Cash crunch hits wheat sowing
Farmers claim that a big number of them had to miss wheat sowing this season as they did not have enough money. Citing statistics to substantiate their claim, they say that wheat acreage in the country had dropped by massive 1.4 million acres.
Punjab has fallen behind by 900,000 acres, Sindh 350,000 acres and Khyber-Pakhtoonkhawa 150,000 acres.
Their failure to invest in wheat sowing has stemmed from price crash of two cash crops cane and cotton. These crops ensure liquidity for cultivating food (including pulses) crops.
The price of cotton crop in domestic market has dropped by almost 100 per cent, despite substantial recovery in international market. This season was exceptionally tough due to weather vagaries. The months of March and April last year were hotter than usual, which affected the early sown cotton.
The farmers struggled to save their crop, and succeeded with heavy labour – both in financial and manual terms. As if it was not enough, heavy monsoon tested their nerves and finances in subsequent months. To make the matter worse, general sales tax was imposed on inputs – increasing cumulative cost of production by a massive 30 to 40 per cent.
Increase in fertiliser prices, especially urea, dented farmers’ effort and the government, which had claimed a production of 16 million bales, started trimming the yield expectations progressively, from original target of 16 million bales to 15 million, then to 14 and finally to 13 million bales. Its initial claims of 16 million bales – one million bale more than domestic
requirement – set the market on lower side, which never recovered despite huge slide in ouput. Ever since, the farmers, on an average, have sold their crop at Rs2,500 per 40kg against Rs5,000 per 40kg last year.
The loss of farmers on cotton front becomes evident if a comparison is drawn between cost of production and the sale price.
Against the total input cost of Rs2,860 per 40kg, they sold it at an average price of Rs2,500 per 40kg – a loss of Rs360 per 40kg. These bales have thus caused them a loss of Rs48 billion because of under pricing. At least, that is how farmers calculate their cotton loss and a corresponding reduction in their liquidity position.
Similarly, the cane crop has so far caused another loss of Rs26 billion. The farmers insist that the cost of cane production has got close to Rs170 per maund – a price being recommended by the Punjab government as a support price for next year.
At present, the millers are paying an average price of Rs130 per maund. Even if this year’s support price of Rs150 per maund is taken as a benchmark, farmers are suffering an average loss of Rs20 per maund. Around 80 per cent of total production goes to millers. That means that out of total 65 million tons of cane, around 52 million tons would go to millers at a farmers’ loss of Rs20 per maund. This total loss translates into Rs26 billion.
If the loss of these two crops is taken into consideration, they have created a hole of Rs74 billion in farmers’ kitty this season so far. Where could have the money come from for wheat sowing, they wonder. The poverty cycle, created by cane and cotton prices crash, has not stopped at these two crops; it has already enveloped wheat – if the missed acreage of wheat is multiplied by an average production of 30 maunds per acre, these 1.4 million acres would cause another loss of Rs44 billion to farmers. These losses are for those farmers who own land. The one who has to pay the rent is simply doomed.
Since the entire crop production is an integrated cycle, every crop performance affects every other thing. The slapping of GST on fertiliser has already caused a drop of urea consumption by around 20 per cent and the di-ammonium phosphate (DAP) by 40 per cent, upsetting balanced use of fertiliser.
All these factors are testing farmers’ nerves and financial health, and would contribute hugely in national poverty. The governments, especially provincial ones, need to take note. If left alone, the situation is bound to worsen.
Of all the federating units, Punjab has especial responsibility to save its agriculture as it is the country’s major crops producer.
It must overhaul agriculture marketing system, which, at present, has completely been hijacked by special interest groups – cartelised to the core.
Gluts and shortages are essential parts of the agriculture cycle and the world has created shock-absorbing systems by building
storages and creating regulatory mechanisms. Why can Punjab not take a cue from it and start creating those systems?
Instead of making some piecemeal efforts, primarily designed at fire fighting when crises erupt, it needs to visualise the entire agriculture spectrum and its storage requirement that cater to each and every crop and bring efficiency in agriculture marketing.