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Pakistan Agriculture Overview 

Cashing in on agriculture’s expansion potential
ECONOMY WATCH

The forthcoming budget for 2004-05 should increase the outlay for development strategies for the farm sector and related infrastructure
in order to set the stage for Pakistan to become a major exporter of cash crops and value-added agribusiness products over the next few years to take advantage of the rising trend in world food prices

Cashing in on agriculture’s expansion potential
World food prices are expected to rise sharply over the next three or four years if present trends continue, says a report released last week by the Earth Policy Institute (EPI), an independent Washington-based research group.

The report says four successive shortfalls in annual grain harvests have reduced the world's carry-over stocks to their lowest level in 30 years, amounting to only 59 days of consumption. The relative shortage in stocks is partly reflected in the fact that global rice prices are at a five-year high, while wheat is fetching the highest price on the global market since 1997.

The last time global stocks were so low in the early 1970s, wheat and rice prices doubled. A similar pattern appears to be asserting itself now, according to the EPI, as the prices of basic food commodities are on the rise.

"If the estimated shortfall of 60 million tons materialises, it will take the world into uncharted territory," notes Brown. "Either world stocks will drop by 12 days of consumption, falling to an all-time low of 47 days, or food prices will rise..."

As a big producer of food crops and other farm produce, Pakistan has the potential to cash in on this rising trend in prices by formulating and implementing strategies aimed at making the country a major exporter of cash crops and value-added agribusiness products.

For that to happen, however, the government needs to substantially increase budgetary spending for programmes and projects in the agricultural, rural development, irrigation, horticulture, livestock, small and medium enterprises and trade promotion sectors.

A beginning can be made, in the forthcoming budget, by increasing outlays for the farm and agribusiness sectors.

China is now a big importer of farm produce, with the rising demand being fuelled partly by the growth in population and partly by rising per capita income levels and high GDP growth that has made the Chinese economy the fastest growing major economy in the world over the last twenty years.

According to one estimate, China's annual import of farm produce has exceeded $ 10 billion a year in recent years. This rising trend in imports is expected to continue, making China a big potential market for Pakistani farm produce.

The two countries enjoy excellent relations and China is now looking to import large quantities of fruit and other farm produce from Pakistan. According to Chen Neiz Wge, a Chinese agricultural expert who visited Pakistan last year, China's big consumer market could become an important destination for Pakistani mangoes, for example.

Pakistan produces the best mangoes in the world, as well as a wide range of other top quality fruit. A team of Chinese experts is due to visit Pakistan this month for a final inspection of the arrangements to import mangoes from this country.

China has already agreed to issue a quarantine certificate, allowing the import of Pakistani mangoes. The Chinese Quarantine and Quality Control Bureau have declared Pakistani mangoes pest-free and of good quality.

Cashing in on agriculture’s expansion potentialThe pest-related concerns of China have been adequately addressed in a mutually agreed protocol between the two countries, opening up a huge market in China for Pakistani mangoes.

Last year, for the first time, pears grown in western China were transported overland to Pakistan, using the KKH (Karakoram Highway). The same route can readily be used to transport Pakistani mangoes and other fruit to western China.

Fruit exports to China (not just mangoes but many other varieties as well, including citrus fruit) could become an important source of foreign exchange earning for Pakistan, with volumes eventually running into hundreds of millions of dollars a year. But several problems need to be addressed first.

According to an interim report prepared by Rural Partnerships Limited, in association with Enterplan Limited and SEBCON (Pvt) Limited under the Asian Development Bank-financed Technical Assistance TA 4058-PAK Pakistan Agribusiness Development Project, "The overall trends that are apparent for fruit production in Pakistan are that while the total area of production has increased, the overall production has decreased."

The report says, "This is largely due to the problems in Balochistan with the drought and subsequent water shortage that has seriously cut the yields of apples, peaches, apricots and grapes. Exports of fruit products continue, but production fails to take account of this segment of the market which has potentially high value, but stringent quality requirements."

