chain of rice marketing. There were
two types of rice traders e.g. Beparies and retailers. Collecting rice from rice
millers Beparies sold their product to the retailers in different local markets.
Sometimes to meet the rice demand Beparies used to collect rice from other
district market for example nearest Sherpur district. But some rice retailers also
used to collect rice from small scale rice mills directly. Ultimate consumers get
rice through rice retailers from local market’s retail shop.
Transportation was the main cost of value addition by the rice traders. Average
transportation cost was Tk 21/quintal which was 12.69% of total value addition.
The average transportation cost of local market rice traders was Tk 21.00/quintal.
Marketing margin or value addition was Tk 165.40/quintal which was 6.11%
more than paddy purchase price (Table 4.9).

44
CHAPTER VI
THE CONSTRAINTS AND OPPORTUNITIES OF RICE VALUE CHAIN
6.1 Introduction
According to Bangladesh Economic Report-2011, Jamalpur district is one of the poorest
districts in Bangladesh. Most of the farmers were subsistence. Frequent flooding affects
farmers and incurred loss from crop damage. Moreover, government services were not
available in the study areas. Agricultural extension services were not available during
cropping season. Farmers were found to produce some other cash crops like sugarcane
and banana for better profit and good marketing opportunities. Traders and millers of
the study areas were not conscious about the better opportunities of value chain.
Therefore, they could not make desired profit. However, researcher identified some
opportunities along with some constraints to improve the rice value chain. Constraints
and opportunities are discussed below.
6.2 Constraints in Rice Value Chain
Due to ignorance and unavailability of modern technologies none of the actors in the
study areas made best use of rice value chain. The study identified the constraints as
follows:
6.2.1 Farmer’s Constraints
Farmers faced two main constraints. The first one was related to paddy production and
second one was related to value adding with paddy.
6.2.1.1 Production Related Constraints
a) High cost of input materials of rice production such as fertilizers, irrigation,
labour etc. Therefore, farmers did not earn the expected profit covering their
production cost. Almost 90 per cent respondent farmers claimed that high cost of

45
input materials particularly high cost of fertilizer and irrigation were main
problem faced by them.
b) Due to unavailability and inaccessibility of modern technologies such as power
tiller, disc harrow, deep tube-well etc. very low yield was resulted. Moreover,
about 90 per cent farmers of the study areas used fragmented and small piece of
land for paddy production. As a result they could not use modern technologies
in their land.
c) Although this study has been conducted basically based on the previous paddy
season and in that time irrigation was not very essential except some exceptional
cases. But about 75 per cent farmers mentioned about the problem of interrupted
electricity supply during irrigation period. Moreover diesel price was high, as a
result getting timely and sufficient irrigation were not possible.
d) About 90 per cent farmers used their own cultivated seed for next season. But
they could not maintain the quality of seed. Moreover, unavailability of quality
seed in the market was a great problem faced by the farmers. Only some large
farmers used modern technologies with quality seed purchased from well
reputed seed company. Adulterated seed reduced the average yield of paddy.
e) In the harvesting season supply of paddy remains higher than demand which
reduced the price of paddy. Small farmers had to sell their large portion of
paddy for instant cash. So they could not wait for better price in future.
f) Roads and highways were not well developed and also transportation facilities
were not good. For these reasons marketing cost was high. Farmers had to sell
their product locally at relatively lower price to the Farias and Beparies at the farm
gate.
g) Unavailability of agricultural subsidy and credit support. Financial institutes
were not available to provide credit support and local money lenders charged
high interest rate. Marginal farmers had not any access in the financial support
from banks and other NGO’s due to complex procedure of getting credit. About

46
20 per cent large farmers had access in the bank loan. Krishi Bank was only
agricultural credit lending institute in the study areas.
h) Farmers claimed that they had not access in government procurement program.
This is why they could not manage fair price in the time of harvesting.
i) Paddy producers reported that production of paddy needs proper doses of
fertilizers, water and other inputs, in addition to special care with respect to
timely agronomic practices. The production cost of paddy was high since inputs
requirement was high. It was difficult to manage sufficient capital on the part of
the producers. Most of them could not invest capital from their own sources.
Problems related to the availability of credit by farmers were that 90 per
cent of the fanners in all the farm sizes faced lack of capital as a production
problem whereas the problem was more acute to small farmers than
medium and the large farmers.
j) Most of the farmers were illiterate and unaware of the attack by pests and
diseases on their paddy. They were not well trained. Over 75 per cent of all
farmers reported that the diseases and pest attack adversely affected their paddy
production.
6.2.1.2 Value Adding Constraints
Most of the farmers were not acquainted with the value chain activities and its`
usefulness. Moreover, due to immediate cash needs, the farmers were not able to fetch
the advantages of value addition. The study found the following problems in paddy
value addition.

