Since June this year, due to the extremely heavy monsoon rain, serious flooding has occurred in many regions of Pakistan, which is described as ″never seen before″ ever in Pakistani history. Approximately one-third of the country is flooded and more than 33 million people are affected, which account for 15% of the country’s total population, having resulted in an expected economic loss of above $10 billion in total. As of press time, flooding has not ended.
In recent years, natural disasters such as locust plague, COVID-19 and the flood have occurred one after another, coupled with the domestic inflation and the exchange rate fluctuation, Pakistani agriculture and the overall economy have been impacted. Pakistan is China’s major pesticide export destination, where more than 90% of pesticides are imported from China. In 2020, the pesticide volume imported from China was 22,500 tons, valued at $243 million, ranking seventh among all Pakistan’s import countries. Considering the disasters happening to Pakistani agriculture, the writer managed to contact several Pakistani local agricultural inputs companies, including Muhammad Shafique, CEO of Suncrop Group, Zulfiqar Ali, CEO of Patron Group, Mian Hanif Tariq, Chairman of Exin Group as well as Saeed Kulachi, General Manager of Yaqoob Group, who briefed AgroPages of the current state of Pakistani agriculture and the operations of local agricultural inputs companies.
More than half of cotton crop in the country are affected by flooding, which may lead to a serious economic setback
In July, Pakistan’s provinces of Punjab and Sindh remained relatively safe, being ready for raining. However, moving into August, all provinces were hit by greater rainfall and flooding, with northern provinces being hit by serious flooding, which then spread to the provinces of Punjab and Sindh. At present, almost all provinces of Pakistan have been affected by flooding, especially the regions closest to the Indus River flow area, which is the most fertile and healthy crop area.
Southern Sindh is the most seriously affected area, with about 70% of crop area being affected; 40% area of Punjab are affected; 50% area of Balochistan and 25% area of KPK (Khyber-Pashtun) are affected. The crops which are affected most seriously are rice, cotton, maize and vegetable.
Farmers work in a flooded field in Mehar, Pakistan (Source: REUTERS)
According to PARC Islamabad & ICIMOD, the economic loss from rice, cotton and sugarcane in the most seriously affected Sindh province amounted to $1.3 billion; economic loss from major vegetables such as tomato, onion and chili reached $374 million; the local prices of onion and tomato are 10 times higher than usual; and the economic loss from livestock hit $13 million.
Loss of three major crops in Sindh Province
Source: PARC Islamabad & ICIMOD
In Pakistan, 50-60% of cotton area are affected, followed by rice, with 20% area being affected. Farmer’s next season sowing of cotton is faced with a threat, bearing in mind that cotton is a Pakistan’s largest crop as well as an important part of Pakistan exportation, which indicates that a major economic setback is foreseeable in Pakistan.
Agricultural inputs at high inventory level, logistical cost 50% higher
In the agricultural inputs market, the distributors maintain high stocks of pesticides, which are still adequate. Due to the rise in the dollar exchange rate, the prices of the purchased agricultural inputs have been already at a high side, which have currently not fluctuated much.
Muhammad Shafique, CEO of Suncrop Group, Pakistan’s largest agricultural inputs company, says that the market would experience a highest-level inventory when extreme raining and flood cause major destructions. Flooding has had a serious impact on logistics, the railway from Karachi, Pakistan’s only port, to all parts of the country, is still not in service, and most of the roads in Sindh is still flooded.
Zulfiqar Ali told us that the sales in July and August decreased. So far, there are sufficient stocks of agricultural inputs while prices are low. The biggest unstable market factor lies on the exchange rate. At the beginning of 2022, the dollar was 174 against Pakistani rupee, which peaked at 248 in July when all companies suffered largest exchange rate loss in a month ever in history. As logistical cost and fuel prices are rising, logistical cost is nearly 50% higher than last year.
Production run of agricultural inputs manufacturers not bad, but raw material cost on the rise
For the several companies interviewed, the beginning of 2022 was good. However, flooding will inevitably have a significant impact on the company’s year-round business operation.
