Structural flaws in food sector

Low per-capita wheat, sugar output and mismanagement behind food crisis

KARACHI:

Pakistan is the eighth-largest wheat producer in the world. China tops the list of 10 major wheat-producing countries followed by India, Russia, USA, France, Australia, Canada, Pakistan, Ukraine and Germany.

Moreover, Pakistan is also the sixth-largest producer of sugar in the world. Amongst the top 10 sugar-producing countries, Brazil leads the list followed by India, China, Thailand, USA, Pakistan, Mexico, Russia, France and Australia.

But the question remains that despite being self-sufficient, why are Pakistani markets affected either by a wheat crisis, a sugar crisis, or both after every few years? The reason lies partly in low per capita wheat and sugar output and slightly in mismanagement of the commodities sector.

Among all the countries named above, some of them with much lesser population than Pakistan’s are ahead in wheat and sugar production that means our per-capita output of both commodities is lower than what it should have been.

However, a country with less population than Pakistan’s can still produce more wheat or sugarcane if it cultivates these commodities on a larger area as compared to Pakistan.

Hence, it is advisable to look at the per-hectare yield of wheat and sugar in other countries. It will help us monitor if we are producing lesser than others as we grow wheat and sugarcane on smaller areas or because the yields are lower.

In case of sugarcane, Pakistan’s per-hectare yield is around 60 tons, whereas the per-hectare yield in China, India, USA, Brazil, Mexico, Australia and Thailand ranges between 65 and 77 tons.

Similarly, Pakistan’s per-hectare yield of wheat is three tons. Comparatively, the per-hectare yield in India and Mexico is four tons and five tons respectively. Meanwhile, China’s per-hectare yield is almost double ie six tons.

Until Pakistan improves its per-hectare yield of wheat and sugarcane, wheat and sugar crisis will keep revisiting the country. Before looking at what’s wrong with the commodities sector in general, and with wheat and sugar sub-sectors in particular, let us look closely at the eccentricities of wheat and sugar.

In Pakistan, like in many other countries of the world, wheat flour is the staple food for the local population. Pakistan has a large population of 220 million – the fifth largest after China, India, USA and Indonesia. This means the bulk of wheat produced in the country is used in making wheat flour.

Previously, wheat flour was used mainly for making bread at home or in hotels and restaurants. Only a small percentage of wheat flour was used in making a diverse range of confectionaries and other flour-based culinary delights.

Similarly, the use of sugar in our national cuisine was also limited and we used to have exportable surplus even at times when supply marginally surpassed local demand. But with time all of this has changed and local demand for wheat flour and sugar has increased significantly.

This is why the inflationary impact of wheat and sugar crisis becomes immediately obvious and is felt more acutely and across a broader section of households and businesses. Similarly, due to the emergence and expansion of electronic and social media in the past 20 years, the inflationary impact of wheat and sugar crisis invites immediate and greater wrath of the public, gives real headaches to the ruling party and affords the opposition parties stronger political leverages to use against the government.

Key factors that hurt

There are four major factors that continue to mar development of a truly harmonised commodities’ sector in general, and wheat and sugar sub-sectors in particular.

The first one is related to the ownership structure, second to the regulatory oversight, third to the price discovery system and fourth to the overall quality of democratic governance in the country.

Wheat and sugar mills in particular and commodities’ sector in general are controlled directly or indirectly by powerful politicians and equally powerful other elements.

This makes even a nominal regulatory oversight too difficult to maintain – what to talk about making it in line with the best international practices. And that, in turn, allows room for the crisis simply because responsibility is not fixed.

As for the commodities’ price discovery, it is so disappointing to see that the main stakeholders in wheat and sugar sectors including farmers and provincial governments are not ready to take full advantage of Pakistan Mercantile Exchange (PMEX).

Despite wheat and sugar being listed on PMEX, and spot and futures trading of wheat and sugar are being allowed, the trading remains thin. This, in turn, does not help in the development of a price discovery system for farmers to adjust their crop cultivation activity accordingly and for provincial governments to project the cost of official procurement of the two commodities wisely.

The overall quality of democracy – and the resultant deterioration in governance – in our country also impedes the growth of agriculture as federal forces seem to be unwilling to allow the provinces to exercise their full right that the 18th Amendment gives them. Being ruled by the centre is an excuse for not developing the agriculture sector in general and commodities’ sector in particular.

Unfortunately, this issue is yet to be addressed and one can hope that the government, the 11-party Pakistan Democratic Alliance and the establishment would finally reach an accord on how to address the issue of 18th Amendment that had brought agriculture under the exclusive domain of provinces back in FY11 but has failed to lift agricultural productivity as originally envisioned.

THE WRITER IS A MECHANICAL ENGINEER AND IS DOING MASTERS

 

Published in The Express Tribune, November 30^th, 2020.

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