Lower Production and Higher Demand Reasons for Soaring Wheat Prices in Pakistan: ADB

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The shortage of wheat production in the recent past, set against the domestic requirements of an ever-increasing population, has triggered price hikes, while imports strained the country’s foreign exchange reserves, says the Asian Development Bank (ADB).

The bank in its latest report “Asian Development Review” stated that in the wake of population growth, urbanization, and industrialization, the availability of arable land and water is facing intense pressure from nonfarm uses in Pakistan. Consequently, the per capita availability of arable land and irrigation water is declining, while demand for food and industrial raw materials is on the rise.

The prices of farm inputs in Pakistan — such as fertilizers, pesticides, farm machinery, and diesel — have experienced a tremendous hike, resulting in the high cost of farm production and consumers crying hoarse over the rising prices of food and other commodities. In addition, climatic changes — as manifested in rising temperatures, varying patterns of rainfall, and increased and intensified flooding — are also raising concerns for farmers and those dealing with the development of agriculture and food production in Pakistan.

The report noted that rice exports have been an important source of earning foreign exchange, estimated at around $2 billion per year in recent years. Increasing maize production has supported the expanding poultry and livestock sectors in the country, as well as the edible oil industry. These crops are thus also important in the context of the balance of trade and payments, and increasing their production, especially through vertical and efficiency improvements can have salutary effects on the balance of trade through import substitution as well as exports. It is imperative to increase the productivity of farm resources and improve the efficiency of inputs used in farm production.

The area under these crops, estimated at 14 million hectares, accounts for approximately 55 to 60 percent of Pakistan’s total cropped area, and their annual production constitutes 98 percent of the total production of food grains in the country. Thus, the production and productivity of these crops play a crucial role in food security and food inflation and also impact the balance of trade in Pakistan. The contribution of Punjab to the annual production of food grains in the country is estimated at over 73 percent for the most recent years for which data are available, reflecting the province’s status as the food grain basket of Pakistan.

Analysis of land productivity and technical efficiency in the production of major food grains in Punjab has highlighted substantial variation and scope for increasing production by improving productivity and technical efficiency at the farm-firm level.

Technical efficiency and estimates of slacks in the use of important inputs in wheat farming in various crop zones indicate that farmers can reduce the level of important inputs from 10 percent to 29 percent without changing the current level of output and technology. A large variation in technical efficiency is a manifestation of the substantial potential for increasing farm productivity and the production of food grains in the province. However, successful efforts need to be predicated on detailed analysis and diagnosis of the underlying factors for each region and crop, it added.

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