“Pakistan imports pulses worth $600 million every year”. “The country spends $2 billion per annum on import of edible oil”. As current account woes returned during 2021, headlines lamenting Pakistan’s lack of self sufficiency in food production have become a recurrent theme in policy discussions. Given one of the world’s largest irrigated farm area, why does Pakistan devote little to no land for pulses (or oilseeds etc) cultivation?
While many factors such as price competitiveness and tariffs on import play a role, textbook theories of comparative advantage may not fully explain farmers’ complete indifference to crops such as mash & masoor daal, or garlic. Why?
Consider a counterfactual: Pakistan is among world’s top five cotton producers with a liberal import regime, even though competitiveness of local cotton is one of the worst in the world. Some may point to enduring local demand from spinning segment as reason why farmers continue to stick with cotton, despite fierce competition from better quality imported varieties. On the other hand, pulses such as masoor and mash also have well-established local market – just as garlic does – however, Pakistan’s local production of these crops remains marginal.
So, what has ensured local farmer’s perpetual disdain for some crops which otherwise enjoy entrenched domestic demand? A comparison of per acre profitability may offer some insight. A caveat is necessary: the following analysis relies on data from agriculture department, Punjab, which uses estimates of average cost of production per acre in the province and provides indicative prices at farmgate.
Are indicative prices reflective of actual prices fetched by farmers? No, but they help offer a useful insight into farmers’ decision-making matrix. The indicative prices are estimated by applying a 25 percent markup on average cost of production per maund (40kg). This means that selling prices have a built-in standardized profit margin, inclusive of opportunity cost of land (i.e. rent).
The argument? That even if all crops were to offer the same profit rate to growers, they may still choose to grow what are traditionally referred to as “safe or cash crops”, for following possible reasons.
Considering that land is arguably the most important factor of production for a commercial farming enterprise, theory would posit that if farmers were to enjoy same profit rate (i.e. 25 percent) on all crops, they must be indifferent between crop preferences. But that analysis misses one crucial element: that even if all crops were to pay equal profit margin (%), they require vastly different investment amounts, and thus generate very different cashflows.
According to GovPunjab, the investment per acre required for mash and masoor dal is less than half of what is required for crops such as wheat, rice, cotton, or even maize. But even if a farmer were able to charge a guaranteed 25 percent marked-up price at the time of harvest, his profit per acre would only be five thousand rupees for these pulses; compared to fifteen thousand rupees (or above) for cotton, rice, maize, or wheat.
If you were an average commercially minded mid-sized farmer in Pakistan – with a farm area of 25 acres or above – would you rather devote your land to a crop that would generate a maximum of Rs 1.25 lac per season in profit, or a crop that can yield profit of up to Rs 3.75 lac per season (provided you have comparable access to inputs)? Remember, a traditional cropping season may last up to four to six months (excluding for sugarcane, of course).
This does not take away from the fact that farmers’ cropping preferences may be driven by a confluence of forces: from cost of inputs, marketability, perishability, distance-to-processing industry, and extent of own-use for sustenance (such as in the case of wheat), price volatility, and most-of-all, trade barriers and competitiveness. But even solutions such as price guarantees or farm-to-market may not change farmers’ crop preferences.
If Pakistani farmers enjoyed scale, it might make sense for some to devote a portion of their farm property to crops such as masoor or mustard for that matter. But Pakistan’s farmland remains highly fragmented with very low average holding sizes (less than 10 acres, in most cases). Before imported solutions are copy-pasted from other countries, it might help to sponsor research on the subject in view of local farmer’s unique set of challenges in switching to what otherwise seem as ‘logical’ alternatives.