After banning exports of wheat, sugar, and then pulses earlier this year, the ECC has reportedly banned the export of potatoes until December 2020, after retail price of the vegetable reached Rs 100 per kg in some cities. For an economy that takes pride in its “agriculture backbone”, recurrent bans on export of farming commodities is a shame.
But it may not entirely be a bad idea. Potato prices are running amok. Average prices in Lahore are up nearly four times since February 2019 when the portly vegetable was retailing at just Rs 18 per kilo in the provincial capital. What happened?
A quick Google search takes a walk down the memory lane. Back in January 2019, commentators were lamenting a “potato crisis”, with pictures of farmers protesting and laying their crops to waste. Why? A bumper crop had led to a massive surplus in Punjab, with farmers receiving less than Rs10 (per kilo) against “claimed” production cost north of Rs15.
That was then. It is no surprise that acreage declined by over 5 percent in the following rabi season 2019-2020, as many growers invariably shifted to more profitable substitutes. But was a ban on exports necessary?
According to provisional estimates published in the Annual Economic Survey, while acreage has indeed declined, yield has remained intact at 24.5 tons per hectare, indicating that the decline in output over last year is no more than 5 percent. Is Pakistan’s agriculture value chain so volatile that a mere five percent variation in output from one season to another has taken a commodity from bumper/surplus to severe shortfall?
Consider also that the output of 4.6 million tons from an area of 0.19 million ha is still the second highest for the domestic spud economy in its history. Meaning that a difference of 0.3 million tons in production has raised average retail prices by almost 100 percent in some cities, and by three-fourths across the country. Something is amiss.
Enter exports. Over the past decade, Pakistan has exported between 0.3-0.6 million tons of spuds per annum, which is no more than 15 percent of total output. According to 8-digit data reported by PBS, potato export volume during FY20 less than halved to just 0.36 million tons, lowest since at least 2014. Precipitous decline in export volume, thus, should have more than made up for the shortfall in domestic output.
Except, it appears that spud prices have also made a come back in the international market, where average unit prices fetched by Pakistani exporters during FY20 increased by at least 20 percent (if not more) in dollar terms. That may have placed upwards pressure on domestic prices, except this is not exporting season.
Because potatoes are harvested primarily between December and January, most of the export in “fresh or chilled form” mainly takes place before June. Moreover, because spud export is primarily by sea whereas over 95 percent of the crop originates in Punjab, lack of cold chain infrastructure means sizeable export quantum cannot be delayed to later months just because a trader takes a bet on price increase in the international market the following quarter.
Thus, so far as export quantum is concerned, the ban is expected to make little difference. Commodity dynamics also mean that export business simply cannot be shifted to smuggling routes. The delays witnessed in implementation of export bans on wheat and sugar (since the announcement in respective ECC meetings) over last fiscal also does not inspire a lot of confidence. However, if the measure is intended as a price signal, then by all means! Whether the market players shall buy into it or not, is another story altogether.
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