Food In Security & Inflation

7/31/2019 Food In Security & Inflation

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Food Insecurity

& Inflation

December 29

2011


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Food Insecurity & Inflation 2011

1The Institute Of Management Sciences

ContentsExecutive Summary ................................................................................................................................. 2

Introduction ............................................................................................................................................ 3

Food Security ...................................................................................................................................... 3

Official Definition ................................................................................................................................ 3

Food Insecurity.................................................................................................................................... 4

Inflation ............................................................................................................................................... 4

Food Inflation ...................................................................................................................................... 4

Why food insecurity? .............................................................................................................................. 4

Right to food ........................................................................................................................................... 5

Constitution of Pakistan .......................................................................................................................... 6

Components of food security ................................................................................................................. 6

Agriculture and Food Security ................................................................................................................ 7

Agriculture in Pakistan ........................................................................................................................ 7

Crop Situation ......................................................................................................................................... 9

a) Major Crops .................................................................................................................................... 9

b) Minor Crops .................................................................................................................................. 13

Food inflation ........................................................................................................................................ 14

Why food inflation? .............................................................................................................................. 14

Recent causes of food inflation in Pakistan ...................................................................................... 15

Price Hike, Floods Affected Food Security: WFP ........................................................................... 15

Climate Change Linked To Food Price Hike ................................................................................... 15

Food Inflation in 2010-11 ...................................................................................................................... 16

Inflation in Brief ................................................................................................................................ 17CPI Inflation ................................................................................................................................... 19

SPI Inflation ................................................................................................................................... 20

WPI Inflation ................................................................................................................................. 21

Remedies ............................................................................................................................................... 22

Suggestions ........................................................................................................................................... 24

Recommendations ................................................................................................................................ 26

References ............................................................................................................................................ 27


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Hunger is exclusionexclusion from the land, from income, jobs, wages, life and

citizenship. When a person gets to the point of not having anything to eat, it is becauseall

the rest has been denied. This is a modern form of exile. It is death in life

Josue de Castro

Executive SummaryFood security in Pakistan has significantly worsened as result of the recent food price hikes.

The main findings indicate that more than half of the surveyed households experienced high

food prices as a shock. Most households have tried to cope with the high food prices by

reducing non-food expenditures. The high food prices is undermining the poverty reduction

gains, as food expenditures comprises a large share of the poors total expenditures and

food price hike has severely eroded their purchasing power.

The poorest households now need to spend 70% or more of their income on food and their

ability to meet most essential expenditures for health and education is severelycompromised. In addition, the diminished purchasing power has severely impaired the

capacity of the poor households to seek health care, and children education, particularly

girls. This situation has further exasperated by the falling nutrition level, particularly for

already malnourished children. High food prices affect urban and rural households

differently, as income, food sources, expenditure patterns as well as coping strategies vary.

It further indicates that more than 40 percent of households reported no change in income

since last year, while a larger share in urban areas observed a decrease than an increase in

income.

Following the worst ever floods in Pakistans history in July-August 2010. Experts on watermanagement, food security and economy had a common view that the country as well as

the nation is likely to suffer in various sectors for years due to the floods which affected

nearly one-fifth of the countrys landscape. They warned of widespread food insecurity and

inflation, disputes and litigation over property rights and general socio-economic unrest in

the country if the state institutions fail to respond timely to the post-floods challenges.


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Introduction

Food SecurityFood security exists when all people, at all times, have physical, social and economic access

to sufficient, safe and nutritious food which meets their dietary needs and food preferences

for an active and healthy life.

The amount and quality of food available globally, nationally and locally can be affected

temporarily or long-term by many factors including climate, disasters, war, civil unrest,

population size and growth, agricultural practices, environment, social status and trade.

Affordable age, status, gender, income, geographic location and ethnicity all affect a

person's ability to access and afford sufficient food. When there is a shortage of food the

rich are unlikely to go hungry but their demand for food increases the price and makes it

harder for poor people to obtain food.

Official Definition

The initial focus, reflecting the global concerns of 1974, was on the volume and stability of

food supplies.

Food security was defined in the 1974 World Food Summit as: Availability at alltimes of adequate world food supplies of basic foodstuffs to sustain a steady

expansion of food consumption and to offset fluctuations in production and prices.

In 1983, FAO expanded its concept to include securing access by vulnerable peopleto available supplies, implying that attention should be balanced between the

demand and supply side of the food security equation: Ensuring that all people at

all times have both physical and economic access to the basic food that they need.

In 1986, the World Bank report, Poverty and Hunger, focused on the temporaldynamics of food insecurity. It introduced the widely accepted distinction between

chronic food insecurity, associated with problems of continuing or structural poverty

and low incomes, and transitory food insecurity, which involved periods of

intensified pressure caused by natural disasters, economic collapse or conflict. Thisconcept of food security is further elaborated in terms of: Access of all people at all

times to enough food for an active, healthy life.

By the mid-1990s food security was recognized as a significant concern, spanning aspectrum from the individual to the global level. However, access now involved

sufficient food, indicating continuing concern with protein-energy malnutrition. But

the definition was broadened to incorporate food safety and also nutritional

balance, reflecting concerns about food composition and minor nutrient

requirements for an active and healthy life.


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The 1996 World Food Summit adopted a still more complex definition: Foodsecurity, at the individual, household, national, regional and global levels [is

achieved] when all people, at all times, have physical and economic access tosufficient, safe and nutritious food to meet their dietary needs and food preferences

for an active and healthy life. (1)

Food Insecurity Food insecurityexists whenever the availability of nutritionally adequate

and safe foods or the ability to acquire acceptable foods in socially acceptable ways is

limited or uncertain.

Inflation

Inflation is a rise in the general level of prices of goods and services over time."Inflation" is

also sometimes used to refer to a rise in the prices of some specific set of goods or services.

Food Inflation

Food inflation is a consistent rise in the price level of all agricultural food items. This rise in

price level is neither seasonal nor sudden; it keeps on increasing over a period of time.

