Is Chicken Really More Affordable Than Daal in Pakistan?

Pakistan's finance minister Ishaq Dar has suggested to his countrymen to eat chicken instead of daal (pulses or legumes). Does the minister sound like Queen Marie-Antoinette (wife of France's King Louis XVI) who reportedly said to hungry rioters during the French Revolution:  “Qu'ils mangent de la brioche”—“Let them eat cake”? Let's look into it.

It is indeed true that some varieties of daal are priced higher than chicken. For example, maash is selling at Rs. 260 per kilo, higher than chicken meat at Rs. 200 per kilo. But other daals such as mung, masur and chana are cheaper than chicken.

The reason for higher daal prices and relatively lower chicken prices can be found in the fact that Pakistan's livestock industry, particularly poultry farming, has seen significant growth that the nation's pulse crop harvests have not.

Poultry Farm in Pakistan

Pakistan's poultry industry achieved 127% growth in the total number of birds produced, 126% growth in the total meat production and 71%growth in terms of total eggs produced between 2000 and 2010, according to government data. As a result, the cheapest sources of animal protein in Pakistan are the eggs and meat from the poultry sector.  As of 2013, the per capita availability of poultry meat in Pakistan is 5 kg. In addition, Pakistanis consume 51 eggs per year per capita.

Major Pulse Producing Nations in 2011

Poultry share of meat consumption in Pakistan has steadily increased over the years.  In 1971, the market share of beef was 61%, mutton was 37%, and poultry meat a mere 2-2.5%. In 2010 the market share of poultry meat had increased to 25%, while beef and mutton declined to 55% and 20% respectively.  This increase in the overall size of the poultry sector has decreased the gap between the supply and demand of animal proteins and helped stabilize beef and mutton prices, making meat relatively more affordable to more people.

Production of daal, another important source of protein in Pakistan, has not kept pace with demand. Domestic production is not enough to provide 6-7 kilos of daal per person consumed in the country. Pakistan is forced to resort to imports to meet demand. Pakistan spent $139 million to import 628,000 tons of pulses in fiscal year 2010-2011. Pulse imports jumped to $224 million in July 2014 to January 2015 period, according to a report.

Overall, livestock contribution to agriculture in Pakistan has now risen to 58.55 percent, with the rest coming from crops, fisheries and forestry, according to Economic Survey of Pakistan 2015-16. The agriculture sector accounts for 19.82 percent of GDP and 42.3 percent of employment with strong backward and forward linkages. Dairy farming has grown in Pakistan by leaps and bounds, making the country the third largest milk producer in the world.

Services sector now accounts for 59.16% of Pakistan's GDP,  the largest sector of the economy, followed by industrial sector that contributes 21.02%. Manufacturing is the most important sub-sector of the industrial sector containing 64.71 percent share in the overall industrial sector.

There has been significant progress in increasing animal protein supply via growth in Pakistan's livestock sector over the last few decades. Nations' policymakers now need to focus on increasing plant protein sources to close the gap between protein supply and demand in an affordable manner.


Related Links:

Haq's Musings

Pakistan Among Top Meat and Dairy Consuming Nations

Pakistan Leads South Asia in Value Added Agriculture

Livestock and Agribusiness Revolution in Pakistan

Pakistan's Rural Economy Showing Strength

Solving Pakistan's Sugar Crisis

Food, Clothing and Shelter in India and Pakistan 

Is India a Nutritional Weakling?

Wheat Price Up 400 Percent

Wheat Price Touches $900 Per Ton
Triggered by wheat export curbs by Kazakhstan and the lowest world inventory in 26 years, wheat price hit a new record at $25 per bushel or about $900 per ton. This translates into Pakistan Rs. 55 per kilo for raw wheat in bulk excluding transportation, milling and bagging. It represents a 400% increase in less than a year. According to the U.S. Department of Agriculture's Foreign Agricultural Service, Kazakhstan is the sixth-largest exporter of wheat, behind the U.S., Canada, Russia, Argentina and the European Union. Kazakhstan is in the belt of wheat production that stretches from Ukraine through southern Russia. It already has exported nearly seven million tons of grain, of the available 10 million tons from the 2007-08 crop, Agriculture Minister Akhmetzhan Esimov said.

Price Doubled Since Dec, 2007
In my January 15, 2008 blog post Wheat Flour Shortage in Pakistan, I wrote as follows: " Former Prime Minister Shaukat Aziz announced in Sept, 2007 that the Pakistani government would import one million tons of wheat, stating that this action was necessary to “maintain a reasonable buffer stock for the future.” The export price for Pakistani wheat during the April-May export window was approximately $225-232 per ton. For December 2007 delivery, Pakistan is now looking at an estimated import price of $380-400 per ton, exclusive of transportation." Well, here we are in February 2008 and the price of wheat has more than doubled yet again since Dec, 2007. In fact, the inflation of wheat prices now exceeds all other commodities including oil, gold, metals etc.

