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Food Insecurity & Inflation

December 29

2011

Food Insecurity & Inflation 2011

Contents
Executive 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 ................................................................................................................................ 17 CPI Inflation ................................................................................................................................... 19 SPI Inflation ................................................................................................................................... 20 WPI Inflation ................................................................................................................................. 21 Remedies............................................................................................................................................... 22 Suggestions ........................................................................................................................................... 24 Recommendations ................................................................................................................................ 26 References ............................................................................................................................................ 27

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Food Insecurity & Inflation 2011

Hunger is exclusion exclusion 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 because all the rest has been denied. This is a modern form of exile. It is death in life Josue de Castro

Executive Summary
Food 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 severely compromised. 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 water management, 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 Security
Food 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 all times 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 people to 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 temporal dynamics 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. This concept 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 a spectrum 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: Food security, at the individual, household, national, regional and global levels [is achieved] when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life. (1)

Food Insecurity Food insecurity exists 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 it difficult for them to compete in export markets against highly subsidised farmers in rich countries.

Right to food
Article 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 international perspective 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 Pakistan
Article 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 security


Food 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 food utilization 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, its distribution 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 ricewheat 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 Economic Survey 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 in Pakistan, 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 rainfed conditions. (6)

Table 1: Agriculture Growth Year Agriculture 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 (P)
P: Provisional

Major Crops 17.7 -3.9 7.7 -6.4 7.8 -2.4 -4.0

6.5 6.3 4.1 1.0 4.0 0.6 1.2

Minor Crops 1.5 0.4 -1.0 10.9 -1.2 -7.8 4.8

Livestock 2.3 15.8 2.8 4.2 3.1 4.3 3.7

Fishery 0.6 20.8 15.4 9.2 2.3 1.4 1.9

(in %age) Forestry -32.4 -1.1 -5.1 -13.0 -3.0 2.2 -4.0

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 Crops
Pakistan 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 to agricultural 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 Year Sugarcane 2004-05 47,244 (-11.6) 2005-06 44,666 (-5.5) 2006-07 54,742 (22.6) 2007-08 63,920 (16.8) 2008-09 50,045 (-21.7) 2009-10 49,373 (-1.3) 2010-11 (P) 55,309 (12.0)

Rice 5,025 (3.6) 5,547 (10.4) 5,438 (-2.0) 5,563 (2.3) 6,952 (25.0) 6,883 (-1.0) 4,823 (-29.9)

Maize 2,797 (47.4) 3,110 (11.2) 3,088 (-0.7) 3,605 (16.7) 3,593 (-0.3) 3,262 (-9.2) 3,341 (2.4)

(000 Tons) Wheat 21,612 (10.8) 21,277 (-1.6) 23,295 (9.5) 20,959 (-10.0) 24,033 (14.7) 23,311 (-3.0) 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 (000 Hec.) % Change (000 Tons) % Change 2006-07 1029 13.5 54742 22.6 2007-08 1241 20.6 63920 16.8 2008-09 1024 -17.1 50045 -21.7 2009-10 943 -8.4 49373 -1.3 2010-11 (P) 988 4.8 55309 12.0
P: Provisional (July-March)

Yield (Kgs/Hec.) % Change 53199 8.0 51507 -3.2 48635 -5.6 52357 7.7 55981 6.9

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 0.9 percent 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 Rice Year Area (000 Hec.) % Change 2006-07 2581 -1.5 2007-08 2515 -2.6 2008-09 2963 17.8 2009-10 2883 -2.7 2010-11 (P) 2365 -17.9
P: Provisional (July-March)

Production (000 Tons) % Change 5438 -2.0 5563 2.3 6952 25.0 6883 -1.0 4823 -29.9

Yield (Kgs/Hec.) % Change 2107 -0.4 2212 5.0 2346 6.1 2387 1.7 2039 -14.6

Source: Ministry of Food and Agriculture, Federal Bureau of Statistics

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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 contributes 13.1 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 (000 Hec.) % Change 2006-07 8578 1.5 2007-08 8550 -0.3 2008-09 9046 5.8 2009-10 9132 1.0 2010-11 (P) 8805 -3.6
P: Provisional (July-March)

Production (000 Tons) % Change 23295 9.5 20959 -10.0 24033 14.7 23311 -3.0 24214 3.9

Yield (Kgs/Hec.) % Change 2716 7.8 2451 -3.9 2657 8.4 2553 -3.9 2750 7.7

Source: Ministry of Food and Agriculture, Federal Bureau of Statistics

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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 2009-10 2010-11 (P) Crops 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 6 Area and Production of Minor Crops 2009-10 Crops Area Production (000 hectares) (000 tons) 24.0 10.9 Masoor 183.3 118.7 Mung 24.1 10.7 Mash 138.5 3141.5 Potato 124.7 1701 Onion P: Provisional (July-March)

2010-11 (P) % Change In Area Production Production (000 hectares) (000 tons) 24.0 10.6 -2.7 137 77.1 -3.5 23.8 11.2 1.0 127.7 3726.5 18.6 143.7 1892 11.2 Source: Ministry of Food and Agriculture

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Food inflation
After 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 spending power 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 primary agricultural 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 storage locations. This will have an immediate impact on the prices. Proper care must be taken of warehouses where all agricultural especially perishable goods 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 analysis of 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 Gilani said 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 2010-11


Inflation 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 major supply 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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Food Insecurity & Inflation 2011

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 and 15.3 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 groups than 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 percent of 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 period average 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 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.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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Remedies
Agricultural growth has 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 to reduce poverty; Promotion of efficient and sustainable agricultural growth to raise the incomes of small 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 enhance employment 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 through decentralization 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 poverty reduction 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 to reduce food 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 sitespecific 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.

Suggestions
Identification 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 supply of 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 and small 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 within the 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 undertaking small 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 heavily rely 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 poor people. 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 smallscale rural enterprises and traders and entrepreneurs and to strengthen the agricultural colleges and universities in their efforts to produce better research and extension manpower.

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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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, 2004 3. 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 System in 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 Nations System in Pakistan, Islamabad 7. Economy survey of agriculture 2010-11, federal.gov.pk 8. National Coordinated Wheat Program, Briefing Paper, Pakistan Agricultural Research Council (NARC), Islamabad 9. Economy survey of agriculture 2010-11, federal.gov.pk 10. Economy survey of agriculture 2010-11, federal.gov.pk 11. Economy survey of agriculture 2010-11, federal.gov.pk 12. Economy survey of agriculture 2010-11, federal.gov.pk 13. Dawn-October 07,2011 14. Dawn-October 17,2011 15. Economy survey of inflation 2010-11, federal.gov.pk 16. Inflation monitor, October 2011, State bank of Pakistan 17. Economy survey of inflation 2010-11, federal.gov.pk 18. Economy survey of inflation 2010-11, federal.gov.pk 19. Economy survey of inflation 2010-11, federal.gov.pk 20. Economy survey of inflation 2010-11, federal.gov.pk 21. World Bank, Rural Poverty Report on Pakistan, April 2007 22. United Nations Statement on Food Security in Pakistan 2000, United Nations System in Pakistan, Islamabad

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