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In May 2020, the federal government announced a Rs56.6 billion relief package for agriculture sector, consisting of subsidies on purchase of fertilizers (urea and DAP), pesticides, seeds, and mark up on commercial loans. This is the largest sector-specific funds allocation announced by the incumbents since they came into power in August 2018.

That should be reason enough to conclude that the federal government has high expectations of agriculture sector’s performance in the ongoing fiscal. Except, the targets set for major crops by the Federal Committee on Agriculture (FCA) last month betrays this sentiment.

For Kharif (monsoon) crop season 2020-21, total target area for four major crops (including rice, cotton, maize, and sugarcane) is short by six percent than actual area cultivated during the corresponding season last year. Recall that target area for Kharif FY20 was itself missed by nearly three percent as targets for cotton and sugarcane were missed by significant margins. At 7.8 million hectares, target area for kharif FY21 (four major crops) is also the smallest for at least last seven seasons. Is it a cause for concern?

That Pakistan is slowly running out of agricultural land to cultivate may not be a news for most readers. Between FY08 and FY20, Pakistan’s farming sector has lost 0.6 million hectares of cultivable land, as net sown area has been reduced to 15.74 million hectares from its peak levels. Yet, there appears to be more to the story during ongoing Kharif, where target area is short by additional half a million hectares compared to the previous year.

Zooming on individual crops helps unravel the mystery. For starters, the FCA has toned down its expectations of grandeur for cotton, where target area has been reduced by a whopping 0.6 million hectares compared to last year. On surface, that could have dire implications for sectoral GDP, except cotton target area has on average been missed by 15 percent over the last decade, with output clocking in at 30-year low during the last season.

Cotton’s loss has been paddy and cane’s gain. For rice, currency devaluation and attractive commodity prices in the export market means that the crop may maintain its positive momentum from last year, when acreage exceeded 3 million hectares for the first time in its history. In the case of sugarcane, cyclical crop behaviour coupled with shortfall for the last two seasons has led to high domestic prices, indicating that growers may once again take comfort in the resilient crop.

But the biggest surprise in store is corn - Pakistan’s star kharif crop. Recall that over the last two decades, maize has consistently gained area as cultivated land has increased by nearly fifty percent to peak 1.43 million last year. Maize yield has also performed exceptionally, growing from a little under 2 tons per ha pre-2000s to 5 tons per ha in FY20, rarely missing targets. What then explains FCA’s not-so-great expectations from kharif’s star performer?

Short answer: Covid. Recall that the beginning of lockdown in March-2020 coincided with harvest season in central Punjab’s corn belt. As poultry prices crashed in the weeks following lockdown, demand for maize – feed crop - spiralled downwards, while grain prices also crashed by as much as 33 – 50 percent in April-2020.

As poultry prices have since returned to normal levels, channel checks indicate that poultry feed mills have made substantial inventory gains on timely grain procurement. Except, because most small to midsized farmers’ have weak holding capacity, fate of most growers’ profitability was already sealed.

While poor crop performance in past season is not sufficient reason for weak crop outlook in the next, lockdown has had far-reaching consequences. Because commercial consumption of bird meat is still suffering as large public gatherings remain banned, farmers have little reason to believe that poultry prices - and by extension, feed demand – will be recovering any time soon. And with fears of Covid making a come back in winters, feed crop growers have found wisdom in cutting back on losses and staying on the side lines for the time being.

Given the mediocre official expectations of corn and cotton – coupled with historically erratic behaviour in cane payments by sugar mills – it appears that all eyes in the ongoing kharif season will be on paddy. In case export demand also suffers a shock in the aftermath of Covid, Pakistan’s major crop sector (kharif) may witness very tough times ahead in the months to come.