Food trade deficit grows bigger and bigger

AFTER recording a promising surplus in 2012-13 and 2013-14, Pakistan’s food trade ran into a deficit. The deficit keeps growing as demand is expanding for imports of food industry raw materials as well as for finished food products, and as issues in our food exports persist.

In 2012-13 and 2013-14, food exports at $4.76 billion and $4.62bn beat food imports of $4.19bn and $4.24bn, respectively, creating food trade surpluses. But the trend reversed the very next year, giving birth to a growing food trade deficit.

This happened despite falling international palm oil prices, which never exceeded the $760 a tonne seen at the end of the 2013-14 fiscal year. In fact, average monthly prices began falling from $755 a tonne in July 2014 and hit the bottom at $485 a tonne in September 2015 before moving up again.

But even during its northward journey so far, it has remained below $760 a tonne, with just one monthly exception of $788 a tonne in December 2016.

“As far as the impact of palm oil price is concerned, you can’t trace that element in the current spell of growing food trade deficit,” asserts an executive of Habib Oil Mills.

The same is true also for soya bean oil whose international prices began sliding from $1,210 a tonne in September 2012 and plunged to $590 a tonne in September 2015.

It has been recovering since then (sometimes only to lose recovered grounds), but throughout its upward journey it has remained below $900 a tonne with the only exception of $907 a tonne in December 2016.

Going for import substitution is as much necessary as discouraging imports of finished food items

Despite low prices of palm oil and soya bean oil, when spending on their imports rise — as it did in 2015-16, and then after a year’s gap in the first quarter of this fiscal year — it does inflate our food import bill. But that happened due to larger import volumes. This is good for the economy as it gives boost to edible oil production.

What isn’t good, though, is a jump in import of miscellaneous, mostly end-consumer food imports (other than palm oil, soya bean oil, tea, pulses, milk, cream and milk food, dry fruits, nuts and spices).

Imports of hundreds of such food items are growing year after year. In 2016-17, Pakistan spent $2bn, or about one-third of its total food import bill, on the import of these items.

This is where we need to make savings. The recent increase in regulatory duties on imports is expected to help us on this front as more than 200 food items have been subjected to higher duties through a statutory regulatory order (SRO), importers of food items at Karachi’s Jodia Bazaar say. The order, issued on Oct 16, notified increased import duties on more than 700 import items.

To contain food trade deficit, going for import substitution is as much necessary as discouraging imports of finished food items. But efforts in this regard are yet to pay full dividends. Ongoing experiments on tea and olive cultivation is a good example. Nothing concrete has emerged in either case — concrete enough to make a dent in imports.

On the exports side, too, our weaknesses are many and varied. Overall rice exports are up but high-priced basmati varieties are not doing equally well due to increasing local consumption and poor export marketing.

Fish and seafood shipments are also growing but not fast enough to give a big boost to our total food exports because investment in fish processing and packaging remains scant.

In fruit exports, we continue to depend heavily on mangoes and kinno, but due to little modernisation in orchard management and fruit processing, exports of even these two fruits remain below potential.

Exports of vegetables are fetching less per-unit value than they should due to issues in packaging and preservation. Besides, tunnel farming is still at initial stages and has yet to contribute in creating big exportable surplus.

Meat exports are suffering from stiff competition from the United States, Australia, New Zealand and other countries, even in our traditional markets in the Gulf Cooperation Council (GCC) region. Oilseed industry is struggling to meet domestic demand and production of dry fruits is falling.

However, some initiatives have been taken for boosting pulses production and their import bill may fall in 2017-18 from a record high of $952m in the preceding fiscal year. Imports of pulses in the July-September quarter have already shown a declining trend.

But adequate availability of water is a must, not only for big-ticket food export items like rice or sugar but also for import-reducing pulses.

Sadly, water woes in the country are far from over. That brings into spotlight the importance of developing crops that consume less water and using water-economising technologies and practices.

On both counts, efforts are being made in Punjab and in Sindh, but not at the scale and intensity to boost outputs dramatically — and soon.

One big reason for our food exports not growing fast enough to cut food trade deficit is that decisions regarding wheat or sugar exports are delayed. By the time we enter world markets, demand begins to fall and we end up exporting low volumes at off-peak prices. Of late, things have, however, begun to change.

In 2016-17 and also in this year, decision on sugar export came almost in time. “If decision-making on wheat exports is also quickened, food exports will grow making a dent in food trade deficit,” says a senior official of Trade Development Authority of Pakistan.

But in order to make sugar and wheat permanent items of exports “we need to do lots of work to ensure sustainable growth in outputs of sugarcane”, he says. “Judicious allocation of limited arable land for all key food crops (rice, sugarcane, wheat and maize) isn’t so easy. Quite often an increase in the area under cultivation of one crop comes at the cost of the other.”

Source Dawn