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Tackling food trade deficit

July 20, 2009

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In eleven months of fiscal year 2009, exports of food items were worth $2.785 billion. These included rice, seafood, fruits and vegetables, meat and meat products, oilseeds, nuts, and very small quantities of wheat and sugar.

And $3.662 billion were spent on food imports including edible oil, wheat, sugar, powdered milk, cream and milk food for infants, pulses, tea, coffee and spices etc. Hence a food trade deficit of $877 million.

According to Federal Bureau of Statistics, food trade deficit totalled $813 million in FY06. It fell to $725 million in FY07 but nearly doubled to $1.4 billion in FY08—because of import of $860 million worth of wheat that year and higher international prices of palm and soyabean oil.

Growing exports of rice, restart of export of wheat products and a higher overseas demand for our seafood and meat should boost overall food exports this fiscal year. Pakistan is not importing wheat this year and sugar imports would remain limited to 200,000 tonnes. Imported edible oil is less costly this year and demand for tea and powdered milk is down due to falling income levels. So, on balance, one can expect a lower food import bill and a possible cut in food trade deficit.

Food trade deficit can be eliminated by focusing on food production, export and import substitution. This can be one of the ways to contain overall trade deficit. (In FY09 overall trade deficit declined 18.5 per cent to $17 billion.

According to a report of the Food and Agricultural Organisation, the prices of agricultural produce have risen faster than those of manufactured goods. And higher income levels in the Middle East have boosted the demand for high value-added farm products.

But any effort to enhance food exports ought to be backed by efforts to cut imports of food items by import substitution. This two-pronged strategy would yield quick results in efforts to reduce trade deficit. .

Pakistan meets less than 30 per cent of its edible oil requirement through domestic sources and imports more than 70 per cent. Import of edible oil constitutes a large chunk of our food import bill. “There is a need to raise production of sunflower and canola seeds,” remarks Mr Amjad Rashid, a former chairman of Pakistan Vensapati Manufacturers Association. “We can grow palm trees initially using imported seedlings. In the beginning Malaysia too had used Nigerian palm seedlings.”

Pakistan Oilseed Development Board has been in existence since 1995 but it has not done enough to enhance production of indigenous oilseeds. The board officials say they help growers go for rapid conversion of wild olive into oil-bearing species as well as assist them in plantation of olive in NWFP, Islamabad and Balochistan. They say the board provides growers in Sindh and Balochistan with the seedlings of oil palm trees. But they do admit that a lot more needs to be done for developing local oilseeds to stop edible oil imports.

In FY09, Pakistan produced 755,000 tonnes of sunflower seeds,obtaining 287,000 tonnes of oil. It also produced 134,000 tonnes of canola seeds to extract 51,000 tonnes of canola oil. The government must give incentives to growers to enhance production of domestic oilseeds and improve their oil extraction ratio. Pakistan also needs to boost milk production to lower imports of powdered milk. In FY09, the country produced 43.56 million tonnes of milk and plans to enhance it by 10 per cent in the next five years. Importers of powdered milk say that with this much increase in milk production and with some investment in milk processing plants, imports of powdered milk, cream and milk food for infants can be substantially

cut. In 11 months of FY09, $68.5 million was spent on import of powdered milk, cream and milk food for infants.

A five-year growth target of 8.5 per cent has been set to increase meat production over the FY09 production of 2.51 million tonnes. As the resettlement of the displaced people starts in NWFP, exporters hope the supply of exportable surplus of meat would improve. In FY09 meat exports rose 28 per cent to $66 million. Meat exporters are confident this amount would rise to $100 million this fiscal year.

Seafood exporters have also made inroads into non-traditional markets like Malaysia, Indonesia and Egypt since the EU slapped ban on fish exports in 2007. In eleven months of FY09, seafood exports totalled $219 million, up 64 per cent year-on-year.

Exporters say they have complied with most of the conditions for revival of exports from EU countries adding that the Marine Fisheries Department would present their case to EU next month. “If everything goes well, I hope the ban would be lifted sometime by the end of the year,” says Mr Faisal Iftikhar, Chairman, Pakistan Fisheries Exporters Association.

The lifting of the ban may add some $30 million to seafood exports. Exporters say fish exports may touch $300 million mark in the next fiscal year. Recently the government has allowed export of wheat products by private sector. A source close to Trade Development Authority of Pakistan said that three parties have arranged for shipment of the first batch of 560 tonnes of wheat flour to the UN and the US and some European countries.

A Karachi-based miller said, currently wheat flour is attracting a price of $600 per tonne price, adding that it is enough to maintain viability of exports.

“We have got export orders of 60 tonnes of wheat floor from the United Nations and are ready to make shipments any time,” said Sheikh Javed Akhtar, Director, Ashrafi Food Industries.