Farmers take a hit as Eid economy sinks

Updated August 19, 2019


The pain of economic slowdown is growing in rural households as the market for sacrificial animals shrank and prices crashed this Eidul Azha.

In desperation to contain losses, many traders decided to return to the market early with the unsold stocks instead of waiting for buyers until the third day of Eid.

Traditionally, farming families raise animals, mostly goats or calves, to sell in cities at a premium on Eidul Azha to generate funds for purposes not covered by routine income.

“The money earned from the sale of cattle makes Eid in rural Pakistan sweeter. It is treated as an annual bonus. Besides affording some indulgence for the family, the money is often used to replace agricultural tools, do home repairs or invest in assets. Small farm-holders may also use the money to retire debt,” Adil Gujjar, manager at a commercial farmhouse in Multan, told Dawn over the phone.

Market watchers project a 40-50 per cent fall in the total volume of livestock trade this year. The average price of a goat, calf, cow or sheep was down by 10-15pc from last year, chewing up margins at low volumes.

The Federal Board of Revenue (FBR) has kept out of maweshi mandis (cattle markets) for now. Recent reports about a tax on the sale and purchase of sacrificial animals proved incorrect. FBR Chairman Shabbar Zaidi told Dawn the sale and purchase of cattle on Eid was tax free.

A senior officer of the FBR, however, told Dawn privately that a proposal to this effect did come under discussion in the recent past. “You need to inquire the sales tax people in the FBR as I am not sure if cattle trade falls in the purview of any tax.”

The contraction in the Eid market reinforces the perception about the growing financial stress in average Pakistani households as the economy slumps under the watch of the PTI government.

“I used to sacrifice a goat every year. I switched to collective qurbani — where the cost of a cow is shared equally by seven participants — for affordability reasons last year. God knows that this year I had to forego qurbani as I simply couldn’t afford it anymore,” Amir, a young professional with two school-going kids, told Dawn.

Businessmen with rural linkages also expressed concerns. They foresee a major reduction in the cattle population, propelling a chain of reactions that may not bode well for the future of the sector.

The livestock sector has been posting healthy growth even when the crop sector underperformed. Livestock has a growing share of 60.5pc in agriculture and 11.2pc in GDP, according to the Pakistan Economic Survey 2018-19, up from 58.9pc and 11.1pc in 2017-18. It grew at the rate of 4pc in 2018-19 against 3.8pc a year before.

“It is not easy to raise healthy animals. Cattle need persistent care and attention like children. Farmers will stop breeding cattle if the market continues to punish them.

“The farming community is a neglected lot. It is on the losing end for one reason or the other. It will be perfectly understandable if the farming community trims time and resources dedicated to cattle after the debacle this year. I foresee a short supply and vertical price hike in the livestock market on Eid next year,” said Saqib Butt, owner of a food company and supermarket chain.

Another leading businessman, Sardar Rafiq Khan of Bukhari Cattle and Dairy Farm, sounded worried. “It is sad. I know many who took their animals back to farms from mandis all across the country. This is a major setback to the rural economy that could drag down sentiments in the breeders’ community.”

He urged the government to provide farmers with support before the situation gets out of hand and starts eroding the agricultural base that is already under stress.

The cash-based trade in livestock on Eid makes it difficult to gauge the flow of funds. Besides, there is a chain of stakeholders involved in the activity that spans a whole year and culminates on Eid. There are companies, short-term investors, cattle-farm owners, brokers, transporters and mandi operators along with a host of service providers and temporary workers. Estimating the share of each segment in the Eidul Azha economy is hard. Risks are high and returns are uncertain in this trade.

A few indicators that help in assessing the size of the market, such as the number of hides and skins collected and the consolidated figure for the arrival of animals in the government-managed markets, are released after a lag of one month.

At this point, we know that the funds transferred by overseas Pakistanis shot up by 24pc to $2.04 billion in July from $1.65bn a year ago, according to the State Bank of Pakistan (SBP). The SBP issued fresh banknotes of various denominations to the tune of Rs284bn as demand for cash increases on Eid.

According to initial estimates, the size of the Baqra Eid economy — dominated by the sacrificial animal trade — slumped to Rs200bn from around Rs360bn in 2018. In the absence of credible data, the calculation is based on an intelligent guess.

The subdued market on Eid belies the latest reports about an improvement in consumer confidence. According to the SBP, consumer confidence in Pakistan increased to 43.3 index points in July from 43.1 index points in May. The index covers household perceptions relative to the last six months and their expectations for the next semester. It is based on a stratified random telephone survey of 1,600 households across Pakistan.

“The gap between the market and the survey projections exposes the weaknesses of the exercise and its lack of relevance in providing a credible insight into consumer behavior,” commented an analyst.

“Unusual rains and a lack of proper drainage in many cities — including Karachi, the biggest cattle market — aggravated the situation for cattle traders, heightening the risks amidst low customer footfall and inadequate arrangements,” another businessman commented.

Overall business dynamics did not undergo a major change this year, though the participation of short-term investors was comparatively limited.

“The young, urban, professional class either assessed the market was riddled with a higher risk and low return projection or the financial squeeze left them with no spare funds to play around with in the seasonal market,” a banker said while trying to explain the phenomenon in the absence of relevant data.

Published in Dawn, The Business and Finance Weekly, August 19th, 2019