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Pakistan - Challenges remain despite bumper rice crop
Financial Times, April 12, 2004
Pakistan's rice farmers have been celebrating bumper yields. But high domestic prices have dashed hopes of large-scale exports, analysts say in their latest assessments.

The gap between global and domestic prices is up to 20 per cent, although economics would suggest the heavy crop should have pushed domestic prices down.

Rice traders say the rise was prompted last winter by reports that Pakistan was about to receive large export orders including one from Iran.

Even though stocks are ready to be shipped out, the middlemen and traders who paid a higher price at that time are now refusing to take a hit. Meanwhile, farmers with unsold stocks are resisting settling for prices lower than those obtained by some of their colleagues.

According to Haji Abdul Majeed, a leading rice dealer, exporters have almost stopped buying new rice stocks. They are waiting for either global prices to increase to domestic levels or for Pakistani prices to fall.

This season's 4.9m tonnes of rice compares with 4.3m a year before. "This is a bumper crop," says Rahim Janoo, a prominent rice exporter. "But there are no signs of a bumper crop in the market because sentiment around daily trading is weak."

The higher yield was largely the result of last summer's monsoon rains which reversed a five-year drought and lifted prospects across the board for farm incomes. Farmers were also helped by larger yields of last year's wheat crop which preceded rice sowing. The larger profits from wheat gave additional cash to farmers for fertilisers and pesticides, further lifting yields.

While the immediate outlook remains bleak, some officials are encouraged by improving relations with India, Pakistan's competitor in rice exports. In the past, when relations were tense, Pakistani officials complained about India's rice exporters aggressively publicising shortcomings in Pakistani rice.

"In the past, we were concerned about the Indians bringing about bad publicity for Pakistan, such as spreading the word about pest attacks on our crops when that was not true," says one senior Pakistani official.

Mr Janoo, who has just led a business delegation to India, believes the rice businesses of the two countries have much to gain from new ties, such as Pakistan importing the relatively cheaper Indian machinery for rice processing.

But opinion is divided over whether the Pakistan government's goal of $1bn of rice exports compared with last year's $555m can be reached. Across the traditional rice growing farmlands, farmers complain about the failure of successive regimes in reforming the largely inefficient system of canal irrigation. In some cases up to half the water is lost through cracks and theft. There is also a total absence of advanced technologies in sowing and harvesting.

Mr Majeed says the fall-out from a slowdown in short-term exports may be temporary, but the long-term challenges should not be ignored. "One year of high yield is no evidence that we don't have to work hard to resolve our challenges," he says.
MGR Archive 14.4.2004
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