According to a recent study on Pakistan agriculture conducted by Bank of America, farming does not always remain a profitable venture for small farmers, especially considering the increase in farm input costs has not been offset by the increase in wheat support price.
The study was conducted to look into changes in farm economics over the last few years and how rising input prices despite intermittent increase in wheat support price have dented ability of farmer to invest in agriculture inputs.
It is worth mentioning here that in Pakistan, majority of the cultivators belong to the category of small or marginal farmers having land less than 12 acres. There are 6.62m farms in Pakistan, out of which 85.69 percent is cultivated by small farmers. In Punjab 85.39 percent of the total farms are in the category of small farms. It has been observed in the report that per acre yield of small farmers is hit worse than average levels. This is also evident in the trend seen in the last couple of years where returns from Kharif crops have been lower and the same has been reflected in wheat statistics. Small farmers are naturally worst hit where not only has consumption of urea fertiliser reduced, DAP application has completely been eliminated in extreme cases. This has resulted in a decline in yields for such farms from a high of 40 maunds per acre to below 28 maunds per acre.
Fertiliser is the most important and an expensive input, as per Pakistan Economic Survey 2012-13. Contribution of balanced fertilisation towards increased yield is from 30 to 50 percent in different crop production regions of the country. One kg of fertiliser nutrient produces about 8kg of cereals (wheat, maize and rice), 2.5kg of cotton and 114kg of stripped sugarcane. Almost hundred percent soils in Pakistan are deficient in nitrogen, 80 to 90 percent are deficient in phosphorus and 30 percent in potassium. Soil fertility is continuously depleting due to mining of essential plant nutrients from the soils under intensive cultivation.
According to the report on Pakistan agriculture, although the federal government has announced a 14 percent increase in wheat prices for last procurement season, net realised gross income at the farm gate level is still be lower given small farmers hardly get access to government procurement agencies coupled with other allied bottlenecks. Despite their preference to sell the crop to the government which ensures stable prices, farmers have no option but to sell in the open market via dealers. Resultantly, ordinary farmers have to rely on market forces.
Farmers have seen phenomenal increase in the price of urea fertiliser, which is primarily caused by consistent suspension in supply of gas to fertiliser manufacturing plants, levy of General Sales Tax, imposition of gas development cess and its shortage in the market. As a consequence, urea prices have increased from Rs 800/bag to Rs 1,700/bag over the last about three years. Such a price jump has not been seen in past 10 to 15 years or even since launching of fertiliser manufacturing industry in the country. A 50kg bag of urea fertiliser has been increased to Rs 750/bag in last about 33 years, while in the last about two and half years it soared by about Rs 950/bag. Consequently, farmers are not applying urea fertiliser as per demand that is in return reducing their per acre yield.