Future of farm economy

Historically, agriculture has played a strategic role in the economic development and prosperity of any nation. More so in a predominantly agricultural economy like Pakistan, as it provides a major source of food, income and employment opportunities for the vast population.

According to available data, almost half of Pakistan’s population is engaged in agriculture; but the sector contributes only 24 percent of the GDP, with an average growth rate of under two percent annually.

Food and commodity prices have been fluctuating all over the world, including in Pakistan. While the immediate focus of the government has rightly been on cushioning its impact on poverty and hunger, the agriculture sector as a whole needs to be examined; not only to ensure food security and combat hunger, but to stimulate robust, sustainable growth for the economy.

This sector has the potential to become a growth engine for Pakistan. However, it suffers from a variety of constraints. Right from availability of adequate arable land and water for farming, low productivity, inadequate infrastructure, lack of modern technology, quality of agri inputs, to financial viability of smallholder farmers with small landholdings and limited access to agricultural research or risk mitigation measures against crop diseases or natural calamities. Lack of employment opportunities for the rural population, market linkages for farm output and global concerns like climate change also greatly impact the sector’s competitiveness on the world stage. These structural challenges need to be addressed to transform the agrarian sector and help Pakistan achieve its overall growth targets.

While the above challenges are imminent, it is also true that rapid urbanization and rising income and demand for food products like fruits, vegetables, dairy, meat and processed foods are fueling growth for the food industry. Pakistan is the sixth most populous country in the world, with a population set to reach 300 million by 2050. It is also one of the world’s fastest growing retail markets.

The dairy sector is critical for the local economy and is beginning to show a shift towards modernization. It will benefit greatly from phased implementation of the Minimum Pasteurization Act as that will speed up investments in the processed milk segment in the country, which is at two percent of total milk produced in Pakistan currently. Milk productivity also needs to be augmented as dairy animal yields in Pakistan are approximately a fifth of the average yields across global markets like the US and Europe. Yields can be improved through interventions like agri-extension services and tax incentives to increase fodder crop acreage in the country.

Farm gate price of milk has been stagnant with rising inflation, further reducing the economic viability of this sector. We need to improve productivity, define feed standards in line with global standards, bring improvements in logistics and infrastructure of the milk supply chain and educate dairy farmers on farm management, for the economics to work.

There is also an urgent need to invest in effective supply chain logistics, adequate cold-chains as well as setting up more agro-processing facilities to reduce wastage of perishable goods. Besides that, more investment in technology, R&D and adoption of global best practices is required to implement internationally accepted food safety and quality standards.

A balanced agriculture policy which is market oriented can further spur growth. Research-based farming practices can improve our agricultural productivity. Government support to drive investment in agri-research, providing targeted subsidies to farmers and promoting farm mechanization will go a long way in enhancing use of modern agricultural practices that can deliver higher productivity and farm income.

Our crop policy should be based on cost competitiveness rather than traditional cash crops that are grown without much efficiency. Crops such as corn, fodder crops, and vegetables need to be incentivized. It is encouraging that the government is actively looking at zone based cropping strategy. The Potohar region has been declared as the Olive Zone, Cholistan as the Grape Zone and Layyah/Bhakkar as the Citrus Zone. This will improve productivity due to the suitability of the environment for these crops.

Water conservation should also form a part of the crop policy. Drip irrigation should be introduced wherever feasible and water thirsty crops should be regulated in favour of water efficient crops.

Uplifting PMEX (the national commodities exchange) to allow farmers to physically deliver and trade their commodities through the exchange, besides providing them a credible price discovery mechanism should also be looked into.

Despite all the progress Pakistan has made over the last decade, around half of our population continues to face food insecurity. For a country that produces enough food to feed its population and even export, prevalence of hunger amongst the economically vulnerable population is both unnecessary and unacceptable. Besides hunger, under-nutrition and micro-nutrient deficiencies are also rampant in rural parts of the country.

Long-term plans to mobilize public policy as well as government and industry resources to enable food security, eliminate hunger and investments in food safety and nutrition are needed for the sector to harness its true potential.

The writes is the country president at Cargill Pakistan.