EXPORTS of all food items except sugar fell, while imports surged in the first quarter of this fiscal year, pushing up the food trade deficit nine times higher than a year-ago.

During July-September 2014, the food trade deficit swelled to $547m as exports of food items fetched $883m against imports of $1.43bn, official stats show. In July-September 2013, this deficit was a tiny $61m, with exports at $981m and imports at $1.042bn.

Not only export earnings of major food items declined, the export volumes also fell. For example, rice shipments were down 7.6pc, seafood 6.9pc, fruits 16.5pc, meat 23.4pc and vegetables 47.6pc.

Exports of fruits and vegetables went down primarily due to field and orchard losses because of the floods and disruption in transportation of refer-containers from hundreds of flood-affected villages in Punjab to port city of Karachi

Exporters hold flood-related damages to agricultural supplies and PTI’s/PAT’s public sit-ins in Islamabad responsible for this situation. Rice exporters say delayed harvesting of rice due to floods in Punjab created supply shortages which hiked local prices. That forced many of them to reduce export volumes. A declining trend in global average price of aromatic rice varieties ($266 per tonne in Jan-Sep 2014 vs $269 per tonne in Jan-Sep 2013) also discouraged exports of basmati.

However, rising demand for export-quality packaged rice in local markets somewhat compensated export volume losses to some extent, says an official of Rice Exporters Association of Pakistan.

Some exporters, worried by reports of up to 10pc crop loss after the floods, also lowered export

shipments during the first quarter, anticipating the immediate price hike in the local market to subside afterwards.

Some latest reports including one by Suparco indicate that the losses would be lower than initially feared and rice exports, particularly of basmati, would increase. Growers and traders say basmati varieties are still being harvested in parts of Punjab and KP and arrivals would continue through mid-January.

Seafood exporters say foreign sales of fish and fish preparations fell during Q1FY15 for two reasons. First, fish catches by local fishermen fell as illegal fishing by foreign trawlers in our part of the Arabian Sea continued unabated and unchecked.

And second, fish exports to China, a fast-growing market for Pakistan, were affected by fiercer competition from India and Bangladesh, and shipments to the North African countries were also hit by political disturbance in that region.

Exports of fruits and vegetables went down primarily due to field and orchard losses because of the floods, and disruption in transportation of refer-containers from hundreds of flood-affected villages in Punjab to port city of Karachi. Besides, the presence of fruit-fly in one of the mango consignments to the EU market and its subsequent return to Pakistan led to imposition of a ban on exports of mangoes without post-harvest, hot-water treatment.

That, according to exporters, also caused volumetric fall in mango exports, more so due to unavailability of adequate hot-water treatment facility.

So, there were some problems in food exports which resulted in lower export earnings in Q1FY15. This coincided with increase in demand of food imports in the wake of the floods and due to unabated smuggling of wheat, tea and other food items from Pakistan to Afghanistan. So, the food trade deficit had to grow and it did.

Wheat imports almost doubled to 275,000 tonnes in Q1FY15 from 139,000 tonnes in a year-ago period as local wheat supplies fell short of market requirements.

In addition to smuggling, delay in timely release of subsidised wheat from provincial agriculture departments, poor quality of this wheat, loss of grains at government-run godowns after the floods and falling international wheat prices also led to larger wheat imports. (Global average wheat prices gradually fell from $335 per tonne in May to $245 per tonne in September, importers say).

Imports of tea, during Q1FY15, also went up to 40,000 tonnes from 29,000 tonnes in Q1FY14. Officials of tea blending companies say the bulk of additional amounts of tea were smuggled out of Pakistan under the guise of Afghan transit trade.

However, commercial tea importers point out that the global average international tea price in July-September was higher than in April-June this year, making tea smuggling less lucrative ($2.34 per kg vs $2.22 per kg). They believe the increase in tea imports was more because of higher local demand after rains and floods in Punjab and KP.

Distribution of cooked food and food packets among thousands of flood-hit families surely pushed up demand for such food items like tea, powdered milk and milk-based products plus cooking oil and pulses etc. This is believed to be one big reason for increase in imports of milk, cream and milk food for infants to more than 16,000 tonnes in July-September this year from 10,000 tonnes last year. Import volumes of pulses also increased to 154,000 tonnes from about 116,000 tonnes, more so because their local output also declined for various reasons.

Palm oil imports at 565,000 tonnes in Q1FY15 was almost unchanged at the year-ago level and showed a nominal 4pc rise in terms of value due to moderate hike in global prices.

Imports of soybean oil did show an increase — to 33,000 tonnes from 24,600 tonnes — but for blending in locally produced cooking oil whose output is on the rise.

Published in Dawn, Economic & Business, November 3rd, 2014