Cool chain distribution and cold storage of fruit and vegetables is another problem that needs to be urgently addressed in the forthcoming budget. But accurate data on the current cold store numbers and capacities throughout the country are not available, with the exception of Punjab.

Also, much of the existing inventory of cold store equipment is "dominated by old designs prior to the influence of thermal efficiency and energy conservation being fully appreciated," says the Rural Partnerships' report.

The drought in Balochistan and other parts of the country eased somewhat last year, with better-than-average rains. But this year the sowing season of rice - one of the country's major export crops - has been delayed for a month in Sindh following an estimated 50 per cent water shortage in the province's share of river flows. As reported in The News on Friday, Sindh had sent its irrigation water indent of 58,000 cusecs (cubic feet per second) last week to the Indus River System Authority (ISRA), in accordance with the water accord of 1991, but the inflow of water at Guddu Barrage last week was only 30,124 cusecs.

The report noted that the sowing season of rice started at the end of April in the lower Sindh districts of Thatta and Badin, but had not yet begun in other areas because the major source of water supply - the Kalri Baghar Feeder Canal, which offtakes from the right bank of the Indus at Kotri Barrage - was discharging only 1,000 cusecs of water.

Last year, Sindh produced a bumper crop of rice after it was sown on an area of 551,000 hectares against the target of 500,000 hectares. This year, however, the provincial government has set the target of rice cultivation at 500,000 hectares, with a production target of 1,297,000 tonnes, as against 1,433,000 tonnes achieved last year.

So Sindh is expected to have 136,000 tonnes less rice available for export this year. Yet the provincial government is discouraging the cultivation of rice by providing subsidized cottonseed to farmers to replace it. "The decision has been taken due to the unavailability of water," a spokesman for the agriculture department told The News.

The report noted that as a result of this policy, last year some 18,000 hectares of land - in Sindh's Larkana, Jacobabad and Shikarpur districts - came under cotton cultivation after the provincial government provided cotton seed to farmers at 50 per cent subsidized rates. "This year, cotton cultivation in the province will be raised to 25,000 hectares," the agriculture department spokesman said.

Cashing in on agriculture’s expansion potentialThe prospects for Pakistan's cotton crop this year look better than last year, due to a projected increase in acreage. Pakistan expects to harvest 10.72 million bales (170 kg each) of cotton in the 2004-05 crop year, against 10 million bales last year, a government official said on Friday. Textile products are the country's biggest export earner, accounting for more than 60 per cent of all exports.

Expectations of better water supply during the cotton sowing season also encouraged hopes of higher output this year, along with a near five per cent increase in land under cultivation, Qadir Bux Baloch, Cotton Commissioner at the federal Ministry of Food, Agriculture and Livestock (MINFAL), told the Reuters news agency on Friday.

"The area under cotton is set at 3.14 million hectares (7.85 million acres) this year, up from 2.995 million hectares last year," Baloch said. He said another reason for the higher crop target was because many farmers were switching to cotton after a sharp increase in prices.

As the Reuters report noted, "A pest attack and heavy monsoon in September (last year) sent domestic prices to record highs and resulted in last year's crop, some of which is still being harvested, falling below a target of 10.55 million bales."

Despite being the world's fourth-largest cotton producer, Pakistan needed to import around 1.6 million bales of high-grade cotton in fiscal 2003-04 to meet the growing demand in local textile mills. For the first time in years, the mills imported at least 300,000 bales of cotton from India to bridge the supply gap in the local market.

The irony, however, is that while domestic prices of cotton in Pakistan soared to record highs last year, the price of raw cotton in the international market has hovered at the 60 US cents per pound level in New York since the 1980s.

Nothing better illustrates the need for a big agricultural producer like Pakistan to focus on value-addition in its effort to boost export earnings and promote higher levels of GDP growth. Agribusiness value-addition strategies - not just in the cotton sector but right across the board of the whole agricultural sector - should therefore be one of the key elements of the forthcoming budget.

By Kaleem Omar

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