Focus on Pakistan

by Chris Lyddon
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Pakistan is one of the world’s most important exporters of rice, making the crop vital to its economy, but the staple at home is wheat. Water, whether it’s too much in the form of floods or shortages when it’s needed for irrigation, is a major issue.

The International Grains Council (IGC) put Pakistan’s total grain production for 2011-12 at 28.2 million tonnes, up from 27.8 million the year before. Its wheat crop is estimated at 24 million tonnes, up from 23.9 million. The sorghum crop is put at 200,000 tonnes, up from 100,000 tonnes.

The Council predicts a fall in the wheat crop for 2012-13. “Seasonally warm weather and light precipitation benefited the crop in Pakistan, where output is projected at 23.5 million tonnes,” it said.

Total grain imports in 2011-12 are put at an unchanged 100,000 tonnes. Wheat exports are put at 1.2 million tonnes, down from 1.3 million.

Rice production in 2011-12 is put at 7.2 million tonnes, up from 4.8 million, a low figure which was affected by floods, while rice exports are put at 3.7 million tonnes, up from 2.8 million, enough to make Pakistan one of the world’s leading rice exporters.

The USDA’s attaché, also predicting a fall in wheat output in 2012-13, noted a declining trend in area, down by 5% in two years. “Government reluctance to raise the procurement price in accordance with the increase in input prices and recent trend of early sowing of cotton (February-March) are the main reasons for the reduction in the planted area for wheat,” it said.

“Last year, the Government of Pakistan procured 6.4 million tonnes of wheat from the local production but has yet to announce a procurement target for this year’s harvest,” the attaché’s annual report, published at the end of March, said. “Trade sources estimate that Pakistan exported 1.5 million tonnes in MY 2010-11 and around 800,000 tonnes in MY 2011-12.”

The attaché said that wheat exports in 2012-13 are forecast at 300,000 tonnes, mainly to Afghanistan. “Pakistan’s wheat prices are presently 10% higher than the world prices and the Government of Pakistan is considering a proposal for subsidizing wheat exports,” the report said.

There is a problem with irrigation. “Since the completion of the nation’s irrigation system in the 1970s, demand for water has increased by more than 50% while storage capacity has decreased by about one-third due to silting,” the attaché said. “This has left per capita water availability at a fraction of its earlier levels. As a result, chronic shortfalls in water available for irrigation are expected to impose an increasingly larger constraint on Pakistan’s agricultural prospects.”

During 2011, Pakistan experienced floods for the second year in a row. “But unlike 2010’s catastrophic floods, 2011 flooding was localized and restricted to lower Sindh and affected mostly rice and cotton crops in the flood affected areas, the attaché said. “The rice crops in Punjab and upper Sindh remained unaffected.”

The attaché’s figure for Pakistan’s rice production in 2012-13 is 6.8 million tonnes. “The estimate of Pakistan’s rice exports in MY 2010-11 is increased 28% to 3.2 million tonnes, mainly due to the increased demand and better prices in the world market,” the report said. “Pakistan’s rice exports also benefited from India’s ban on rice exports, earlier in the marketing year.”

“MY 2011-12 rice exports are estimated at 3.7 million tonnes, 3% higher than last year’s export estimate. Rice exports in MY 2012-13 are projected at 4 million tonnes based on the expectation of a good harvest,” the attaché said.

HIGH WHEAT CONSUMPTION

The attaché explained that wheat flour, called ‘atta’, is a staple, supplying 72% of calorific energy in the average diet. “Pakistan has a variety of breads, often prepared in a traditional clay oven called a tandoor,” the report said. “The tandoori style of cooking is common throughout rural and urban Pakistan and has strong roots in the region.”

Per capita wheat consumption is estimated at around 124 kilograms a year, which is among the highest in the world.

“Pakistan’s wheat milling industry is privately owned,” the report said. “There are about 1,000 flour mills in Pakistan which meet the consumption needs of about 40% of the population, with the balance met by on-farm consumption.”

The main milled products include “midda” (a 72% extraction flour used for loaf bread and other products) and “atta” (an 82% extraction flour used for flat breads). “The disbursement of government-owned wheat to flour mills is managed in an effort to ensure that sufficient wheat is available throughout the year,” the report said. “Consumer preference is shifting from higher whole grain to lower extraction flour and traditional flat bread to western-style, loaf bread, particularly in urban areas where western bread is viewed as a convenient breakfast food.

“Traditional home-ground flour is also losing favor to commercially milled flour,” the report said. “Demand for specialized products is also increasing in response to changing lifestyles which are more receptive to western-style fast food chains recently introduced into Pakistan.”

The Pakistan Flour Mills Association has 915 flour mills as members. It was formed in 1949 under the name of Punjab Flour Mills Association. “During the last 60 years, there has been tremendous increase in the milling capacity in Pakistan,” it says on the Pakistan Flour Mills Association website. It started with 19 mills. The 915 mills now registered with the association have a daily capacity of 77,275 tonnes.

RICE NOT A STAPLE

Rice is an important crop to the Pakistani economy, but not a staple food. “Rice in Pakistan is a monsoon crop and mostly sown in the irrigated area adjacent to Indus River and its tributaries,” the attaché explained. “The ultimate production level is influenced by the extent and spread of monsoon rains.”

