AGRICULTURE CRISIS IN FY08

(A MYTH OR REALITY???)

MULAZIM ALI KHOKHAR,
RESEARCH ANALYST, PAGE

Mar 10 - 16, 2008

INTRODUCTION

Agriculture sector contributes, directly or indirectly, more than 50% of exports for the country, as is the main source of raw material for textile, sugar, dairy, leather, and others. It represents about 21% of GDP, employees 43% of workforce and is the living source of approximately 60% of our population mainly concentrated in rural areas.

Major products of the sector include wheat, cotton, rice, sugarcane, potatoes and some grans and mungs. The year saw a huge inflation and reduced supplies of the main products; wheat and cotton, which not only embody the local chaos but also the increasing trade gap due short exports. The cotton shortage has hit the textile production and will subside the industrial growth in the country GDP.

INCENTIVES TAKEN FOR AGRI-GROWTH FY08

* DAP subsidy increased from Rs.400/bag to Rs.470/bag.

* Wheat support price set to Rs.425/mound amounting to Rs.250billion

Agriculture loan allocation to rural areas enhanced to Rs.200bn,

* Allocation of Rs.336mn for production of better seeds which can increase the agri-production from 20 to 30 percent.

* Announcement to set 15 new seed test laboratories

MAJOR CROPS AND PRODUCTION

COTTON PRODUCTION

The cotton crop situation is satisfactory, despite mealy bug and Cotton Leaf Curl Virus (CLCV) infestation. The infestation of other insect pests is less than last year levels. The targets set for the FY08 stand at 14.14mn bales from 3.25mn hectares. Cotton arrivals in ginning factories for 1H-FY08 were 9.12 million bales. In Punjab cotton arrivals in ginning factories were 6.866 million bales and in Sindh arrivals were 2.25mn bales. [see Table # 3]

Overall growth in cotton production is to be witnessed at 8.77% and the yield per hectare will hike by 2.78%. Sindh has marked a decent growth in cotton production by 25% to mark the targets of 3mn bales production. The cotton FY07) production was 13 million bales from an area of 3.07 million ha. This was almost at the similar level of last year FY06 production achievement of 13.02 million bales.

WHEAT PRODUCTION

Wheat production overall was impressive this year as 96% percent of the targets were achieved with production growth of 3.04%. Total wheat production amounted to 24mn tons as against 23.3mn tons for the same last year. Highest growth achiever of the provinces was NWFP with YoY growth of 29.31% and increased yield per hacter by 39%, while Punjab produced the 18.5mn tons of wheat about 77% of total wheat production.

Sindh and Balochistan registered negative growth both in production and yield/Ha. Sindh's production declined to 3.4mn tons (down by 6.16%) compared to 3.4mn tons last year while her yield/ha declined to 3426kg/ha (down by 11%) as compared to 3853kg/ha last year. On the other hand Balochistan's production declined to .8mn ton (down by 8%) while her yield/ha decreased to 2888kg/ha (down by 9%). [see Table # 2]

The wheat crop overall achieved decent productions which should have met our local demands but the shortage was created due to hoarding and excess supply to Afghanistan and wheat crisis are controllable if the Government deals the culprits with high hand

Wheat stock position as on 02-01-2008 stood at 2.57mn tons where as Punjab 1.449mn tons, Sindh 0.269mn tons, NWFP 0.078mn tons, Balochistan 0.037mn tons, while the overall wheat exports for FY08 stand at 500,000 tons.

Government has started importing wheat to meet the shortages and resultant food inflation which has already hiked at 18% and the major portion of food inflation is the wheat prices.

FOOD INFLATION AND STEPS TAKEN TO REDUCE IT:

Food inflation has marked the record levels where it stands at 18.25% (JanFY07-Jan FY08), and CPI index has marked 11.86%. The situation is very tough for the new Government and its control in initial phase is next to impossible.

The existing Government has taken steps like: ban on wheat exports, 35% duty on wheat export to Afghanistan, higher DAP subsidies to reduce cost of productions etc. But still the situation is out of control; food and CPI index are on a continuous ride towards north and it looks unstoppable.

AGRI-LOANS

As part of the Agri-reform loans banks have disbursed Rs 90.3 billion to the agriculture sector during the first half of FY08 as against Rs 71.7 billion for the same period last year, showing an increase of 26%. The share of Sindh in total disbursements has improved from 9.9% to 11.3 % over last year whereas the disbursements to other provinces remained almost at the same level. The sector-wise disbursement shows that the share of non-farm sector has increased to 27% from 13% during the first half of FY08.

AGRI-OUTLOOK

MINFAL in collaboration with Asian Development Bank ha started many projects to boost the sector and enhance the yield per hectare utilization of land, increase the land utilization for the cultivation and make the land more fertile. Some of the projects are:

* 'Agri Business Project' at cost of Rs.4.1bn to establish 705 enterprises of 12500 farmers in 1250 groups; including 100 business development support companies, 30 research providers.

* 'Crop Maximization program' covering 1020 village including AJK, FATA/NA to help them start profit oriented businesses like fisheries, livestock and high value crops

* 'High efficiency irrigation program' including drip and sprinklers with estimated cost of Rs.15bn.

All this is done with one sole reason to enhance the sector capabilities to produce at or higher than the consumption growth which is increasing at faster pace.

TABLE 1

AGRICULTURE PRODUCTION

AREA '000 HA

PRODUCTION 'MN' TONS/BALES

YIELD KG/HA

PRODUCTION %

YIELD %

FY07

FY08

TARGET FY08

FY07

FY08

FY07

FY08

Wheat (Tons)

8273

8233

8578

23.292

24

2,815

2,915

3.04%

3.54%

Cotton (Bales)

3072

3082

3250

13

14.14

720

740

8.77%

2.78%

Rice

-

2511

2593.9

-

5.5

-

2,186

-

-

Sugar Cane

-

277

1039.5

-

62.3

-

53.94tns/ha

-

-

Source: Ministry of Food, Agri & live Stocks


TABLE 2

WHEAT PRODUCTION

AREA '000 HA

PRODUCTION 'MN' TONS

YIELD KG/HA

PRODUCTION %

YIELD %

FY07

FY08

TARGET FY08

FY07

FY08

FY07

FY08

Punjab

6418

6374

6433

17.85

18.5

2,781

2,902

3.64%

4.36%

Sindh

885

934

982

3.41

3.2

3,853

3,426

-6.16%

-11.08%

NWFP

695

648

754

1.16

1.5

1,669

2,315

29.31%

38.69%

Balochistan

275

277

409

0.872

0.8

3,171

2,888

-8.26%

-8.92%

Total

8273

8233

8578

23.292

24

2,815

2,915

3.04%

3.54%

Source: Ministry of Food, Agri & live Stocks


TABLE 3

COTTON PRODUCTION

AREA 'MN.' HA

PRODUCTION 'MN' BALES

YIELD BALES/HA

CHANGE %

YIELD  %

FY07

FY08

TARGET FY08

FY07

FY08

FY07

FY08

Punjab

2.46

2.56

11

10.5

11

726

731

4.76%

0.69%

Sindh

0.57

0.64

3

2.4

3

726

797

25.00%

9.78%

NWFP

0.002

0.01

0.01

0.01

0.01

850

170

0.00%

-80.00%

Balochistan

0.04

0.04

0.13

0.09

0.13

383

553

44.44%

44.39%

Total

3.072

3.25

14.14

13

14.14

720

740

8.77%

2.78%

Source: Ministry of Food, Agri & live Stocks