Food inflation will be discussed later. Now lets talk about food insecurity and its causes.

Why food insecurity?There are a number of factors which cause food insecurity:

Poverty: Poor people lack access to sufficient resources to produce or buy quality food.

Poor farmers may have very small farms, use less effective farming techniques, and/or be

unable to afford fertilizers and labor-saving equipment, as of which limit food production.

Often they cannot grow enough food for themselves and are even less able to generate

income by selling excess to others. They may be forced onto less productive land which is

prone to further environmental deterioration. Addressing poverty is important to ensure all

people can afford sufficient food.

Health: Without sufficient calories and nutrients, the body slows down making it difficult to

undertake the work needed to produce food. Without good health, the body is less able to

make use of the food that is available. A hungry mother gives birth to an underweight baby,

who then faces a future of stunted growth, frequent illness, learning disabilities, and

reduced resistance to disease. Contaminated water and food can causes illness, nutrient

loss and often death in children.

Water and environment: Food production requires massive amounts of water. It takes

one cubic meter (1000 liters) of water to produce one kilogram of wheat and 5,000 liters of

water for one kilogram of rice. Producing sufficient food is directly related to having


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sufficient water. Increasing irrigation efficiency and limiting environment damage through

Stalinization or reduced soil fertility is important for ongoing food availability. (2)

Gender equity: Women play a vital role in providing food and nutrition for their families

through their roles as food producers, processors, traders and income earners. Yet their

lower social and economic status limits their access to education, training, land ownership,

decision making and credit and consequently their ability to improve their access to food.

Disasters and conflicts: Droughts, floods, cyclones and pests can quickly wipe out large

quantities of food as it grows or is stored for later use or planting. Conflicts can also reduce

or destroy food in production or storage. Farmers flee their fields for safety or become

involved in the fighting. Previously productive land may be contaminated with explosive

debris and need to be cleared before it can be used for food production again. Stored food,seeds and breeding livestock may be eaten or destroyed by soldiers or opposing groups

leading to long-term food shortages.

Population and urbanization: Population growth increases the demand for food.

With most productive land already in use there is pressure for this land to become

increasingly productive. Expanding cities spread out across productive land, reducing the

agricultural production including food production.

Trade: Many poor countries can produce staples more cheaply than rich nations but

barriers to trade, such as distance from markets, quarantine regulations and tariffs make itdifficult for them to compete in export markets against highly subsidised farmers in rich

countries.

Right to foodArticle 25, Universal Declaration of Human Rights 1948 outlines the right to food as:

1. Respect: States must refrain from violating the right to food e.g. discrimination against

women, forced displacement from lands. This can also be used for the internationalperspective developed countries governments should not knowingly violate the right to

food of citizens in other countries through e.g. trade rules.

2. Protect: Third parties must refrain from violations, and government has a duty to

regulate third parties this relates to corporate violations, regulatory frameworks e.g. for

GMOs, and to armed opposition groups.

3. Fulfill: States must take positive action to progressively realize the right to food for all

relates to food security policies, trade issues etc.


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Constitution of PakistanArticle 38 (d) of the Constitution of Pakistan ensures provision of basic necessities of life

including food for the citizens of Pakistan. It says:

The State shall provide basic necessities of life, such as food, clothing, housing, education

and medical relief, for all citizens, irrespective of sex, caste, creed or race, as are

permanently or temporarily unable to earn their livelihood on account of infirmity, sickness

or unemployment.

Components of food securityFood security can be broadly divided into three main components namely; food availability

(physical access to food), economic access to food, and equity of food distribution.

According to some experts, however, the third component of food security is effective foodutilization or absorption.

Food availability

Food availability is achieved when sufficient quantities of food are consistently available to

all individuals. Sources of such a food supply could be households own production, other

domestic output, commercial imports or food assistance.

Access to food

Access to food is ensured when a household and all members of the household have enough

(economic) resources to acquire food meeting the nutritional requirements and dietary

needs of the household. Access is thus primarily a function of a households income, itsdistribution within the household and the price of food, besides the physical aspect.

Economic accessibility implies that personal or household financial costs associated with the

acquisition of food, to meet dietary needs adequately, should be at such a level that the

attainment and satisfaction of other basic needs are not threatened or compromised.

Food utilization and absorption

Food availability and economic access to food alone cannot ensure food security as proper

food absorption is equally important. It has public health dimension and requires a diet

providing sufficient energy and essential nutrients, along with access to potable water and

adequate sanitation. Food absorption also depends on the knowledge within the household

of food storage and processing techniques, basic principles of nutrition, proper child care

and illness management. (3)

Equity of food distribution

While there are sufficient resources in the world to provide food security for all, policy and

behavioral changes are necessary to guarantee a fair share for all people, especially the

poor. Equity is a major issue of concern related to food security, particularly in the context

of Pakistan wherein inequity in land holdings and incomes is relatively high. (4)


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Agriculture and Food Security

Land and water are important natural resources for mankind. The demand for food, fiber,and shelter is increasing with the continuous increase in the worlds population. The rapid

urbanization, continuous tillage, and greater use of fossil fuels, fertilizers and pesticides are

polluting the natural resources and environment.

Food production is mainly dependent upon land and water resources. More than 90 percent

of rice and 43 per cent of wheat in the world is produced and consumed in Asia. The rice-

wheat system, one of the major cropping systems of the South Asia and parts of East Asia,

requires special management. Due to management differences and traditional cultural

cultivation practices, the productivity of the rice-wheat system is stagnating and its

sustainability threatened.

The introduction of new varieties and chemical fertilizers, during the green revolution of the

1960s, resulted in increase in crop yields. But, intensive cultivation, increased use of

fertilizers, pesticides, conventional soil management practices, and improper use of

irrigation water resulted in deterioration of land and water resources leading to poor crop

yields. Large fertile areas prey to water logging and salinity, making small farmers more food

insecure.

