Cash crops: identifying winners & losers

28 Jun, 2022

Last week, an analysis of growth in major crops productivity over last six decades was published in this section, which showed that the past 10 years have arguably been the worstin Pakistan’s history in terms of yield improvements. (For more, read: “The lost decade of farming”, published on June 23, 2022). But crop output – and therefore farmer earnings – have not necessarily done poorly across the board.

Although wheat and cotton farmers witnessed slowest decade of output growth; fortunes of maize, rice, and sugarcane farmers could not have performed more differently. Output of these three crops grew at the second-fastest pace in at least half century. Between FY12 and FY22, national maize output grew 2.5 times, while rice and sugarcane output grew by over 51 percent.

Where productivity growth remained slow, it was supplanted by significant increases in acres under cultivation.While acreage under wheat remained unchanged over the past decade, the country added more than one million hectares under rice, and almost half a million hectares under maize. Even sugarcane, which occupies lowest share in acreage among major crops, added more than 0.2 million ha between FY12 and FY22.

This has coincided with two concomitant trends. One, while average acreage under four major kharif crops (i.e. excluding wheat) averaged 7.5 million ha during FY03 – FY12, average acreage rose to 8 million ha by latest decade. This is surprising, considering that anecdotal evidence suggests that Pakistan is fast losing its fertile acres in Punjab and Sindh to residential developments. If GoP data is to be believed, either fresh farming acres are opening up in yet to be identified regions, or farmers previously growing non-traditional crops have reallocated their land to any four out of five major crops.

Two, Pakistan’s erstwhile favorite cash crop – cotton – lost nearly 1 million ha in area under cultivation during the 10-year period. Cotton’s fall from grace has been well documented in this space and other research publications, driven by a confluence of factors from low global prices, increasing frequency of weather events, poor seed quality, slowdown in demand from local textile industry, and higher profitability of substitute crops.

However, it is the fate of farmers still stuck with growing cotton despite adverse circumstances that appears peculiar.

The intuitive explanation of course is the inability of those farmers to switch to alternate crop combinations, due to unfavorable soil or climatic conditions. The obvious example to this effect is of maize, which despite its remarkable success in central Punjab over past 20 years is rarely found in southern-most Punjab or Sindh, due to higher temperatures in these regions.

Similarly, prohibitive irrigation water requirement of rice – especially basmati variety – means the crop cannot be adopted by growers in non-irrigated regions irrespective of prospective ROI or demand dynamics. Lastly, on-farm consumption by subsistence farmers means they must grow grains/cereals in some form, which restrains them from switching to perennial crops such as sugarcane even if land and climatic conditions may be favorable.

Put together, these developments hint towards a curious trend in rural poverty and inequality. Although available data is insufficient to make conclusively statements, the concurrent disparity between: 1) output growth, 2) productivity growth, and 3) relative profitability of substitute crops indicates that farmers stuck with cotton-wheat combinations may be far worse off financially than farmers that grow rice-wheat, maize-wheat, or sugarcane.

At least to the extent of Punjab, the Multidimensional Poverty Map of Pakistan published by Pakistan Poverty Alleviation Fund corroborates this hypothesis, where southern Punjab districts such as D.G. Khan, Rajanpur, Lodhran, Muzaffargarh, Bahawalnagar, and Bahawalpur are the poorest in the province. Curiously, the adoption rate of substitute crops such as rice, maize, and sugarcane has been the slowest in these districts.

Cotton may be the lifeline of Pakistan’s textile industry, and given its near-term trade deficit concerns, advocating adoption of imported cotton may be poor economic advice. However, if farmers’ loyalty to cotton has failed to break them out of poverty, does advocating more cotton cultivation serve public policy objectives well?

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