FARMERS REMAIN NON-BENEFICIARY OF FOOD PRICE SPIRALS

TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Oct 20 - 26, 2008

Food inflation has become an international issue and is hurting differently developed and developing economies. While developed nations are somehow exercising control over price rise of foods, developing nations are finding it difficult to keep particularly food inflation on an even keel plunging poverty graph deep down to parlous stage. The situation smacks of bizarreness more because instead of benefiting from international food price spikes developing economies with agriculture base are in the throes of food insecurity and shortages.

During last two years prices of principal commodities in developing countries increased by 30 to 150 percents, which call for an immediate attention of international community as increase in price does not only taper buying power of consumers but it also hauls population further into diabolical trap of poverty that is a root cause of social evils.

Pakistan which is recognized as an agriculture driven economy has become a top recipient of international food price inflammation and has seen its urban and rural population falling into below poverty line due to frequent rise in food prices, which pulled graph of poverty by over 6 percent in urban and almost 3 percent in rural areas typically during a period of 2005-07. This percentage continues to fly in a present worst state of affairs in which both lower and middle income groups are expending half of their incomes on food purchases. In fact, ADB estimates that food inflation in Pakistan claims 50 percent of income of poor.

Although, being agriculture based economy Pakistan should have been eldorado for the large portion of its population whose livelihood directly or indirectly draws on agriculture sector, it has recorded despondency and vulnerability of its farm folks on the face of importing pervasive price spirals. What is commonly pronounced as double edged price is concretely describing sword of Damocles hanging over the heads of ignored Pakistani community of farmers whose role as economic growth agent has not been paid off.

Coupled with upward trend in energy and fuel prices that are making cost of inputs like fertilizers and insecticides all time high, inadequate payments against outputs are not supportive enough to expand income level and improve living standards of farm producers. Recent measures pledged to be taken by the government of Pakistan to develop agriculture sector are though signalling better prospects, these are not sufficient to extensively eradicate food from importing accounts.

Unfortunately, in its entire six month job tenure new government has not gained efficiency to manage national wheat requirements. Insufficient wheat production was mainly attributed behind high price of staple whereas government inability of bringing price parity nationwide is wilfully evaded. Wheat price soared by 100 percent from January 2007 to April 2008. Despite wheat price bombshell was a legacy of last government, successor has journeyed a time to administer relief actions. After all, provincial government is subsidizing purchase of roti-prime end product of wheat-in Punjab. What impedes to centralization of such public assistance programmes?

Extension in wheat support price to Rs. 950 per 40 Kg will be more beneficial to hoarders than crop producers as final cultivation takes place in the month of November, commented an analyst.

Since wheat import bill is rising every month, the allocation of Rs. 500 million for wheat production maximization programme is unlikely to meet demand-supply shortfall. $14,000 wheat import bill in July FY09 touched heightened mark of $41 million in the following August as quite opposed to $16,000 in the corresponding month of last fiscal. Total food import bill of the starting two months of current fiscal year stood at over $452 million.

Gravity of situation exacts immediate short and long terms plans to slash unbridled food import outlays that put unnecessary burden on already tapering foreign reserves. Agro society can easily offload this load through government focused spending on agriculture sector development. Government should earmark substantial amount to enhance productivity of farmlands and to induct technology in agro production. However, it is feared that prospective government-IFIs agreement would compel tightening of budgetary deficit and may limit public sector development spending.

Any such fear if proven true will imply demise of unexplored latent agro resources that can amplify export revenue for the country. In the context that the sector productivity needs to be enhanced, acquiescence to foreign plan will be imprudent. A recent FOA study shows that rural households in Pakistan, Bangladesh, Vietnam, and Malawi are net consumers of food products.

In its briefing paper released on the World Food Day, commemorated last Thursday, Oxfam attributed susceptibility of poor countries to price shocks to their dependence over food imports and abandoning of agriculture system after cutting wheat production. It said policy decisions taken by most developing economies were supported by international donors and institutions. It pointed out to failure of IMF and IFIs in investing in agriculture for decades.

World Bank is realizing importance of solidifying bases of agro based economies. World Development Report 2008 accentuates, "agriculture can work in concert with other sector to reduce poverty, produce faster growth, and sustain environment".

Oxfam identified flaws in agriculture and trade policies and problems in supply chain as reasons common to slow growth of agriculture in developing economies.

The paper recommendations are worth mentioning: government should increase spending on agriculture and targeted farming sector expenditures. It must invest in social protection programmes, assist design of community and national based food reserves, adopt trade measures that protect small scale producers, avoid export ban that exacerbates long term prospects in agriculture, ensure due payment to producers, and adapt to climate change.