Patron Group’s sales in 2022 started satisfactorily, which, at the end of June, even reached the volume of the full year of 2021. In early July, heavy raining began in Pakistan, which has disrupted the sales of the company. Zulfiqar Ali says that while Petron Group has already reached the full-year sales last year, the sales in July and August are 20% lower than last year and the sales valued at $ have fallen behind the previous year.
Exin Group has experienced same situation. Mian Hanif Tariq says that before flooding began, the company had already achieved its annual sales target. Overall, the sales in 2022 will be better than 2021, but obviously it is not possible to exceed what is planned for this year.
Flood has caused the energy price rise such as the electricity. At present, flood-stricken area is facing severe power shortage, with electricity price being doubled. People can do nothing, except government. However, Muhammad Shafique believes that pesticide production is not an energy-intensive industry, therefore Suncrop’s production run is not affected much. Nevertheless, the company’s business operation has been hit by inflation and the exchange rate fluctuation. Now, Suncrop Group has cut down volume of purchase. Saeed Kulachi says that Yaqoob Group’s two plants in Multan and Faisalabad are running in normalcy. Inflation is a major factor which influences production and international trading. At this moment in time, the prices of all ingredients used in production are rising which have far exceeded farmer’s affordability.
To get ready for next season as soon as possible, which is crucial
Today, it is crucial to attend to planting of crops for next season. The top priority will be corn, potato and leaf mustard, followed by wheat. As a result of the flood disaster, all Pakistani are confronted by food shortage. The supply of wheat is relatively adequate, for which governments still maintain stocks, which can be made available at preferential price. However, due to the increase in the exchange rate and the logistical cost, the prices of all bean products are rising while edible oil is at its high price level. These are most basic foodstuffs.
In the coming months, the flood-stricken area will see difficult recovery. How will Pakistani agricultural inputs companies adjust operations in response to the situation?
Zulfiqar Ali spoke openly that Pakistani agriculture has suffered from a series of adverse events in recent years, like locust plague, COVID-19 and now the flood, which have all had an impact on the agricultural development of the country. Local agricultural inputs manufacturers are working hard to help the government and farmers cope with the disasters. At the time of locust outbreak, Patron Group provided the government with pesticides free of charge for control of locusts. Currently, the company is trying to incentivize farmers to start cultivation immediately once the flood is gone, such that food shortage, which may happen next, can be avoided.
Patron Group is prepared to guide farmer’s planting activity so that farmers can start to grow the right crops as soon as possible in an economical way and at the right time. In addition, the company has suggested cultivation of alternative crops in order to quickly harvest crops after the flood. At present, all R&D staffs of the company are busy in guiding farmers recover production while providing food to farmers.
Mian Hanif Tariq believes that the biggest challenge to farmers at this stage is how to recover flooded crop field as soon as possible and prepare for planting of wheat, which is the key crop of the next season. Exin Group is currently trying to take back the agricultural inputs from flood-affected area and is planning supply of new products. To help the affected people, Exin Group worked with major distributors and their work team in the flooded area to provide affected people with food package encompassing flour, rice, cooking oil, sugar, salt and tea. In some regions, Exin Group provides shelter to flood-affected people. Saeed Kulachi says that Yaqoob Group has provided basic needs such as food and medicine to the farming communities in the flooded area of southern Punjab.
Coming up next, Exin Group will provide an ″open and serve″ solution to farmers and distributors. Moreover, the company will offer some biological products to affected farmers at extremely low prices, including the Brand Steer Bio, which is an optimum alternative to high-priced fertilizers. The Brand Steer Bio contains five kinds of bacteria including phosphate solubilizing bacteria, rhizobium, potassium bacteria and zinc solubilizing bacteria. To help farmers better control wheat weeds, the company is prepared to offer the low-priced product Synergy, which is a product to enhance the effect of fertilizer and pesticide applications.
Furthermore, Suncrop is making preparation for the upcoming crop planting. Muhammad Shafique, CEO of the Group, shows strong confidence in the Pakistani agriculture. He believes that farmers will soon return to normal with planting of crops, as Pakistani agriculture has appeared adaptive and resilient to disasters for several times already. Under the current situation worldwide, the issue of food security has attracted increased attention, whilst Pakistani agriculture is foreseen to be back to its property very soon.