Saturday, January 12, 2008

First Sugar, Then Flour, Now Rice

We keep this up, and pretty soon there's not going to be anything left to eat. From today's Dawn:
ISLAMABAD, Jan 11: With the flour crisis deteriorating by the day, officials and analysts are raising the spectre of a looming shortage of rice.

Analysts say that unchecked exports of rice are threatening to create a serious shortage. In November 2007 alone, the export of rice witnessed a growth of over 19 per cent. Figures for Dec 2007 are not available as yet.

The rice shortage is being experienced all over south and east Asia.

A source in the finance ministry said that former prime minister Shaukat Aziz had allowed export of 0.5 million tons of wheat at $200 a ton on a projection of a 0.8 million surplus stocks in May but the agreement was now importing at more than $500 a ton to meet the rising local demand.

Other rice-producing countries in the region, such as India and Vietnam, have taken measures to discourage export. However, Islamabad has not taken any action so far.

If increase in the export of rice was not checked, sound an expert, shortage of another food grain would be impossible to avert.
UPDATE: In response to a commenter's question on why no one does anything about hoarding, here's a report from The News on the institution of an anti-hoarding body. While I highly doubt a bureaucratic body is going to stop hoarding on the scale that we're seeing, it is something. Though as someone once said, never mistake activity for achievement.


ahmadzak said...

i don't think its only the government's fault. I know so many people in Karachi who are buying truck loads of these commodities and waiting till there's a price hike, just so that they can make a quick buck. why doesn't anyone keep a check on that!

Asad said...

Alex Bigham for The New Statesman

Nurturing democracy in Pakistan

"The country's economy has improved dramatically in the past five years, thanks in part to the stewardship of former Prime Minister Aziz, but it hasn’t translated as much as it should do into poverty reduction for ordinary people".

Such overstatement and understatement within one paragraph...

Is this guy on crack?kgtulece

zeyd said...

So I went to a pre-tender meeting for the import of 600,000 tons of wheat last week. It was chaired by government officials and when i brought up an issue on specification which would drive up prices, I received this response (translated from urdu): "How does that concern us? If the government wants to pay inflated prices then let them; it's not coming out of our pockets.''

And this from a government official representing a government corporation. I shook my head, shrugged, and smiled. It's so fucked man.

Ahsan said...

zeyd, since you seem to be a lot closer to the action on the ground with respect to wheat, perhaps you could explain one of these days what exactly is going on. specifically,

1. is pakistan's crisis, insofar as its root causes are concerned, significantly different from the rest of the region?

2. is it the case that hoarding is as much to blame as the govt makes it out to be? or are they simply passing the buck?

3. what short and medium-term fixes can you see that have a chance of working?

your thoughts would be much appreciated by both the contributors and readers of the blog.

zeyd said...

1) Yes. For one, our govt constantly overstates the predicted production. If they say we're gonna produce 23 million tonnes, then expect about 20. Also, if they say they're gonna use about 8 million hectares of land for production, then expect about 7.5 million to be used. That's the initial problem, add the fact that our farmers generally have no idea what they're doing (in terms of chemicals and general efficiency of production) and we're always going to produce less than the amount needed for local consumption. And whilst there isn't enough for the locals, these private fuckers still manage to sell and export abroad.

2) Yes and no and yes. These bastard private millers have been hoarding for a while now and only recently have the govt forcefully tired to make them release their stocks. Both parties are to blame, but since when has our govt been proactive anyways? The private millers are scum and don't care if the locals go hungry. Fill your pockets and let others starve, is their mantra. The same holds true for the govt. There is definitely money being exchanged between the hoarders and the govt. Make your own conclusions.

3) This is tricky and looooong. The only short term fix is to make sure the hoarders release their stocks into the market so that prices come back down. Imports need to be expedited (the govt officials i mentioned constantly create problems--to fill their pockets--which leads to delays of the wheat arriving) and released into the market as soon as vessels arrive.

Medium and long term solutions entail educating the farmer, showing him how to make the most of his land at the cheapest cost. These farmers still employ traditional practices thinking that if it worked for my father, then it'll work for me. There is a lot more to say on this, but I actually have some work to do (tomorrow's the tender) but I hope that helps.

John L said...

How is hoarding hurting? I'm not clear on how that works.
If someone hoards wheat, it's because they think wheat will be harder to come by in the future. If you think something will be harder to come by later, isn't the rational thing to do save what you have now for later?

By buying a bunch now to save, the hoarders drive up prices now (when there is more). When they finally sell, the price will go down. Sounds like exactly what you would WANT to do.

Now, if they are hoarding now and there WON'T be a shortage later, all bets are off. But in that event, they will lose a bunch of money, right?

I'm just not understanding how these "evil hoarders" are hurting anyone.

Ahsan said...

john l:

in many cases, the word "hoarders" refers to buyers. that is the inference you are making here. however, in pakistan's case the hoarders are the sellers. they keep supply low (much like OPEC) to keep prices high. they also sell it abroad in afghanistan and central asia where prices are higher, even though the govt has specifically told them not to because supplies in the country are low.

zeyd: thanks very much for that. we appreciate it.

john l said...

I'm still not quite getting it. If prices are higher in afghanistan and central asia, doesn't that imply that those folks need the food even worse than Pakistanis? If the supply is lower in Pakistan, why wouldn't the price be higher? And are you implying that they have a cartel like OPEC, where they all agree not to sell? How do they enforce such an agreement? Why wouldn't someone break it to make a buck?

Ahsan said...

hi john l:

the higher prices in afghanistan and central asia are more indicative of the fact (and i'm not expert, but this is an educated guess) that their climate/economy is not well-suited to this particular crop. south asia and south east asia are bigger producers of this stuff, which is why prices are a little lower there.

it *could* be the case that they need the food more than pakistanis, but it is *definitely* the case that if there are artificial or real shortages of wheat/flour in pakistan, then it shouldn't be exported! maybe that's a little insensitive to their [i.e. afghanistan and CA] needs, but at the end of the day, if pakistanis are facing shortages, and pakistani producers are defying government orders to not export/smuggle their grain to fetch higher prices, then they deserve to be condemned in strong terms.

as for your other questions, yes it certainly is an interesting and obvious question as to why we don't see a breakaway faction selling it to make a quick buck. again, i'm no expert, but my suspicion is that production is in a remarkably small set of hands, and so cheating is not as big a potential problem as in OPEC, where there are well over a dozen countries (though some obviously matter more than others).

if and when zeyd comes back, i'm sure he will be better able to answer your questions. he's a lot closer to the ground on this issue.