47
a) Value addition by storing paddy was risky due to price fluctuation. Paddy
market was very volatile as to why there was no surety of getting better price in
the time of di-storing.
b) Farmers had to make a distress sale. A large portion of paddy was sold at the
harvesting season to meeting up the family expenses and debt repayment.
c) Marketing cost was very high due to high transportation cost.
d) Lack of market information such as price at local and other markets. .
6.2.2 Paddy Trader
Paddy traders were relatively in better position. Farias added value with paddy
more than the farmers without taking any risk. Some Farias added value without
incurring additional marketing cost. They purchased and sold paddy in the same
market by just transferring paddy from farmer to the Beparies. Thus, without any
cost the Farias received profit in the same markets.
a) Rice millers and large Beparies purchased paddy directly from the markets and
also from the farmers. The small traders like Farias could not compete with the
big traders and also with the rice millers.
b) Bad infrastructure and transportation system increased the transportation cost.
Therefore, they could not make decision from where to buy and where to sell.
c) Lack of credit facility.
d) About 80 per cent paddy traders were not informed properly due to their
negligence. Moreover as a lag behind area Lack of market information was an
obstacle for effective value chain in the study areas
6.2.3 Rice Miller
Rice millers were the main actors in the rice value chain system. Millers added the
maximum value in paddy marketing. Rice millers could add extra value in three ways.
Firstly they purchased paddy thus, added the marketing costs. Then paddy was husked

48
in the mills and in this step milling costs were added with the paddy. Finally, rice and
bi-products were sold thus, selling costs added to rice. It was found that the rice miller`s
net margin or profit was the highest in rice value chain.
Although the rice millers were the main value adding actors but they also had to face
some constraints. The problems were as follows:
1. Rapid fluctuation of paddy and rice price and also rice market causing changes
in the costs and profit structure of the rice millers. About 90% rice millers
claimed that when paddy price increased then they could not increase rice price
because due to time lag of milling. So they had to incur loss or reduce profit
margin.
2. Lack of uninterrupted electricity supply compelled the millers to use high cost
fuel. Thus their costs increased but output price do not increase as per cost.
About 100% rice millers of both Dewangonj and Islampur upazilas claimed that
at least 10-12 hours of the day they had to depend on fuel for running the rice
mills. In the peak season electricity supply hampered their production more than
that of other times. As a result cost of milling increased but rice price could not
be changed.
3. Transportation system and infrastructure were not developed. So paddy
purchasing and rice selling cost both were higher than other regions of the
country.
4. About 80% rice millers reported that they had to face difficulties due to shortage
of paddy in the local markets. In some recent years individual mobile paddy
husking machine was used to husk paddy by travelling door to door. Some small
scale paddy traders (mainly Farias) supplied rice to rice retailers by husking
paddy from travelling rice mills. As a result most of the large rice mill cannot use
their capacity due to shortage of paddy in dull season and rainy season due to
bad natural calamity.

49
5. Paddy could not be stored for long time due to uncertainty of better price in
future. Moreover shortage of fund for storing rice millers could not store large
scale paddy.
6. Small rice millers claimed that they could not enter into government rice
procurement program.
6.2.4 Rice Trader
Traders were the final value chain actor in the rice value chain system. The
researcher has identified some constraints related to rice value addition. These
constraints were as follows:
a) Transportation cost was very high because transportation system was not
developed. But it was observed that roads were being repaired. According to the
report of rice traders when all the roads will be repaired transportation cost will
reduce about 10%-15% on an average.
b) Rice price was not stable. Therefore, rice traders could not take the advantage of
high price in off-peak season. Every week rice price fluctuated by 10%-15% rice
price fluctuate. For this reason rice traders could not store rice for long time.
c) Demand for rice was more or less same in a specific market. About 90% traders
mentioned that their everyday sales varied by 10% only. So traders couldn’t
increase scale of selling at any time.
d) Almost 100% traders mentioned about market risk. They had little support in
case of any uncertain situation e.g. distorted supply of rice due to strike, natural
calamities etc. Insufficient credit facilities were available. Therefore, traders
couldn’t increase their business activities.
Some common problems were identified after analyzing the constraints of all the value
chain actors high cost of paddy production and low product prices discouraged the

