We can divide the causes of price hike in two major/ broad categories1. External causes 2. Internal causes.

External Causes: The main External cause was the increased price of rice in world the market. In 2007, price of rice had gone up tremendously. This directly affected our market of rice. There are many causes behind this. They are- bio fuels, food inflation, trade restrictions, global stocks, energy prices, financial crisis, global supply etc. There are also short term and long terms factors also behind this price hike. Short term factors were temporary export bans and restrictions implemented by several major and mid-level rice exporters panic buying by several large rice importers weather-related problems in specific growing areas a sharp decline in the value of dollar in fall 2007 a shift of funds into commodities from stocks and real estate in 2007 that added to price volatility and may have temporarily boosted prices. And the long term factors were Sharply rising incomes in developing Asian countries Very high prices for other foods Extremely high nominal fuel and fertilizer prices The elimination of excess global rice stocks Negligible yield growth for rice over the past decade A massive increase in the production of bio-fuels in recent years.

Trade restrictions: Export bans, restrictions, and taxes implemented by several major rice exporting countries beginning early in the fall of 2007 were significant factors behind the rice price spike in the winter. In late September 2007, Vietnamtypically the second-largest rice-exporting country placed a ban on commercial sales. By mid-summer 2007, Vietnam was already overcommitted for calendar 2007 in the global export market. Additional sales by Vietnam in 2007 would have reduced the amount of rice available for its large domestic market to a level deemed by Vietnamese policy-makers to be too low. Then, in early October 2007, facing rapidly rising food prices, Indiatypically the thirdlargest rice-exporting countryannounced a minimum export price (MEP) for all categories of rice except for its premium basmati rice (a high-quality aromatic rice). India exports most of its basmati rice. Earlier that summer, except for parboiled rice, India was making few sales of non-basmati rice. At an initial $425 per ton, the MEP was an effective ban on non-basmati exports, which typically account for about two-thirds of Indias total rice exports. India repeatedly raised its MEP in the fall of 2007 to restrict non-basmati exports. **Bangladesh collects mainly non-basmati rice from India and Vietnam.

Panic buying increase the price: It was not just the exporters that were responding to the rapid rise in food prices. By early spring 2007, several major rice importers, primarily the Philippines and big buyers in the Middle East and Africa, were in the market for extremely large quantities of rice. They were attempting to lock in prices for several months of supplies before prices rose even further in order to assure their consumers of adequate supplies, and dampen domestic food price increases. Dollar price decreased: Every transaction is made by US dollar. In 2007, value of dollar decreased. As a result, we needed more dollars to import rice. So the price of the imported rice had gone up at 36+. Because of this price of our domestic growing rice also gone up, as the government were not able to supply the imported rice in low price.

Bio-fuels: America increased the production of bio fuels which greatly affected the world food price. Internal causes: There were several internal reasons behind this price hike of rice in 2007. They are1. Natural disaster 2. Political incapability 3. Syndicate 4. Raised production costa. Scarcity of Fertilizer b. High diesel price Natural disaster: Bangladesh is a self independent country in producing rice. But in July 2007 the countrys 64 districts was affected by floodwater and an estimated 14 million people are suffering due to the flooding. The floods covered over half the country and in some places it was the worst seen in sixty years. After three months, in 15 November, Bangladesh was hit by another calamity, this time Cyclone Sidr. News agencies were reporting awful scenes in southern Bangladesh: bloated corpses bobbing in swollen rivers and flooded paddy-fields. The storm also destroyed some 600,000 tonnes of rice. This two natural monster hampered our production greatly. As a result we had to face the shortage of rice.

Political incapability: In 2007, Bangladesh was run by caretaker government, who has a little control over market price. As they have no connection with the people who control the market. They had also lack of knowledge in running a country. They did not take any steps to collect rice in the first place. So when Bangladesh was affected by natural disaster, we had not enough stock of rice.

Again, political parties didnt try to help the government to stop the price hike of rice because they needed an issue to protest against caretaker government. They influenced the corrupted business men to increase the price more and more. Syndicate: In Bangladesh production cant control the market price, middleman controls them. They brought paddy in relatively lower price from farmers and sold them in much more higher price in market. In 2007, government was government offered 19 tk. Per K.G. where middlemen offered higher. So government failed to collect enough rice and paddy where middlemen stored a major percent. As a result, supply decreased and price gone up. Again, world price for rice has gone up, so it was impossible for government to collect rice and sold them in open market along with the demand in low price. Middlemen made an syndicate for controlling the price for making unlawfully high profit. High production cost: In 2007 production cost also increased. Two main factors boosted the price up. a. Scarcity of fertilizer: in 2007, the supply of urea had gone down. Farmers didnt get urea at normal price. They had to buy it in higher price. The reason behind this wereproduction of urea decreased and price of the raw material of urea also increased. Government couldnt import it timely as well. The middlemen also play a vital rolethey store urea and demand extra price. b. Diesel price: diesel price has also gone up in the world. Government tried to give subsidy on that but real farmers didnt always get that. Many smuggle the oil into open market in high price.