Agriculture in Pakistan

Agriculture is considered the mainstay of Pakistans economy. According to the EconomicSurvey of Pakistan 2001-2002, nearly one-fourth of total output of the GDP and 44 per cent

of total employment is generated in agriculture. More than 67 per cent of the countrys

rural population is directly or indirectly linked with agriculture for their livelihood. Whatever

happens to agriculture is bound to affect the livelihood and consequently food security of

the poor rural people.

Agricultures share in the GDP has declined from 38 per cent in 1969-70 to 28 per cent in

2001-02. Decline of agriculture and shrinking livelihood opportunities have resulted in rising

poverty in rural areas. (5)

Agriculture is an important sector, providing food to the fast growing population of the

country. With a population growth rate of 2.23 per cent, there will be a net addition of 3.0

million people each year.

According to United Nations Statement on Food Security inPakistan, 2000, in more than 50

years (1948-2000), the population has increased four folds but during this period the

production of wheat, the major food crop, has increased only

2.9 fold. Pakistan Agricultural Research Council, however, claims that wheat production in

the country has increased by 647 per cent (more than 6.4 fold) during 1948 to 2006 whereas

increase in the area was 210 per cent during this period. The country's consumption

requirement, however, is approximately 21.3 million tons per year.


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There are four major crops; wheat, rice, cotton and sugarcane. Among the minor crops the

most important are; fruits and vegetables, followed by pulses and oilseeds. The main

successes since the 1960s have been in the production of wheat, rice, cotton and poultry

products. Although self-sufficiency has not yet been achieved in grain production, rice and

cotton have contributed substantially to increased export earnings.

During the period of 1990-91 to 1999-2000, the major crops sub-sector witnessed a growth

rate of only 2.87 per cent. The other sub-sectors such as minor crops and livestock did well

in the 1990s but fisheries slow down. Income from forestry is declining due to ban on

harvesting enforced since 1997-98 for forestry protection.

Wheat production fluctuated between 14.56 million tons in 1990-91 to 21.5 in 2005-06.

The relative success story of wheat, rice and cotton has not been repeated in sugarcane

though its production has increased mainly through increased area which went up from

190,000 hectares in 1948 to a record 1.16 million hectares in 1998-99, declining to one

million hectares in 1999-2000. Sugarcane yields have remained more or less static. For oil

seeds, the country turned from self-sufficiency into a major importer of edible oils.

In 2000, the imports represented 65 per cent of domestic consumption. Area under maize

has doubled since 1948 but its yield has not shown any significant improvement due to lack

of high yielding varieties and most of the crop in NWFP continues to be grown under rain-

fed conditions. (6)

Table 1:

Agriculture Growth (in %age)

Year Agriculture Major Crops Minor

Crops

Livestock Fishery Forestry

2004-05 6.5 17.7 1.5 2.3 0.6 -32.4

2005-06 6.3 -3.9 0.4 15.8 20.8 -1.1

2006-07 4.1 7.7 -1.0 2.8 15.4 -5.1

2007-08 1.0 -6.4 10.9 4.2 9.2 -13.0

2008-09 4.0 7.8 -1.2 3.1 2.3 -3.0

2009-10 0.6 -2.4 -7.8 4.3 1.4 2.2

2010-11 (P) 1.2 -4.0 4.8 3.7 1.9 -4.0

P: Provisional Source: Federal Bureau of Statistics

This table clearly shows the percentage of agriculture growth of major and minor crops as

well as the livestock, fishery and forestry in Pakistan.


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Crop Situation

a) Major CropsPakistan has two principle crops seasons, namely the "Kharif", the sowing season of which

begins in April-June and harvested during October December; while "Rabi", begins in

October December and harvested in April-May. Rice, sugarcane, cotton, maize, mung, mash,

bajra and jowar are Kharif" crops while wheat, gram, lenti (masoor), tobacco, rapeseed,

barley and mustard are "Rabi" crops. Major crops, such as, wheat, rice, cotton and

sugarcane account for 90 percent of the value added in the major crops. The value added in

major crops accounts for 31 percent of the value added in the agriculture. Thus, four major

crops (wheat, rice, cotton, and sugarcane) on average, contribute 28 percent to the value

added in overall agriculture and 5.9 percent to GDP. The minor crops account for 10.9

percent of the value added in overall agriculture. Livestock contributes 55.1 percent toagricultural value added much more than the combined contribution of major and minor

crops (41.9%). The production performance of major crops is documented in Table 1. (7)

Table 1:

Production of Major Crops (000 Tons)

Year Sugarcane Rice Maize Wheat

2004-05 47,244

(-11.6)

5,025

(3.6)

2,797

(47.4)

21,612

(10.8)

2005-06 44,666

(-5.5)

5,547

(10.4)

3,110

(11.2)

21,277

(-1.6)

2006-07 54,742

(22.6)

5,438

(-2.0)

3,088

(-0.7)

23,295

(9.5)

2007-08 63,920

(16.8)

5,563

(2.3)

3,605

(16.7)

20,959

(-10.0)

2008-09 50,045

(-21.7)

6,952

(25.0)

3,593

(-0.3)

24,033

(14.7)

2009-10 49,373

(-1.3)

6,883

(-1.0)

3,262

(-9.2)

23,311

(-3.0)

2010-11 (P) 55,309(12.0) 4,823(-29.9) 3,341(2.4) 24,214(3.9)

Wheat production in the country, however, has been well below potential and variable. The

major reasons for low productivity and instability includes: delayed harvesting of Kharif

crops like maize, sugarcane and rice, and consequent late planting of wheat, non availability

of improved inputs like seeds, inefficient fertilizer use, weed infestation, shortage of

irrigation water, drought in rain-fed area and terminal heat stress, soil degradation, and

inefficient extension services. Moreover, farmers are not aware of modern technologies

because of weak extension services system. (8)


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Sugarcane:

Sugarcane crop is a major raw material source for the production of white sugar and gurh.