50
value chain actors. Credit facilities were limited in the study areas. Non-governmental
organization charged high rate of interest. Money lenders also charged very high
interest and were found 120 per cent annually. Grading and standardizing were not
familiar to the value chain actors. Poor infrastructure and transportation facilities along
with high fuel price were responsible for high transportation cost. As a result there was
huge variation of price in different markets. Market information was not available to the
producers and small traders.
6.3 Opportunities
Some opportunities were also identified. If the value chain actors were well financed
they could store their product for better price in future. Storing paddy and rice could
ensure availability of rice and reduce price risk. Modern technologies could reduce the
cost of production thus; marketing margin would increase, so transportation system has
to be improved to reduce transportation cost. This would reduce the marketing cost
which in turn would reduce consumer’s prices. But it has been seen that in the study
areas road and infrastructure were being developed gradually by government.
By discussing with the actors it was found that value chain would increase the volume
of business in the study area. Because value chain always mobilize business activities in
the form of various marketing functions. Farmers would have concerned about better
price of better quality of paddy. Good quality seed requirement would increase due to
increase in demand for better yield and price also. Moreover some other farmers would
try to store paddy for better price in off season. Thus a balance would make in demand
and supply that would stabilize the market price. Other actor including rice millers
would increase their volume of business if they got their required paddy or rice in the
local area. Thus all the actors involved in the value chain would ensure better income
with stabilized, fare and riskless price. Ultimate consumer would get rice in reasonable

51
price as increase in volume of business would decrease marketing costs of the value
chain actors.
So market information should be made available so that the traders can make decision
when and from where to buy and sell. Above all value chain concept should make more
clear and familiar to all the actors involved with rice value chain.
6.4 Conclusions
Value chain actors in the study areas were not concerned about the value chain activities
but the study found that the actors added value with the products (paddy and rice). If
the opportunities could have been utilized would be helpful to improve the rice value
chain.

52
CHAPTER VII
SUMMARY AND CONCLUSION
The main objective of the study was to analyze the value addition of rice in various
marketing stages. However the specific objectives of the study are as follows:
i) To estimate the value addition of rice by different actors in Jamalpur
district.
ii) To examine the activities related to value addition of rice by different actors.
iii) To identify the constraints and opportunities of rice value chain and to
recommend measures for further improvement.
The main issues covered were the value chain functions and cost structure of
paddy production, marketing at the post-production level, processing of paddy in
rice mills and bi-products, and finally marketing of rice and byproducts. The data
used for estimating production cost structure were based on the face to face
interview with farmers, paddy traders, rice millers and the rice traders of
Dewangonj and Islampur upazilas of Jamalpur district.
7.1 Summary
Farmers were the first value adding actors who produced paddy and supplied it to
the markets. They hardly covered their cost of production. Farmers of the study area
faced various problems. Therefore, average rice production was not very
satisfactory. Frequent flooding affected rice production in the study areas. About 65-
70% of the farmers in the western areas of both upazilas near the Jamuna River
mentioned the problem of early flood almost every year. Besides, some problems
were lack of input, lack of power supply for irrigation, high cost of inputs,
unavailability of modern technology, and lack of timely credit.

