To make the matter worse, the World Bank is telling that the trend of high grain prices would continue till 2015. Can Pakistan, which has not been able to land back on its financial and social feet after few months prices peak in the mid-2008, absorb five years of continuous volatility? Most certainly not! - Illustration by Khalida Haq.

The serious food, fuel and financial fluctuations of 2008, which bred food insecurity among the world’s poor and pushed over 30 million more down the poverty line, are returning to the world markets, says the World Bank.

The bank has warned that grain prices, which are already either close to 2008 peak or have crossed it, will retain the trend for next five years – up to 2015.

Wheat prices, which once peaked at $439 per ton during March, were largely around $350 per ton throughout 2008. Currently, the price has touched $378 per ton and is rising. It was $365 per ton last weak and $206 per ton last year. The trend is expected to hold as the world fears a net drop in output of 31 million tons (from 678 million tons in 2009-10 to 647 million tons in 2010-11) mainly due to Australian rains and Russian drought. This is 14 million tons short of 661 million tons world requirement estimated for next year.

Similarly, maize prices, which peaked at $287 per ton during June 2008, have passed $302 per ton. They were up from $288 per ton last weak and $167 per ton last year. Though the world maize production during the current year is expected to remain at 809 million tons – only four million tons short of last year’s production of 813 million tons – it falls some 31 million tons short of international requirement of 840 million tons. With wheat diverted to poultry feed to meet maize shortfall and also maize diversion to ethanol production, wheat prices are expected to remain high.

The total grain (wheat, rice, maize, soybean, barely) deficit during 2011 would be around 61 million tons – supply of 1,726 million tons against consumption of 1,787 million tons. This shortfall would naturally convert into higher prices and hit the world poor again.

For countries like Pakistan, it would be a mixed blessing: higher grain prices would pump additional money into rural areas but add to urban poverty and food insecurity. Even in rural areas, extra money would go only to those who have surplus production (read big farmers) but may not benefit subsistence farmers. It may be a bane for majority and boon for a microscopic minority – a huge addition to further social imbalance in a society that is already dangerously lopsided.

To make the matter worse, the World Bank is telling that the trend of high grain prices would continue till 2015. Can Pakistan, which has not been able to land back on its financial and social feet after few months prices peak in the mid-2008, absorb five years of continuous volatility? Most certainly not!

The cost of a few months grain prices peak was so horrendous that even thinking the same pressure for five-year should drive everyone nuts. Immediately after the price peak receded, Pakistan issued fresh poverty figures at the beginning of 2009. It conceded a phenomenal increase of 15 per cent in the poverty incidence – up from 23 per cent in 2008 to 38 per cent in the beginning of 2009. Most of the independent researchers, however, put them even higher by three to four per cent.

Now the same kind of pressure would be exerted on Pakistan for five years if the World Bank warning turns out to be true. If five months of pressure added 15 per cent to the poverty incidence, what would be the social cost of five years? Especially when the state is certainly poorer, both socially and financially, than it was in 2008-09. Currently, it neither has money to subsidise grain nor credible mechanism to take subsidies to the poor. It leaves the poor vulnerable to these fluctuations, and places the country on a social time bomb.

Pakistan is one of the most stressed society when it comes to food security. A recent report by a British company – Maplecroft, which provides risk intelligence service for businesses – ranked Pakistan 11th most food stressed country in the world. In an indexation of 148 states, only countries like Angola, Mozambique, Congo, Haiti and Burundi stood above Pakistan. Similarly, the Food and Agriculture Organisation (FAO), World Food Programme (WFP) and the World Bank, by and large, have reached the same conclusion in their reports.

Granted that poverty is not exclusively agricultural phenomena, other policies (monetary and fiscal) also play their role. But, agriculture plays an essential role in an agrarian society like Pakistan. It is especially true when it comes to food security, which is essentially a supply side (an agricultural) issue.

Considering the FAO definition, “food security exists 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;” one can conclude that agriculture plays the pivotal role in ensuring security, especially in free markets operating on demand-supply mechanism. Any shortage could lead to spiraling of price, taking them out of common man’s easy reach. It is directly linked to agriculture (food production, and ensuring availability of sufficient per capita food).

The developing international grain shortage and prices would be a critical test for policy-makers. It is time to prepare for it. Fortunately, Pakistan has healthy stocks of wheat, which is a staple for the country. But reports about the next crop are not so good. If the prices keep spiraling, its stocks would not survive smuggling during the next year, leaving the state vulnerable for next four years. The state needs to plan accordingly.

Huge additional income for the big farmers, which this international trend promises, also strengthens the case for agriculture taxation to better equip the state for dealing with social crisis that the same trend would generate.