Implications For Pakistan
Like most developing nations, the average person in Pakistan has very low discretionary spending,with the bulk of his or her income spent on food, clothing and shelter. The dramatic increases in commodity prices, particularly food, is very troubling for the vast majority of populations living in the developing countries such as Pakistan, India, China and the African nations. The exceptions, of course, are the nations with their own significant production of food and fuel and other natural resources. The nations producing and exporting food, fuel, and metals actually benefit from this trend of higher commodity prices.
The incoming government in Pakistan will face a very difficult challenge in containing tremendous inflationary pressures on basic commodities such as food and fuel. A failure in this effort can lead to significant instability and has the potential to threaten the future of democracy in Pakistan.

Wheat Flour Shortage in Pakistan

Rising Atta Prices
The rising prices and acute shortages of atta (wheat flour), a staple in Pakistan, are clearly distressing to the people. However, putting it in perspective, this wheat crisis is not isolated to Pakistan. There are widespread fears of food shortages and lack of affordability in
many countries around the world.

According to a recent report in Wall Street Journal, the prices of Illinois corn and soybeans rose 40% and 75%, respectively, from a year ago. Kansas wheat is up 70% or more. And a growing number of economists and agribusiness executives think the run-ups could last as long as a decade, raising the cost of all kinds of food.

World Wheat Stock At 26-Year Low
Global Demand is leaving end-of-year grain inventories at levels that are less than 20% of the total amount used each year; a graph of stocks as a percentage of use is as follows:



Source: US Dept of Agriculture

No More Cheap Grain
"The days of cheap grain are gone," says Dan Basse, president of AgResource Co., a Chicago commodity forecasting concern.

Rising prices and surging demand for the crops that supply half of the world's calories are producing the biggest changes in global food markets in 30 years, altering the economic landscape for everyone from consumers and farmers to corporate giants and the world's poor. The biggest increases in demand are the result of rising incomes in the developing nations where a large number of people have moved up into the middle class. Meanwhile production has failed to keep up with the rising demand. In Canada, for example, Statistics Canada trimmed its spring wheat production estimate to 509.8 million bushels, down from its October forecast of 526 million. In 2006, Canada produced 684 million bushels of spring wheat. Canada produced less
spring wheat this year than in 2006 due to reduced plantings and unfavorably hot conditions during the growing season.

USDA Report on Pakistan Wheat Crisis
According to a US Dept of Agriculture Report in December 2007, Prime Minister Shaukat Aziz announced in Sept, 2007 that the GOP would import one million tons of wheat, stating that this action was necessary to “maintain a reasonable buffer stock for the future.” The export price for Pakistani wheat during the April-May export window was approximately $225-232 per ton. For December 2007 delivery, Pakistan is now
looking at an estimated import price of $380-400 per ton, exclusive of transportation. The timing couldn’t be worse. World wheat stocks are at a 26-year low, mainly due to severe weather conditions in the major production areas of Canada, Australia, the EU and Ukraine. Consequently, wheat prices have hit all-time record highs.
The Government of Pakistan subsequently decided to make smaller wheat purchases, rather than a single 1 million ton purchase. Pakistani officials cited overbooking at the Port of Karachi and the problems berthing larger vessels as well as the need for a monthly review of the wheat situation as reasons for moving away from a single tender. They have also hinted that they may lift the ban on private imports. The Government of Pakistan could provide a subsidy for the imported wheat to cover the differential between the government issue price and the import price.
Clearly, Pakistan witnessed a perfect storm scenario on wheat in 2007 with an overly optimistic wheat crop estimate, a well-intentioned decision to lift the four-year wheat export ban to raise farm prices, severe weather conditions in the major world wheat production areas, and increased demand during Ramadan. In hindsight, lowering the official crop estimate should have had the same effect on farm prices as exports, while keeping more wheat within Pakistan. This report clearly spells out some of the mis-steps by Pakistani Government leading up to the current crisis.

Food Subsidies
Many developing nations, such as Pakistan, control and subsidize food prices by procuring the harvest from farmers at a fixed price and by providing subsidies to keep the retail prices low. The world market price for raw wheat comes to about Pak Rs. 24 per kilo in large quantity purchases excluding the cost of transportation, milling and bagging. Pakistan Government has set the retail price of atta(wheat flour) at Rs.16 per kilo. Large differentials in prices and availability across national borders encourage smuggling for profiteering. Add to this the endemic corruption in many developing nations, and you have all the ingredients for a serious food shortage. Measures such as the use of the military to guard grain storage and milling and distribution centers can help temporarily. But these are just band-aids.

The Future
There is no obvious long term solution, other than systematically increasing production, building state wheat reserves (instead of wheat exports), and by providing special assistance to the low-income people. I hope I am wrong but there is clearly a possibility of atta riots in Pakistan to add to the already precarious security situation. The politicians opposed to Musharraf would be all too happy to take advantage of this situation, as the media play up the shortages to stoke widespread public anger.