Its share in value added in agriculture and GDP is 3.6 and 0.8 percent, respectively.Sugarcane was cultivated on an area of 988 thousand hectares, 4.8 percent higher than last

years level of 943 thousand hectares. Sugarcane production for the year 2010-11 is

estimated at 55.3 million tons as against actual production of 49.3 million tons last year. This

indicates a rise of 12.0 percent over the production of last year.

Main factors contributing for more production are lucrative market prices of last years

produce and timely availability of inputs encouraging the farmers to grow more sugarcane

crop. The area, production and yield of sugarcane for the last five years are given in Fig. 1

and Table 2. (9)

Fig 1:Sugarcane Production (000 Tons)

The following table explains the graph of sugarcane production (Fig 1) with the help of its

area and yield.

Table 2:

Area, Production and Yield of Sugarcane

Year Area Production Yield

(000 Hec.) % Change (000 Tons) % Change (Kgs/Hec.) % Change

2006-07 1029 13.5 54742 22.6 53199 8.0

2007-08 1241 20.6 63920 16.8 51507 -3.2

2008-09 1024 -17.1 50045 -21.7 48635 -5.6

2009-10 943 -8.4 49373 -1.3 52357 7.7

2010-11 (P) 988 4.8 55309 12.0 55981 6.9

P: Provisional (July-March) Source: Ministry of Food and Agriculture, Federal Bureau of Statistics


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Rice:

Rice is the second largest staple food crop in Pakistan and is a major source of export

earnings in recent years. It accounts for 4.4 percent of value added in agriculture and 0.9percent in GDP. Pakistan grows high quality rice to meet both domestic demand and

exports. Area sown for rice is estimated at 2365 thousand hectares, 17.9 percent less than

last year (2883 thousand hectares). The production of the crop is estimated at 4823

thousand tons, 29.9 percent less than last year. This is mainly attributed to devastating

floods of July, 2010 coupled with breaches of protective bunds of river Indus which badly

affected the main paddy growing districts and low market returns during last year. While

decrease in production is due to decrease in area, attack of pests and disease and logging of

early sown crops. The area, production and yield of rice for the last five years are given in

Table 3 and Fig 2. (10)

Fig 2:

Rice Production (000 Tons)

The following table explains the graph of rice production (Fig 2) with the help of its area and

yield.

Table 3:

Area, Production and Yield of RiceYear Area Production Yield


2006-07 2581 -1.5 5438 -2.0 2107 -0.4

2007-08 2515 -2.6 5563 2.3 2212 5.0

2008-09 2963 17.8 6952 25.0 2346 6.1

2009-10 2883 -2.7 6883 -1.0 2387 1.7

2010-11 (P) 2365 -17.9 4823 -29.9 2039 -14.6



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Wheat:

Wheat is the main staple food for most of the population and largest grain source of the

country. It occupies the central position in formulating agricultural policies. It contributes13.1 percent to the value added in agriculture and 2.7 percent to GDP. Area and production

target of wheat for the year 2010-11 had been set at 9045 thousand hectares and 25 million

tons, respectively. Wheat was cultivated on an area of 8805 thousand hectares, showing a

decrease of 3.6 percent over last years area of 9132 thousand hectares.

However, a bumper wheat crop of 24.2 million tons has been estimated with 3.9 percent

increase over the last years crop of 23.3 million tons. The prospects for wheat harvest

improved with healthy fertilizer off-take and reasonable rainfall during pre-harvesting

period. The area, production and yield of wheat for the last five years are given in

Fig 3 and Table 4. (11)

Fig 3:

Wheat Production (000 Tons)

The following table explains the graph of wheat production (Fig 3) with the help of its area

and yield.

Table 4:

Area, Production and Yield of Wheat

Year Area Production Yield


2006-07 8578 1.5 23295 9.5 2716 7.8

2007-08 8550 -0.3 20959 -10.0 2451 -3.9

2008-09 9046 5.8 24033 14.7 2657 8.4

2009-10 9132 1.0 23311 -3.0 2553 -3.9

2010-11 (P) 8805 -3.6 24214 3.9 2750 7.7



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b) Minor Crops

i) Oilseeds

The major oilseed crops include sunflower, canola, rapeseed & mustard and cottonseed.The total availability of edible oil in 2009-10 was 2.9 million tons. Local production of edible

oil was 662 thousand tons which accounted for 23 percent of total availability in the

country, while the remaining 77 percent availability was ensured through imports. During

the year 2010-11 (July-March), a quantity of 1.7 million Tons edible oil/oilseeds worth US$

1.65 billion has been imported. The local production in 2010-11 is provisionally estimated at

696 thousand tons. Total availability from all sources is thus reduced to 2.35 million tons.

The area and production of oilseed crops during 2009-10 and 2010-11 is given in Table 5.

Table 5

Area and Production of Major Oilseed Crops

Crops

2009-10 2010-11 (P)

Area Production Area Production

(000 Acres) Seed Oil (000 Acres) Seed Oil

(000 Tons) (000 Tons) (000 Tons) (000 Tons)

Cottonseed 7,691 3,240 398 6,450 2,934 352

Mustard 486 160 51 439 157 50

Sunflower 872 513 195 1,108 643 244

Canola 142 70 27 233 131 50

Total 9,091 3,983 662 8,230 3,865 696

P: Provisional (July-March) Source: Pakistan Oilseed Development Board

ii) Other Minor Crops:

The production of potato, onion and mash has increased by 18.6 percent, 11.2 percent and

1.0 percent, respectively. Timely rain supplemented to some extent for increasing

production of onion, potato and mash. However, the production of mung and masoor

(lentil) decreased by 35.0 percent, 8.6 percent and 2.7 percent, respectively. The area sown

for mung,mash and potato decreased by 25.2 percent, 1.2 percent, 11.7 percent and 7.8

percent, respectively whereas, there is an increase of area sown for onion by 15.2 percent.

