As if news on the fiscal front wasn’t dismal enough in FY19, the country is set for an all-around disappointing farming year as well. According to latest SBP’s State of the Economy report on 2QFY19, rabi season estimates are in and paint a bleak picture.
Recall that the performance of the three major kharif (March to September) crops remained underwhelming on the back of high carryover stock, depressed international prices, dampened domestic demand and scarce availability of water in southern region.
This meant that pressure on the off-season winter crop increased ever more to keep the growth momentum of previous year going. Except the numbers are in, and wheat, rabi season’s only major cereal crop, has been an equal opportunity disappointment.
On surface, this is surprising because off-season winter rainfall had raised expectations of improved sowing, with hopes of area under cultivation at least meeting official target (which was already on the lower side due to high government wheat stocks). Instead, cultivated area is set to decline by 3 percent, with an accompanied decline of 3.5 percent in production, unless yield records miraculous gains.
So, what turned an already dispiriting agri-year into times of sweeping sorrow? Circumstantial factors this year include lower application of fertilizer due to higher prices, along with a substantive decline of nearly 40 percent in agri-credit disbursements in 2QFY19, compared to same period last year.
But wheat is a heavily protected crop, with nearly all marketed stock procured by PASSCO and similar provincial govt. food departments at fixed rates. Considering depressed returns on kharif season cash crops in the ongoing year, shouldn’t the farmer community not have redoubled it focus on wheat sowing?
Not necessarily, because for growers, kharif season crops continue to be the primary cash minting machines. Pinning their hopes on higher financial returns from crops such as sugarcane, rice and cotton, farmers delay harvesting of these crops, which in turn limits the available sowing time for wheat.
But that’s only half of the story. The remaining explanation lies in the distorted agri-value chain. Even if the farmer is in a hurry too harvest kharif crop to sow wheat, he often faces difficulty in offloading his produce. Sugar millers, for example, delay procurement hoping for cane’s water content to dry up, reducing the gross tonnage of the stock.
Millers view this approach as rational, as the practice does not affect the sucrose content of sugarcane; whereas cane’s price is set in weight and not sucrose terms. On the other hand, government, whose quasi-fiscal operations are already reeling under pressure, is no fan of increasing wheat output either. Domestic wheat prices are already at a significant premium to international rates with much of the burden borne by the exchequer. Moreover, with share lost in the Afghan market, existing official wheat stocks have no where else to go.
Thus, it could be argued that it is in government’s interest to keep quiet and not nudge millers to stop their borderline extortive practices. And hence we let mediocrity abound.
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