53
The paddy yield rate was found to be 50 quintal/acre of paddy. Total variable cost
of production was Tk. 21,250.00 which was about 75.22% of total cost. Labour cost
was the highest at about Tk. 14,850.00 which was 52.57% of total cost. Total variable
cost for producing per quintal paddy was Tk. 1062.50 that was 71.13% of total cost.
Average rental value for per acre of land for one season of rice was Tk. 7,000.00. Land
rent was about 24.78% of total cost. Gross cost was the sum of total variable cost and
total fixed cost. So, the gross cost was Tk. 28,250.00/acre for producing per quintal
paddy it was Tk. 1412.50.
Gross return from paddy and straw was Tk. 32,320.00/acre. Gross return was the
sum of return from paddy and straw where return from paddy produced was Tk.
28,000.00 and from straw was Tk. 4,320.00. Gross margin of per acre land was Tk.
11,070.00 and it was Tk. 4070.00 for per quintal paddy. Net margin or profit from
paddy production was Tk. 4070.00/acre. Net return was very small indicating that the
farmers can hardly cover their variable cost of production. If the rental value was
considered the net return could become very insignificant.
Among all the value adding actors, farmers got the lowest share. Farmers added
value through various activities e.g. cleaning paddy, drying, storing, marketing in
different time and in different markets and by processing (like seed, rice, etc.). After
meeting the family needs, some farmers stored paddy for selling when the prices
went-up. On an average paddy was stored for three months. By drying paddy
farmers added about Tk 105.00/quintal. Farmers could add Tk 100.00/ extra value if
they sold paddy in the markets instead of selling at farm gate. The percentages of
value addition through drying, marketing and storing were 7.97%, 7.64% and 6.94%,
respectively. That means on an average farmers add 7.13% value with paddy.
Paddy traders were second types of actors in rice value chain. Mainly the Farias and
Beparies were the paddy traders. Paddy traders collected paddy from local farmers

54
of Islampur and Dewangonj upazila and supplied to the rice millers in the same
areas. Major part of paddy was assembled for selling in local markets named
Guthail bazaar, Aamvodra bazaar, Battazor, Modon bazaar etc. On top of that, some
large rice millers collected paddy from Dinajpur, Rangpur, Naogaon, Bokshigonj etc.
Like farmers, the paddy traders were engaged with different activities such as
grading, sorting, storing, drying etc. Paddy traders assembled paddy from the
farmers and supplied to other large traders or the millers. Transportation cost,
loading, unloading etc. were the value adding activities of paddy traders.
Total marketing cost of paddy was 53.03 Tk. /quintal which was about 57% of value
addition. Among the variable costs transportation cost was the highest which was
about Tk. 23.75/quintal. Total variable cost was Tk. 48.91 (92.24% of total cost) and
total fixed cost was Tk. 4.11 (7.76% of total cost). Average purchase price of paddy
was Tk. 1,425.00/quintal and average selling price of paddy was Tk.
1510.83/quintal. Value addition by the paddy traders was Tk. 85.83/quintal which
was 6.03% of total.
Rice millers were the third types of actors in rice value chain. They were the largest
value adding actors. They purchased paddy from the markets or farmers through
their own agents. After collecting paddy, rice millers crushed the paddy for getting
rice as the main product and also other bi-products like bran, husk and broken rice.
Finally the millers sold their rice and other bi-products to the rice traders and in
some cases also to the retailer.
Transportation, loading/unloading, millings, bagging etc. were mainly the value
adding activities of rice millers. For milling paddy, all value adding activities such
as boiling, drying in the sun, husking, bagging, storing etc. were done. Labour cost
of milling, fuel/electricity cost, managerial cost, bagging cost, storing cost etc. were
the main sources of value addition for husking paddy.

55
Problems of rice millers were shortage of electricity, high fuel cost, high labour cost,
unavailability of labour, shortage of paddy supply, high transportation cost, poor
infrastructural and transportation system etc.
Rice millers had to incur cost in three stages i.e. paddy purchasing, milling and rice
and bi-product selling. Among these, marketing cost of paddy was the largest about
Tk. 76.95/quintal. This was 24.52% of total cost. Total milling cost was Tk.
67.38/quintal of which total variable and fixed cost was cost was Tk. 51.88/quintal
and Tk. 15.15/quintal, respectively. Milling cost was 21.47% of total cost. Total
selling cost of rice was Tk. 36.73/quintal which was 11.71% of total cost. From
paddy purchasing to selling rice, millers added value of about Tk. 313.78/quintal.
Rice traders were the last actors of rice value chain. In the study area there were
Beparies and retailers. Rice traders had limited scope for value adding. Rice retailers
do not get opportunity to fluctuate price of rice in the same market areas. But they
have opportunities to fluctuate rice price in different markets. It has been seen that
retail price of rice in Islampur upazila was about 4-5% lower than the retail price of
Dewangonj upazila. It has found that in Islampur upazila the number of rice mills
was more than Dewangonj upazila and for this reason supply of rice was more in
Islampur upazila than Dewangonj upazila.
Transportation cost was the main cost of rice trader. The average transportation cost
was Tk. 21.00/quintal. Total marketing cost of rice was Tk. 55.84/quintal. Rice
traders added about Tk. 165.42/quintal. Purchasing and selling price of per quintal
rice was Tk.2710.42 and Tk. 2875.82, respectively. Net margin or profit from per
quintal rice was Tk. 109.58 (table 4.9).
In the long value chain of rice maximum value added by rice millers was about
23.23% or Tk. 409.30 per quintal and lowest value added by rice traders about 6.11%
or Tk. 165.40 per quintal (table 4.9).