The area and production of minor crops are given in Table 6. (12)

Table 6Area and Production of Minor Crops

Crops

2009-10 2010-11 (P)

% Change In

ProductionArea

(000 hectares)

Production

(000 tons)

Area

(000 hectares)

Production

(000 tons)

Masoor 24.0 10.9 24.0 10.6 -2.7

Mung 183.3 118.7 137 77.1 -3.5

Mash 24.1 10.7 23.8 11.2 1.0

Potato 138.5 3141.5 127.7 3726.5 18.6

Onion 124.7 1701 143.7 1892 11.2

P: Provisional (July-March) Source: Ministry of Food and Agriculture


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Food inflationAfter discussing food inflation and the production of the major and minor crops lets talk

about the food inflation and its causes.

Food inflation can be defined as a consistent rise in the price level of all agricultural food

items. This rise in price level is neither seasonal nor sudden; it keeps on increasing over a

period of time.

Why food inflation? Due to lack of post harvesting infrastructure such as cold chains, transportation,

and storage facilities.

High food inflation ensures that consumers have to cut back on their spendingpower or reduce their purchase capacity.

60% of the country's total cropped area is not irrigated. Bad monsoon in Pakistan. In Recession times, spending power of the consumers decreases. Shortage of supply in food items and high procurement prices. Crackdown on hoarders and black marketers could help prevent prices from rising

further. This step might not significantly reduce prices but will ensure that prices

don't escalate further.

The Government should allow the private sector to import and store the primaryagricultural commodities at zero import duty. This will help ease the prices to a large

extent.

The Government also needs to unload the wheat inventory it has in its storagelocations. This will have an immediate impact on the prices.

Proper care must be taken of warehouses where all agricultural especially perishablegoods are kept to prevent them.

Buffer stock should be released on time. Wastage of food items. Political factors have not properly balanced. Consumers should plan their budget according to their need. Government should take strict action against manipulation.


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Recent causes of food inflation in Pakistan

The beginning of the current year 2010-11 in Pakistan saw number of unfavorable factors

impacting the supply and demand situation which created imbalances in the economy.Massive floods swept through one-fifth of the country and caused massive damages to

crops, livestock and infrastructure which resulted in sharp acceleration in the commodity

price and spike in inflation.

Price Hike, Floods Affected Food Security: WFP

The United Nations World Food Program says the increase in prices of food items and

effects of floods have negatively impacted on food security in Pakistan.

Leading markets in Hyderabad, Peshawar, Multan, Karachi, Rawalpindi, Islamabad, Lahore,

Quetta and Sukkur are quite sensitive t o domestic and international wheat and rice price

fluctuations according t o market integration and price transmission patterns. The analysisof the relationship between crop production and natural disasters suggests that all major

wheat producing areas of Pakistan are significantly vulnerable to climate shocks, with

Punjab and Khyber Pakhtunkhwa being the most vulnerable to weather shocks.

The WFP says that as a result of high prices and falling incomes, Pakistans per capita wheat

consumption has been declining and led to the rising wheat stocks before floods in recent

years.

In 2010-11, Pakistan was expected to be self-sufficient in wheat due to a reduced demand

and is expected to continue to be a net exporter of rice with favorable world prices and

government policy. However, the surplus volume of rice is expected t o decline by over one

million tons this year. The study indicates that households of employees and pastoralists in

rural areas and service sector-and industrial-based households in urban areas are most

affected by price increases.

The main income source of employees, paid employees, service sector and industrial

livelihood groups is non-agricultural wage, which accounts for over 80 per cent of income on

an average in Pakistan. (13)

Climate Change Linked To Food Price Hike

Such calamities were not only causing food shortage but also serving to increase the prices.

The speakers urged the governments and multinational organizations to coordinate efforts

to design comprehensive strategies for promoting agriculture development in order to allow

the vulnerable communities to gain access to food.

2011 was the second consecutive year in which floodwaters destroyed Kharif crops in parts

of the country at a time when farmers and growers were preparing for the Rabi sowing

season. The floods adversely affected crops of cotton, rice, sugarcane, sorghum, vegetables

and pulses cultivated on about 0.84 million acres of farmland.

The international prices of staple food items were at a 30-year high and represented a major

threat to food security in developing countries like Pakistan. Population pressures, rapid

economic growth and global market conditions were behind the price hike. The importance


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of the countrys agriculture sector to its economy could be gauged from the fact that up t o

62 percent of the rural population was directly or indirectly engaged in agricultural activity.

Its share in the countrys gross domestic product (GDP ) stands at 21 percent. It not only

provides food to 177 million people but also to about 160 million livestock, besides

providing raw material for agro-based industries. There is a need for creating better linkages

between scientists and growers in order to bring about self-sufficiency in food.

The challenges the country faced could only be addressed by translating the knowledge

generated by researchers into demand-driven technologies having the potential to enable

the farming communities to increase their productivity. Pakistan had the potential to double

its food production, provided the agriculture sector was given adequate support.

In a message for the day, President Asif Ali Zardari said Pakistan needed to ensure food

security as well as energy security. Any shortcomings in either of the two sectors would

cause severe depletion of the countrys foreign exchange reserves. Prime Minister Yousuf

Raza Gilanisaid Pakistan should not only be a frontline state in the war on terror but should

also be in the vanguard against poverty and hunger. He said his government was focusing on

formulating farmer-friendly policies to ensure adequate supplies of staple food. (14)

Food Inflation in 2010-11Inflation as measured by the changes in Consumer Price Index (CPI) has escalated by 14.1

percent in July-April 2010-11 as against 11.5 percent in the comparative period of last year.

