Floods Pressures Pakistani Grain and Vegetable Crops — Tridge
Floods have destroyed around 32% of Pakistani total agricultural land since mid-June 2022. The Sindh Province has been one of the areas most affected by the floods, producing around a third of the country’s food supply. During this monsoon season, the province had excessive rainfall that was about sixfold higher than the 30-year average and damaged about 50% of the province’s crops. Other provinces such as Balochistan and Punjab have also been severely affected by the floods.
Pakistan is currently suffering from one of the most devastating natural disasters in its history due to the floods that have swept away a third of the country. Pakistan is already struggling with currency devaluation and rising inflation.
Source: Trading Economics
For the sixth consecutive month, the annual inflation rate rose from 25% in July to 27.3% in August 2022. This is by far the highest in over 47 years, and rates could rise even further. Similarly, food inflation in Pakistan also surged to 29.5% in August 2022.
Some Pakistani crops that have been severely impacted by floods are wheat, rice, tomato, and onion. Pakistan is one of the top 10 producing countries of wheat, but most of the domestically produced wheat is for local consumption. The planting of the Pakistani wheat crop, which takes place in October and November, may be hindered in flooded in Punjab and Sindh, wheat-producing areas in Pakistan. The current situation may lead to increased reliance on imports due to the expected fall in supply, adding further pressure to the already tight global wheat supply.
Pakistan is the 2nd largest exporter of rice, behind India, and China has grown to be a significant importer of Pakistani rice to use as animal feed. In Q1–22, China purchased 466,617 mt of rice from Pakistan, a 9% YoY increase. However, the recent flood will influence rice exports as the Pakistani rice crop was affected by the flood. To make matters worse, the Chinese rice crop may be reduced in half due to the ongoing drought. While other producing markets, India, also forecasted rice production to decline. Other importers of Pakistani rice including Malaysia, Afghanistan, and Kenya will be affected as well.
The wholesale price of onions and tomatoes in Pakistan has risen by 50% MoM and 45% MoM, respectively at the beginning of September 2022. Pakistan can produce onions all year round, but floods in late August damaged the crops, reducing onions availability. The government has authorized the import of onions and tomatoes from Afghanistan and Iran in an effort to compensate for the supply in the domestic market.
The flooding has exacerbated the Pakistani situation in tackling the economic crisis and high inflation. Food is becoming unaffordable in Pakistan due to soaring prices in the agricultural sector, particularly for staple foods. Due to the expected food shortage, Pakistan may import more to make up for the shortage and curb the high price. According to the Pakistan Bureau of Statistics, the negative trade balance gap increased by 29% MoM to USD 3.53 billion in August 2022 and may grow even higher. Since the water from flash floods is not expected to dissipate for another two to three months, there will likely be supply disruptions and an increase in inflation of more than 30% by the end of 2022.
Originally published at https://www.tridge.com on September 14, 2022.