“About 11% of Pakistan’s total agricultural area is planted to rice,” it said.” It is the third largest crop in Pakistan (after wheat and cotton), and is grown under diverse climatic conditions. Unlike other South and South Asian countries, rice is not considered a staple crop in Pakistan.”

“Traditionally about 45% of the crop is used for local consumption, with the balance exported,” it said. “Pakistanis, in general, prefer the higher priced Basmati rice which is mainly consumed by the more affluent. IRRI (International Rice Research Institute) and other varieties are largely consumed by the less affluent due to the price differential.”

OILSEEDS NEGLECTED

In a separate report, the attaché explained how oilseeds have been left behind as the government has made wheat a priority. “In an attempt to ensure food security, Pakistan’s agriculture policy is largely focused on the enhancement of wheat production,” it said. “Oilseed production typically receives less attention compared to crops like wheat, rice, cotton and sugarcane.”

The Pakistan Oilseed Development Board was established in 1995 under federal control. But in 2011 its functions were delegated to the provinces. “So, at present, there is no central authority to promote domestic oilseeds and to provide a sound regulatory and policy framework to this sector,” the report said. “There is no support price mechanism for oilseeds and the Government of Pakistan does not procure oilseeds. The lack of availability of quality seed, poor coordination among research organizations, lack of suitable machinery for planting, harvesting and threshing operations, improper dissemination of site-specific production technologies and lack of research-based crop management are some of the major constraints being faced by the oilseed sector.

“Given the poor quality of local oilseeds and logistical hurdles of transporting oilseeds to crushing facilities, the domestic crushing industry has focused more on importing quality oilseeds rather than providing incentives to local growers for increased domestic production.”

It forecast 2012-13 vegetable oil imports at a record 2.3 million tonnes, 4% up on the previous year. “Nearly 73% of Pakistan’s domestic consumption of vegetable oil is met through imports, 8% of which is comprised of palm oil,” it said.

2012-13 oilseed production is forecast at a record 5.8 million tonnes, up 8% from the estimated 5.7 million harvested the year before. Imports of oilseeds are forecast at 1 million tonnes (80% rapeseed and 19% sunflower seed).

Key Facts

Capital: Islamabad

Population: 190,291,129 (July 2012 est.)

Religions: Muslim (official) 95%, (Sunni 75%, Shia 20%), other (includes Christian and Hindu) 5%.

Location: Southern Asia, bordering the Arabian Sea, between India on the east and Iran and Afghanistan on the west and China in the north

Government: Federal republic. Chief of state: President Asif Ali Zardari (since Sept. 9, 2008); head of government: Prime Minister Syed Yousuf Raza Gilani (since March 25, 2008).

Economy: Decades of internal political disputes and low levels of foreign investment have led to slow growth and underdevelopment in Pakistan. Agriculture accounts for more than one-fifth of output and two-fifths of employment. Textiles account for most of Pakistan’s export earnings, and Pakistan’s failure to expand a viable export base for other manufactures has left the country vulnerable to shifts in world demand. Official unemployment is 6%, but this fails to capture the true picture, because much of the economy is informal and underemployment remains high. Over the past few years, low growth and high inflation, led by a spurt in food prices, have increased the amount of poverty. The UN Human Development Report estimated poverty in 2011 at almost 50% of the population. Inflation has worsened the situation, climbing from 7.7% in 2007 to more than 13% for 2011, before declining to 9.3% at year end. As a result of political and economic instability, the Pakistani rupee has depreciated more than 40% since 2007. The government agreed to an International Monetary Fund Standby Arrangement in November 2008 in response to a balance of payments crisis. Although the economy has stabilized since the crisis, it has failed to recover. Foreign investment has not returned, due to investor concerns related to governance, energy, security, and a slowdown in the global economy. Remittances from overseas workers, averaging about $1 billion a month since March 2011, remain a bright spot for Pakistan. However, after a small current account surplus in fiscal year 2011 (July 2010-June 2011), Pakistan’s current account turned to deficit in the second half of 2011, spurred by higher prices for imported oil and lower prices for exported cotton. Pakistan remains stuck in a low-income, low-growth trap, with growth averaging 2.9% per year from 2008 to 2011. Pakistan must address long standing issues related to government revenues and energy production in order to spur the amount of economic growth that will be necessary to employ its growing population. Other long-term challenges include expanding investment in education and healthcare, and reducing dependence on foreign donors.

GDP per capita: $2,800 (2011 est.); inflation: 13.7% (2011 est.); unemployment 5.6% (2011 est.).

Currency: Pakistani rupees (PKR); 90.8 rupees equal 1 U.S. dollar (April 19, 2012).

Exports: $25.35 billion (2011 est.): textiles (garments, bed linen, cotton cloth, yarn), rice, leather goods, sports goods, chemicals, manufactures, carpets and rugs.

Imports: $35.82 billion (2011 est.): petroleum, petroleum products, machinery, plastics, transportation equipment, edible oils, paper and paperboard, iron and steel, tea.

Major crops/agricultural products: Cotton, wheat, rice, sugarcane, fruits, vegetables; milk, beef, mutton, eggs.

Agriculture: 20.9% of GDP and 45% of the labor force.

Internet: Code: .pk; 340,834 (2011) hosts and 20.431 million (2009) users.

Source: CIA World Factbook

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