During this period food has remained the major driver of the inflation on the back of majorsupply disruptions owing to devastating floods as well as spike in imported fuel and food

stuff prices. Food inflation is persistently rising and recorded at 18.4 percent as against 12.0

percent in the comparable period of last year. Non-food component witnessed an increase

of 10.4 percent in this period which shows some adjustment against 11 percent in the

comparable period of last year as shown in fig 4. Non-food inflation either stagnated in this

period or registered modest decline but its contribution to rise in overall inflation is 52.6

percent while food inflation accounted for 47.4 percent increase in CPI inflation. (15)

Fig 4: Inflation Rates By Groups


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Inflation in Brief

1. Headline CPI inflation on revised base (2007-08 = 100) is recorded at 11.0 percent on

year-on-year basis in October 2011 as compared to 10.5 percent in the previous month and15.3 percent in the corresponding month of last year.

2. CPI inflation on month-on-month basis increased to 1.4 percent in October 2011 as

compared to 1.0 percent in the previous and corresponding month of last year. Seasonally

adjusted month-on-month CPI inflation comes to 1.3 percent in October 2011 as compared

to 1.1 percent in previous month.

3. Core inflation (trimmed) on year-on-year basis remained at the level of 11.7 percent in

October 2011 as observed during the previous month and decreased when compared to

12.7 percent in the corresponding month of last year.

4. On month-on-month basis, the Core inflation (trimmed) was 1.0 percent in October 2011

as compared to 0.6 percent in September 2011 and 1.6 percent in October 2010.

5. Non-food, non-energy inflation measured by CPI Core (NFNE) on year-on-year basis is

recorded at 10.5 Percent in October 2011 as compared to 10.6 percent a month earlier and

9.5 percent in October 2010.

6. Core NFNE inflation on month-on-month basis increased to 1.4 percent in October 2011

as compared to 0.7 percent a month earlier. Core NFNE was 1.6 percent in October 2010.

7. WPI inflation on year-on-year basis decreased to 15.4 percent in October 2011 when

compared to 17.0 percent a month earlier. During October 2010, WPI inflation was recorded

at 19.5%.

8. WPI inflation on month-on-month basis increased to 0.4 percent in October 2011as

compared to 0.2 percent a month earlier. However, it was lower than 1.7 percent in

October 2010.

9. SPI inflation on year-on-year basis is recorded at 8.2 percent in October 2011 as

compared to 8.7 percent a month earlier and 20.9 percent in corresponding month of the

last year.

10. SPI inflation on month-on-month basis increased to 0.8 percent in October 2011 when

compared to 0.7 percent a month earlier while it was 1.2 percent in October 2010. (16)

YoY or MoM changes in CPI, Core, WPI and SPI Inflation are shown in Table 7.


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Table 7: Inflation Trends (percent) (Base 2007- 08 = 100)

Inflation by Income Groups

Inflation measures for different groups finds that Inflation hurts the poor more as their 70

percent expenditure goes to food. A review of disaggregated inflation with respect to

different income groups reveals that variability is higher for vulnerable lower income groupsthan upper income groups. This is the result of higher expenditure incurred among the

lower income groups on necessities with more variable prices i.e. food. Cumulative inflation

incidence for lowest income groups is 15.3 percent which is highest incidence among all

income groups. On the other hand, the incidence of inflation is lowest for highest income

group and it is far lower than lowest group inflation at 13.6 percent. (17) See Table 8.

Table 8: Income Group- wise Inflation (YoY)


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CPI Inflation

Pakistan is regarded as one of the agrarian economies with high dependency on agriculture.

However, food imports comprises sizeable portion of imports as it account for 13.5 percentof imports in July-March 2010-11 and contributed 38 percent increase in imports. Pakistan

has imported 1.02 million tons of sugar, 1.4 million tons of edible oil (palm oil), 0.5 million

tons of pulses and 94.3 thousand tons of tea. This shows sensitivity of domestic food prices

to global price movement and domestic food security upon global food supplies. To

minimize the impact of imported inflation, efforts have been made to substitute imported

food items with local production. Half hearted and reluctant efforts failed because of not

properly sequencing incentives to increase production of major food and cash crops. The

country has adequate scope of expanding and diversifying import basket as well as

concentrate to improve the supply position through better management of stocks in the

short run and increase production in the medium and long term periods. (18)YoY and MoM change in domestic CPI food commodities are shown in table 9.

Table 9

Inflation in Domestic CPI Food Commodities


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SPI Inflation

Rising food prices contributed to acceleration of inflation across the country. CPI food

inflation increased sharply this year and the same impact was witnessed in SPI with periodaverage inflation of 18.2 percent during July-April 2010-11. Following the general rise in

prices, all type of inflation covered under different groups of SPI are on the rise with

pronounced hike in food group inflation 13.2 percent. The impact was more visible in prices

of pulses, rice, meat, sugar, edible oil and vegetables. A variety of factors can be taken into

account to explain rise in food price component of SPI including shortfall in production of

some essential items and a significant increase in world food stuff prices like palm oil and

rice during 2010-11. The spike in the SPI index persists on the back of persistence of supply

disruptions, utility price adjustments and still high crude oil price. (19) Table 10 shows the

list of SPI items and its price changes YoY and MoM.

Table 10:

SPI Item-wise Price Movements


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WPI Inflation

The Wholesale Price Index (WPI) during July- April 2010-11 has increased by 23.3 percent, as

against 11.3 percent in the comparable period of last year. The recent spike is mainly drivenby upsurge in textile and energy prices. WPI has moved up from 17.6 percent in June 2010

to 25.9 percent in April 2011.The damage to cotton crops by floods and rise in external

demand for cotton related exports and massive surge in international prices were factors

behind higher cotton prices. The impact is also visible in manufactures sub-groups. Among

other groups of WPI suggests that in the food category, the supply shocks have adverse

impact on food inflation and was more visible in prices of heavy last year. The recent spike is

mainly driven by upsurge in textile and energy prices. WPI has moved up from 17.6 percent

in June 2010 to 25.9 percent in April 2011. Weights like pulses, rice meat, milk, sugar and

vegetables, clearly associated with flood related disruptions. (20) Wholesale Price Index

Numbers by Major Groups and Selected Commodities are shown in Table 11.

