S.KAMAL HAYDER KAZMI,
Research Analyst, PAGE
Aug 30 - Sep 05, 2010
The 2010 monsoon season brought the heaviest rains ever recorded in Pakistan triggering flash and floods that have devastated large parts of the country. The floods devastated large parts of northern Pakistan and are currently causing more destruction in southern parts of Sindh.
These devastating floods have also adversely impacted the food supply chains. Nearly 17 million acres of cultivated cropland has been lost to floods while the loss of livestock could also be in millions.
The loss of crops from floods alone can cause huge spikes in the price of necessary food items because of uncertainty in the supply of grains, livestock, etc. At the same time, almost 75 per cent of those affected by floods are the ones who relied on agriculture for sustenance. Even after the floodwaters recede, it will take months, if not more, to resettle the internally displaced farm workers on the land they once tilled, thus causing further delays in domestic food production.
CONSUMER PRICE INDEX BY FOOD
FOOD ITEMS WEIGHT (%) INDICES CHANGE JULY, 2010 OVER JUL-10 JUN-10 JUL-09 JUN-10 JUL-09 JUN-10 JUL-09 IN % IN PERCENTAGE POINTS (IMPACT) Food & beverages 40.34 258.19 254.42 228.93 1.48 12.78 0.63 5.21 Non-perishable food 35.20 257.22 254.83 227.54 0.94 13.04 0.35 4.64 Perishable food 5.14 264.76 251.63 238.42 5.22 11.05 0.28 0.57
During July 2010 the consumer price index (CPI) has increased by 1.23 per cent over June, 2010, and 12.34 per cent over corresponding month of last year. The food commodities that showed rise include tomatoes (32.39 per cent), vegetables (5.65 per cent), potatoes (5.55 per cent), pulse gram (4.95 per cent), sugar (4.90 per cent), gur (4.25 per cent), chicken (3.29 per cent), besan (2.52per cent), cigarettes (2.32 per cent), meat (1.55 per cent), jam, tomato, pickles & vinegar (1.14 per cent), milk fresh (1.12 per cent), sweetmeat & nimco (1.02 per cent) and milk products (0.98 per cent) while those that showed decrease include pulse moong (1.46 per cent) and pulse masoor (1.39 per cent).
Although, the average sensitive price indicator (SPI) of July 2010 was increased at 1.85 per cent over June 2010 for the lowest income group, while it increased by 1.80 per cent in case of all income groups combined.
Moreover, the wholesale price index of July 2010 was decreased by 1.67 per cent over June 2010. It was increased by 18.75 per cent over the corresponding month of last year. The main food commodities which showed an increase in their prices in July 2010 over June 2010 are tomatoes (41.48 per cent), jowar (12.63 per cent), potatoes (8.91 per cent), vegetables (8.23 per cent), gur (7.50per cent), gram split (6.07per cent), besan (5.69 per cent), sugar refined (4.97 per cent), fresh fruit (4.21 per cent), bajra (3.39 per cent), oil cakes (2.99 per cent), cooking oil (2.45 per cent), chicken (2.19 per cent), meat (1.92 per cent), mineral water (1.91 per cent), mash (1.71 per cent), dry fruits (1.58 per cent), maize (1.57 per cent), fruits prepared/preserved (1.34 per cent) and rice (1.14 per cent) while gram whole and onion showed a decrease in their prices of 9.98 per cent and 1.64 per cent respectively in July 2010 over June 2010. Since July 2001, prices have more than doubled in Pakistan, as is evidenced by 128 per cent increase in prices in July 2010.
Compounding the devastating impact of floods are two additional factors: the start of Ramazan, which has always been accompanied with unexplained inflation, and the global wheat shortage that has caused the price of wheat to increase by 90 per cent since June 2010.
The drought in Russia has contributed to severe wheat shortages leading Russia to ban all wheat exports. While Russia accounts for only 11 per cent of the global wheat supply, the export ban has sent shockwaves through the commodity prices. Compounding this even further is the loss of wheat crop in China and India due to monsoon rains. However, India needs to spend at least $1.7 billion to develop warehouses for adequate storage of grains. While the price of wheat in the global market is much lower than $13 per bushel, observed at the height of global food price crisis in 2008, the short-run hike in wheat prices is certainly becoming a global source of concern even when bumper wheat crops in the United States, Canada, and Australia are being highlighted to calm the markets.
The triple convergence of floods, Ramazan, and global wheat crisis suggests that low- and mid-income households in Pakistan may face huge increases in the price of food staples. Already, markets in urban centers are reporting a 100 to 200 per cent increase in the price of food items over the pre-flood levels. Onions are sold at Rs80 per kg and tomatoes are averaging around Rs120 per kg even in Islamabad, which is spared by the flood waters.
Pakistan has suddenly become even more food insecure while being armed with nuclear weapons. The excessive spending on defense over the past four decades to secure its borders has inadvertently left Pakistan food insecure. The challenge for the government is to protect the vulnerable groups of society by stabilising prices of essential items. Medium-to-long term efforts should envisage agricultural reforms so that there can be an increase in supply of essential items through making agricultural land and labor more productive, and having enough quantities of these items to feed the country as well as for export purposes.