While the government of Bangladesh continues to provide strong support to rice producers, its commitment to wheat farmers seems less firm. Some policymakers have gone so far as to question whether support to wheat should be scaled back, citing studies showing that wheat production is unprofitable and represents an inefficient use of resources. But is wheat production in Bangladesh really unprofitable for farmers and inefficient for the country? These are important questions, because until they are resolved, policymakers will have difficulty knowing whether farmers should be encouraged to further increase rice production or to diversify into wheat and other crops.

Researchers from the International Food Policy Research Institute (IFPRI) and the International Maize and Wheat Improvement Center (CIMMYT) recently examined the arguments for and against wheat production in Bangladesh. In Wheat Production in Bangladesh: Technological, Economic, and Policy Issues, Research Report 106, Michael L. Morris, Nuimuddin Chowdhury, and Craig Meisner used a combination of financial and economic analysis to compare production of two irrigated crops (wheat and boro rice) and three nonirrigated crops (wheat, oilseeds, and pulses) in five wheat-growing zones. Their goal was to determine the extent to which government policies and market failures may have driven a wedge between financial and economic profitability. Whenever financial and economic profitability diverge, farmers experience distorted incentives, and policy reforms may be necessary to encourage them to act in ways that are consistent with efficiency objectives.

Although rice is still the preferred food for most Bangladeshis, wheat consumption levels have risen rapidly, spurred in part by the government’s policy of relying on wheat imports during years of domestic production shortfalls. Concerned by the rising flow of wheat imports (both commercial imports and food aid), in the early 1970s the government introduced measures designed to encourage farmers to increase domestic wheat production. Over time, these measures produced results: area planted to wheat increased 15 percent per year from a low base in the late 1970s, and yields rose 3 percent per year (Figure 2). Wheat production growth slowed late in the 1980s, however, as the increased availability of irrigation allowed farmers to shift to more profitable boro rice.

The results of the profitability analysis by and large supported the conventional view that boro rice is extremely profitable relative to other crops. Sensitivity analysis further indicated that boro rice is likely to maintain its edge as long as Bangladesh remains a net importer of rice. Boro rice production will decrease in profitability, however, as rice self-sufficiency draws near and domestic rice prices begin to fall (this is already happening). Currently, boro rice is the most profitable crop in four of the five wheat-growing zones identified by the authors. In the South Central Zone, however, where much of Bangladesh’s wheat production is concentrated, irrigated wheat is the most profitable crop (Figure 3).

The relative efficiency of alternative production activities was determined by calculating the value of the domestic resources required to generate or save a unit of foreign exchange. The efficiency rankings were generally consistent with the results of the profitability analysis. On irrigated plots, boro rice production is most efficient in the Northwest, North Central, and Southwest zones, irrigated wheat production is most efficient in the South Central Zone, and oilseeds production is most efficient in the Northeast. On nonirrigated plots, wheat production represents the most efficient use of resources in all zones except the Northeast, where oilseeds continue to have an edge.

The authors tested the sensitivity of these results to changes in the values of key technical and economic parameters to determine whether the current efficiency rankings can be expected to prevail in the long run or whether they are likely to change as the result of future changes in technology, global prices, or both. The rankings were found to be generally robust, although they could be affected by changes in some zones. For example, a 10 percent decline in world wheat prices would allow pulses to displace wheat as the most efficient production alternative in many nonirrigated areas.

While this finding comes as no surprise, the report also highlights an important reality that is frequently overlooked in the policy debate. Boro rice cannot be grown everywhere. Differences in land elevation and soil texture matter. Soil samples and other measurements taken at the plot level indicate that farmers plant boro rice predominantly in heavy soils located in low-lying areas well-served by irrigation infrastructure. Boro rice is rarely grown in lighter soils located in more elevated areas, and it is never grown where reliable irrigation services are absent. In areas that are unsuited to boro rice production, wheat production not only is often the most profitable alternative from the farmer’s point of view, but it frequently also represents an efficient use of domestic resources.

The report also points out that crop choice decisions in Bangladesh are often motivated by food security considerations. Many rural households produce wheat in order to avoid seasonal food shortages: two-fifths of the farmers surveyed indicated that they grow wheat to ensure that food is available during the “hungry season” prior to the rice harvest. These households hold back part of their wheat harvest for home consumption to tide them over this lean period. Thus, another reason for encouraging wheat production is the use of wheat for household food security by poor families who cannot afford to purchase food.

The authors describe a number of policy changes that could help stimulate increased wheat production, assuming Bangladeshi policymakers decide that increased wheat production is desirable. For example, policies that currently discriminate against wheat production could be reformed. At present, wheat food aid and subsidized commercial wheat imports keep wheat production down by suppressing domestic wheat prices. Revising food aid policies—for example by substituting other commodities for wheat or by monetizing food aid—would help raise wheat prices received by Bangladeshi farmers. This would strengthen incentives to grow wheat domestically and lead to a reduction in Bangladesh’s dependence on imports.

Changes in agricultural research policy could also play an important role in further improving the competitiveness of wheat. Most of the improved wheat varieties that have been released in Bangladesh are best suited for irrigated production conditions; improved varieties showing good adaptation to rainfed areas are still lacking.

Finally, agricultural extension policies could be improved. At present, there is still a large difference between the wheat yields being achieved in experimental plots and the wheat yields being achieved in farmers’ fields. The size and persistence of this “yield gap” suggests that there is still scope for improving farmers’ management skills.

These results from Bangladesh have important implications for other countries that are seeking to maintain productivity growth in the face of agricultural intensification. Many developing countries resemble Bangladesh in having experienced an uneven pattern of productivity growth during the post–Green Revolution period. Maintaining productivity growth in agriculture will depend on increasing productivity among secondary crops and “niche” commodities that exploit specific locational and seasonal advantages. Economic analyses conducted at a high level of aggregation will often miss these potential sources of growth. This study of wheat in Bangladesh illustrates how seasonal and locational details matter, and it shows how policy analysis carried out at an appropriate level of disaggregation can help in identifying efficient production activities that would otherwise go unnoticed.