Table 11:

Wholesale Price Index Numbers by Major Groups and Selected Commodities


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RemediesAgricultural growthhas played a major role in the countrys development and continues

to be crucial for overall growth and poverty reduction. World Banks report on Rural Poverty

suggests following options toreduce poverty;

Promotion of efficient and sustainable agricultural growth to raise the incomes ofsmall farmers and to generate growth linkages in the rural non-farm economy.

Programs to increase livestock production, especially production of dairy cattle and

milk in Punjab and Sindh, and sheep and goats in NWFP and Baluchistan, could have

significant direct impact on the incomes and food security of the rural poor.

Creation of an enabling environment for the rural non-farm sector to enhanceemployment and incomes, and improve rural public service delivery in infrastructure,

health and education to serve as a foundation for growth and to increase household

welfare and food security.

Enhancement of the effectiveness and governance of rural institutions throughdecentralization and strengthen local demand for enhanced accountability. Five

years after devolution, there is still confusion regarding the roles and responsibilities

of the various levels of government, as well as apparent jurisdictional overlaps.

Immediate steps should be taken to begin to alleviate these administrative

constraints and improve the efficiency of spending, and Empowerment of the poor

and protection of the most vulnerable through social mobilization, safety nets and by

facilitating access to productive assets for income-generating activities for povertyreduction and food security.

Food security has basically three dimensions; adequacy of food supply, access to food, and

equity of food distribution. All these dimensions require special interventions and enabling

environment for ensuring household food security. Following are the policy and strategic

options recommended by the United Nations System in Pakistan toreducefood insecurity;

(21)

Sustainable and efficient utilization of the natural resources

Land: Land related problems like depleting soil fertility, soil erosion, water logging and

salinity needs immediate attention to achieve yield potential of crop.

The other option is to take up new lands for agriculture. At the moment there is about 4

million acres land in the reverie belt of the country which should be distributed among local

landless peasants. These are virgin lands where there is no shortage of moisture. The special

conditions attached to these areas, especially bio-diversity have to be taken into

consideration.


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Water: The efficient and effective use of irrigation water is most crucial to the future of

Pakistan. It is also necessary that the government should plan for the future needs, taking

into account agricultural, domestic, and industrial demand of the future and impact on the

environment. There is urgent need for the government to ensure adequate and timely

availability of water for farming to enhance food production and availability. The lowering of

the water table is a serious issue in Balochistan, where the installation of large number of

tube wells for irrigation is the main factor. Efficient utilization will not only promote food

production, but also ensure the sustainable use of the ground water. In arid areas of the

country like Cholistan, Tharparker and greater part of Balochistan, efficient rainwater

utilization can be done through better water harvesting techniques and more efficient use

of the available water resources. In the Rod-Kohi and dry mountainous areas, rainwater

harvesting, storage and management including increasing the capacity of the main

reservoirs should be given higher priority.

Proper application of physical inputs

Seed: Improved seed is one of the important factors in crop productivity enhancement, but

unfortunately this category of seed coverage is within low range of 14-20% for wheat and

other major food crops. The productivity of the food crops can be substantially enhanced

through increased use of quality seed.

Fertilizer: Proper use of organic and inorganic fertilizers is also critical for maintaining soil

fertility to enhance agriculture productivity. Fertilizers should be used according to the site-

specific requirements of crops. The current use of plant nutrients is not only imbalanced and

inadequate, but inefficient as well. The use of organic and inorganic fertilizer needs to be

encouraged in an integrated manner.

Credit: Due to the financial limitations, the small farmers are largely dependent on credit to

procure agriculture inputs. The existing credit procurement system is complicated and not in

easy access to small farmers. There is an immediate need to simplify such procedures. The

agriculture loan should be broad based, and flexible enough to provide credit for variety of

agriculture related activities.

Credit should be extended to the rural non-farm households, including rural poor, landless

farmers and women for their income generation. .

Pesticides: There is indiscriminate use of pesticides for plant protection. Integrated Pest

Management should be promoted for sustainable plant protection. In this regard, policy

changes have to be made, and effective implementation arrangement has to be put in place.

Productivity enhancement of major food crops

Wheat: The yield range for the wheat is in the range of 0.8 to 5.5 tons per ha. This clearly

indicates that through improved management the gap can be reduced, and correspondingly

substantial increase would be obtained in the production. In view of the special concern for

food security, a quick and sustainable increase in wheat productivity is essential.


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Rice: The yield of rice is about 2.0 tons/ha against expected yield of 2.56 tons/hectare.

This increase in yield could be easily achieved through good management practices at farm

level. Rice productivity can be increased through increasing plantation intensity,

mechanized transplanting and reducing post harvesting losses. The strategic option for the

rice would be to increase the productivity of the crop, while keeping the same area under

this crop due to its high water requirement.

Maize: This crop is mainly grown in the rain-fed areas of NWFP and Punjab. The current

production level is about 1.7 million tons. Maize can play an important role in food security

as it is grown in poor areas of the country (the mountainous and rained areas), which are

generally food insecure. The potential of maize to contribute towards more nutritive food

for human consumption is high. Presently, the maize yield is far below its potential (1.5

vs.10-12 tons/ha) which should be enhanced.

Oil seed: The local production of the oil seed is low, and the country imports a large

quantity to fulfill the demand of the fast growing population. There is a need to exploit the

potential of the oil crops by creating more attractive and conductive environment through

the establishment of an effective marketing system of oil seed crops, besides bringing new

varieties of high yield.

SuggestionsIdentification and targeting the food insecure people

In the context of access to food, it would be important to identify the food insecure people,

who are financially poor and are unable to acquire sufficient food, even if the overall supplyof food in the country is sufficient, and to improve co-ordination, information and statistical

data on food insecure and vulnerable groups.