56
7.2 Conclusion
The findings of the study reveal that the producers could not manage expected net
margin due to high cost of production and low output price. Most of the production
was consumed by the farmers. Some large farmers stored paddy and later sold in
the market. Farmers disposed their rice for family consumption, gift to the friends
and relatives, sale and used as a seed. Moreover, a large number of people were
involved in the production and marketing activities. So the farmers and
intermediaries could certainly be benefited financially if production and marketing
system of rice were well developed.
The price became very low during harvesting period while it became too high before
planting period. Frequent price fluctuations create uncertainty about the market
price and enhance risks in rice production. For stabilizing rice prices, forecasting of
prices and production should be made in time before sowing, so that the farmers can
adjust rice acreage accordingly. By effective implementation of the idea of value
chain rice producers could receive the expected return. Value chain shows the areas
in where the cost could be reduced. Market information is very essential for effective
rice value chain. Value chain ensures the quality of product and reduces price thus,
ensuring the expected profit level of the paddy traders.
Like the whole Bangladesh the production of rice in the study areas was greatly
influenced by post-harvest problems such as storage, price fluctuation; demand for
rice etc. Rapid fluctuation of rice price was identified. Rice millers were not
interested to expand their business because of some constraints. Electricity
unavailability and labour shortage and high labour wage were the main problems.
There were some opportunities to improve the rice value chain. The opportunities of
the value chain were:
i. Value chain actors could imagine about the market and forth coming
opportunities having a bird’s eye view of the sector;

57
ii. All types of value chain actors could give attention to detail at all phases of the
value chain;
iii. Linking sector`s stakeholders and their initiatives;
iv. Providing ways for government involvement when clear issues were
identified;
v. Building an organized and effective sector environment;
vi. Increasing buyer confidence; and
The farmers were the first actor in rice value chain, but they did not receive fair price.
They have limited scope of value addition. The priority attention by the government
should be given to the farmers so that they can contribute largely in the value chain.
On the basis of the findings, the following recommendations were made for the
improvement of existing production, marketing and storage system.
i. Government should provide sufficient credit and subsidy to the farmers and
other value adding actors.
ii. In the time of harvesting minimum price of paddy should be declared by
government to ensure that they can cover their production cost.
iii. Government would get important information and find the way to monitor
the market to lessen the price fluctuations.
iv. Value chain analysis is an effective source of market information. So the
market information obtained from it should be made available and easily
accessible for all value chain actors.
v. Uninterrupted electricity supply should be made available for the paddy
producers in the time of irrigation season and also for rice millers to reduce
their cost.

58
vi. To keep rice price at reasonable range unnecessary prolongation of value
chain should be eliminated. For example if the farmers have the opportunity
to sell their paddy directly in the market or to the rice millers that would
reduce the extra value added by Farias and Beparies.
vii. Infrastructure and transport system should be developed to keep paddy and
rice price lower. But if price become lower then farmers would occur loss. In
so input costs for paddy production should be reduced or subsidized.
viii. Diversified use of rice and processing technology should be made available
for the farmers.
ix. Government should finance the farmers in the time of paddy cultivation
period and also after harvesting. This would reduce the price fluctuation and
also ensure the demand supply equilibrium. As most of the farmers could not
store their paddy due to need of cash money. As a result in the peak season
there is an excess supply of paddy i.e. rice. During off season there occur
shortages of paddy. As why government could not assume about the supply
of paddy and also demand for. This would reduce id the farmers were capable
to store their paddy up to a certain period. That would ensure better price for
the farmers in the time of harvesting and also could ensure comparatively
lower price in the off season.
x. Finally value chain actors are needed to informed about the value chain
system and also other actors should have proper knowledge about this. If the
actors were informed about value chain that would make the rice market
more efficient and that would give good return to all kind of actors. Moreover
grading system would be introduced by the rice millers to maintain the rice
quality also.

59
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