Food Price Hikes Badly Hurting Average Pakistani Consumers

Global food prices are soaring by double digits amid the coronavirus pandemic, according to Bloomberg News. Bloomberg Agriculture Subindex, a measure of key farm goods futures contracts, is up almost 20% since June. It may in part be driven by speculators in the commodities markets. These rapid price rises are hitting the people in Pakistan and the rest of the world hard.  In spite of these hikes, Pakistan remains among the least expensive places for food, according recent studies. It is important for Pakistan's federal and provincial governments to rise up to the challenge and relieve the pain inflicted on the average Pakistani consumer.  

Global Agricultural Futures Contracts. Source: Bloomberg

Global Food Prices:

Global food prices are increasing at least partly due to several nations buying basic food commodities to boost their strategic reserves in the midst of the pandemic.  A Bloomberg News report says that "agricultural commodity buyers from Cairo to Islamabad have been on a shopping spree since the Covid-19 pandemic upended supply chains".  It may in part be driven by speculators in the commodities markets. Here's an excerpt of the Bloomberg story:

"Agricultural prices have been on the rise as countries stepped up purchases, adding to demand from China and a drought in the Black Sea region. That has helped push the Bloomberg Agriculture Subindex, which measures key farm goods futures contracts, up almost 20% since June. Sugar prices have gained a boost as China replenished stockpiles, said Geovane Consul, chief executive officer of a Brazilian sugar and ethanol joint venture between U.S. agribusiness giant Bunge Ltd. and British oil major BP Plc." 

Supply Constraint in Pakistan: 

The Pakistan Government estimates final wheat production ended up at 25.5 million tons, slightly above the five-year average of 25.38 million tons, according to Grain Central. While that represented a 1.2 million tons increase on the 24.3 million tons harvested in 2019, it was well short of the government’s target of 27 million tons, forcing Pakistan to import wheat at higher global prices.

Demand for fruits and vegetables is also rising at about 9.5% a year, according to Mordor Intelligence. The supply is falling short of demand, putting pressure on prices. 


Global Food Price Comparison. Source: Bayut



Food Prices in Pakistan:

The food prices have risen 14% for urban and 16.8% for rural areas of Pakistan in the last 12 months, according to Pakistan Bureau of Statistics. In spite of this inflationary trend,  the grocery prices in Pakistan remain among the lowest in the world. A comparison by Dubai-based Bayut shows that groceries in Pakistan cost 72.9% less than in the United States. Other least-expensive countries for groceries include Tunisia ( 67% less), Ukraine ( 66.7% less), Egypt (65.6% less) and Kosovo (65.6% less). 

Globally, Switzerland sells the most expensive groceries, with prices 79.1% higher than in the U.S. Norway is the second most expensive place to buy groceries, with prices 37.4% more expensive than in the U.S., and Iceland is third most expensive, where food items are 36.6% pricier, according to Bayut.

Cost of Dining Out. Source: Commodity.com



Summary:

Global food price hikes have hit average Pakistani hard in spite of the fact that grocery prices in Pakistan remain the lowest the world.  Bloomberg Agriculture Subindex, a measure of key farm goods futures contracts, is up almost 20% since June. It may in part be driven by speculators in the commodities markets. World food commodity prices are increasing at least partly due to several nations buying basic food commodities to boost their strategic reserves in the midst of the pandemic. It is important for Pakistan's federal and provincial governments to intervene in the markets to relieve the average Pakistani consumer's pain. 

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Comments

Rashid A. said…
Good analysis.

In the context of Pakistan, few points:

In Pakistan it is utter mismanagement that is ravaging the food supply.

In Pakistan besides food, inflation in other essentials (electric power, gas, petrol, and SEVERAL FOLD increase increase in medicine prices ) is also debilitating.

No. of people living below poverty line has jumped in last 2 years from 70M to 90M. Food prices are out of reach for these people.

Pakistanis spend a lion’s share of their income on food. So food inflation is devastating Pakistani society. Americans spend much smaller amount of their budget on food.

Besides price inflation, there is severe shortage of essentials. A large amount of wheat in storage was only in papers, it has disappeared from the warehouses. Fakhar Imam, Minister of Ag. & Food Security expresses his wonderment on the development in the Parliament.

The way sugar, power, and medicine mafia has been working, it appears they are all in the same business:
Kumar said…
"Soaring prices of agricultural products are stoking food-security jitters in China. According to the China’s National Bureau of Statistics, food prices went up by 13 percent in July, compared to the previous July; the price of pork rose about 85 percent. On a year-on-year basis, food prices have increased by 10 percent in 2020 — the price of corn is 20 percent higher and the price of soybeans, 30 percent"

https://thehill.com/opinion/international/516607-another-famine-coming-china-struggles-to-meet-basic-food-demands

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