Diversification of on-farm and off-farm income generation activities

In order to raise the financial capability of the poor women to have purchasing power for

the essential food items, diversification of income both from on-farm and off- farm should

be encouraged. There is great scope and potential of increasing yields of short-term cash

crops, like vegetable items produced and marketed in the nearest urban areas. This is

especially the case with lands situated in the urban areas where proximity to large towns

enables an efficient marketing strategy. This can be further integrated into livestock andsmall ruminant development. This would require the integrated development of the farming

system as a whole.

Stabilization of input and output prices

Keeping in view, the poor financial situation of the food insecure people, it would be

required to put in place input and price polices in such a way to rationalize the prices of

both inputs and outputs. Sudden and drastic changes and fluctuations would definitely

affect poor to have access to food. At the top of it is to give the farmer a fair return in the

market place.


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Distribution of land and access to the resources and inputs

The distribution of land resource is skewed. In addition, large farmers have easier access to

resources like water, and credit. Small farmers suffer from resource starvation. Even withinthe small farmer category, there is a case for improving the conditions of the poorest of the

poor i.e. those that own one hectare or less. Therefore more emphasis should be made to

facilitate easy access of the majority of small farmers to the land, water and other essential

agriculture inputs. This will help in the overall agriculture growth of the country.

Gender inequity

Inequity is greatly reflected in gender. In the rural areas, the women are generally

uneducated, and the male members control the resources, in spite of the fact that the

female contributes a lot of labor for food production. In this way they are unable to

maintain their own assets. It will be required to focus more on women and children,especially girls to bring them at par with other members of the family.

Skill development and exposure to the development

Skill development and capacity building are important factors for equity. Well trained

farmers will have more confidence for undertaking small food related enterprises, which

would help in their economic uplift. Efforts have to be made to develop capacity of the

farmers (both male and female) for undertakingsmall businesses and enterprises.

Improving the nutritional aspects of food

Ensuring the food security for household is not only related to availability, but also whether

the food fulfils the nutritional requirement of its consumer. Through balance diet and good

food quality and removal of gender inequity, the nutritional aspects of the food security can

be enhanced. Exploring and promoting cheaper alternatives for nutritional requirement is a

necessity.

Vegetable and Pulses Production

In order to provide the required proteins and vitamins, it will be important to promote

household vegetable production in the form of kitchen gardens. Poor and small farmers do

not have the financial resource to buy these items from the open market, and they heavilyrely on cereal, which fulfills the caloric requirement of the body, but lack the nutritional part

of it. Growing vegetables and pulses will compensate for the nutritional value of the food.

Similarly pulses can compensate for meat, which is generally beyond the purchasing power

of poor farmers.

Rural poultry and rearing of small ruminants

Rural poultry is another important protein source, which can be promoted for improving

nutritional aspect of the diet. The urban areas could certainly take advantage of this. Small

ruminants are reared mainly by the small farmers and landless. For them it is a source of

cash reserve, as well as nutritional resource.


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Recommendations

Removing policy distortion

There is a need for a continuous review of macro-economic framework to remove the policy

bias against agriculture. Policy distortions not only depressed the prices for major crops but

also resulted in large price variations between years. There is a need to evolve a policy that

keeps this variation within narrow bands. There is a need for government to rationalize

public investment as this encourages private investment in agriculture.

Provision of rural infrastructure

Rural infrastructure and human resource development have the attributes of "public

goods", especially in a society composed of a large number of small farmers and poorpeople. The provision of an effective rural infrastructure, particularly rural roads, electricity,

drinking water, and educational and health facilities is one of the most important

instruments that relaxes the constraints faced by the farmers and the non-farming poor

rural people.

Human Resource Development

Raising the literacy level is an essential condition for the success of rural development

programs. There is also a need to give vocational training to both farmers, workers in small-

scale rural enterprises and traders and entrepreneurs and to strengthen the agricultural

colleges and universities in their efforts to produce better research and extensionmanpower.

Research and extension support services

Research system needs a thorough revamp in terms of focus, mandate, management and

power planning and development. Research on high value crops, livestock, fisheries,

Forests conservation, post-harvest handling, irrigation water management and soils

problems need to be given much higher priority. The provincial extension services also need

overhauling. It should give more emphasis to technology and the use of broadcast media to

spread its messages. It needs further focus on middle and small farmers using group

participatory approach and to strengthen its linkages with the research institutes. (22)


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27Th I i Of M S i

References

1. Rome Declaration on World Food Security and World Food Summit Plan of Action,13-17 November, 1996, Rome

2. Article, Business Recorder, Karachi, October 16, 20043. Food Insecurity in Rural Pakistan 2003, World Food Program (WFP) Pakistan, SDPI,

Islamabad

4. United Nations Statement on Food Security in Pakistan 2000, United Nations Systemin Pakistan, Islamabad

5. Mazhar Arif, Land, peasants and Poverty: Equitable Land Reforms in Pakistan, 2004,The Network Publications, Islamabad

6. United Nations Statement on Food Security in Pakistan 2000, United NationsSystem in Pakistan, Islamabad

7. Economy survey of agriculture 2010-11, federal.gov.pk8. National Coordinated Wheat Program, Briefing Paper, Pakistan Agricultural Research

Council (NARC), Islamabad

9. Economy survey of agriculture 2010-11, federal.gov.pk10.Economy survey of agriculture 2010-11, federal.gov.pk11.Economy survey of agriculture 2010-11, federal.gov.pk12.Economy survey of agriculture 2010-11, federal.gov.pk13.Dawn-October 07,201114.Dawn-October 17,201115.Economy survey of inflation 2010-11, federal.gov.pk16.Inflation monitor, October 2011, State bank of Pakistan17.Economy survey of inflation 2010-11, federal.gov.pk18.Economy survey of inflation 2010-11, federal.gov.pk19.Economy survey of inflation 2010-11, federal.gov.pk20.Economy survey of inflation 2010-11, federal.gov.pk21.World Bank, Rural Poverty Report on Pakistan, April 200722.United Nations Statement on Food Security in Pakistan 2000, United Nations

System in Pakistan, Islamabad

Documents

Food In Security & Inflation