JANUARY 2009

FOOD SECURITY MARKET PRICE MONITORING BULLETIN- 6

Summary ƒ The price of average-quality wheat flour is 26 rupees per kg in , a decline of 6 percent in comparison to the previous month. However, the current price of wheat flour is nearly twice the price of May 2007 (Rs 14 per kg), prior to the onset of the global food price increases. Further decline in wheat flour prices is expected to be modest, as the procurement price set by the remains high in relation to the international prices. ƒ Food prices in FATA also declined in comparison to last month. However, in some agencies the wheat flour price remains significantly higher than in other parts of Pakistan. Prices are particularly high in Kurram and Mohamand, where roads have been blocked due to conflict, severely constraining delivery of food commodities. ƒ The population of in NWFP faces severe food access problems due to conflict. Most of the markets to the north and north-west of Mingora town are not functioning. In major towns of Swat, the price of wheat flour exceeds twice the price in . ƒ International wheat prices increased during the month of January, although abundant supply continued downward pressure on prices through December 2008. The US wheat (No.2 Hard Red Winter, f.o.b. Gulf) averaged USD 256 in January 2009, seven (7) percent higher than the December average but 33 percent lower than the average price one year ago. ƒ Sugar prices have increased in the country by 10 percent during January 2009 (average PAK Rs 38.8 per kg) when compared with last month, due to a shortfall in sugarcane production. The Government of Pakistan is planning to import sugar to meet the demand of local markets.

1. Wheat procurement

Government of Pakistan has fixed a wheat procurement target of 6.5 Food crisis in Swat In Swat District of NWFP, the price of food million tones for the current year, based upon an expectation of a commodities has increased severely due to conflict. good harvest. Wheat procurement price has been set at Rs. 950 per In major towns of Swat, the price of wheat flour is 40 kg. This target is 20% greater than the previous year, increasing 100% more expensive than Peshawar, reaching Rs. 60 national reserves in case of another wheat price shock. per kg. Only in Mingora, the district capital, the price difference is relatively modest (6% higher than Peshawar). The greatest price differential was 2. Retail cereal prices continue to decline observed for Kwaza Khela where rice costs Rs 150

Fig: 1-A Average Wheat Flour per Kg- per kg as compared to Rs 47 per kg in Peshawar. Prices are weighted by Population The price of average-quality 30 Most markets in the vicinity of Khawaza Khela 28.9 28.0 wheat flour, in Pakistan, is 27.0 Behrain, Kalam, Matta and Kabal are not functioning 28 Rs. 26 per kg, a decline of 6 and food items are scarce. Buyers have reportedly 25.1 25.2 26 24.7 percent in comparison to been negotiating with those traders having some 24 the previous month. remaining stock, presumably hidden. Fig-1 Percentage increase of market prices 22 compared to Peshawar 5 Feb-09 However, the current price 250

of wheat flour is nearly 200 2008 2008 2009 2008 2008 August 2008 October January 150 twice the price of May 2007 e November December September (Rs. 14 per kg), prior to the 100 percentag onset of the global food price increases. 50 0 Wheat flour Rice (irri-6) Dal channa Beef Ghee -50 Mingora Matta Kw aza Khela In FATA, the price of Fig- 2 Retail prices of wheat flour (avg.Quality) Kabal Pes haw ar wheat flour declined, but PAK Rs /kg 60 The transport rates from Peshawar to Mingora have not remained 41% higher changed significantly. However, roads beyond Mingora 50 leading to the North and North-west are mostly blocked. than the national average. 40 Transporters are reluctant to go beyond Mingora. There is In Kabul, wheat flour 30 fear of militant attacks on the trucks. During breaks in the prices remained stable, 20 curfew, small traders use pick-up trucks from Mingora, often paying three times the usual transport rates. 10 averaging Rs. 47 per kg. J-08 J-08 J-08 J-09 F-08 S-08 N-08 D-08 The price in Kabul is M-08 A-08 M-08 A-08 O-08 The situation mught improve if there is a cease-fire and/or Lahore Multan Karachi Peshaw ar Quetta FATA negotiated solution to the conflict. significantly higher than Kabul in Pakistan, offering an attractive margin for traders.

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PAKISTAN -Food Security update January 2009, Bulletin – 6

In Federally Administered Tribal Areas (FATA)1 the prices of food commodities are still significantly higher than the rest of the country, mainly Fig- 3 Retail prices of wheat flour / average quality / Dec 08- Jan 09 PAK Rs / kg due to security problems. The price of wheat flour is particularly high in 60 Kurram and Mohamand agencies because roads have been blocked due to 50 40 conflict, severely constraining delivery of food commodities. Wheat flour 49.7 45.2 42.9

30 41.3

prices declined by 9 percent in Mohmand and Orakzai agencies, but declined 34.4

20 31.2 30.1 29.0 only slightly in Kurram and Khyber agencies. 10 0 Mohmand Khyber Orakzai Kurram Fig- 4 Retail prices of irri 6 rice / Dec The price of IRRI-6 rice in the D-08 J-09 PAK Rs / kg 08-Jan 09 120 country was 74 percent higher than 100

108 May 2007. However, the rice price was 3.6 percent lower than the previous 80 106 60 month, at Rs. 39 per kg. The current bumper rice crop has put downward 58 40 56

48 pressure on domestic rice prices. A continued decline in the price of rice is 47 47 47 37 37 36

20 32 30 31 27

22 expected over the next couple of months. The Government of Pakistan has 0 20 21 21 commenced procurement of rice and has also encouraged traders to export. Kabul FATA Multan Quetta Lahore

Karachi

May - 07 Peshawar Dec-08 Jan 09 Fig- 5 Terms of trade 13 12.6 12.0 11.8 11.2 11.3 11.0 3. Purchasing Power 12 11.2 11 12.4 12.1 11.2 11.7 10 10.7 10.0 9 8.6 8.5 10.5 Terms of trade in Peshawar (NWFP) and Multan (Punjab) declined in 8.08.3 7.9 8 7.2 comparison to the previous month. The population of FATA faces the 7 7.9 6.3 6 7.0 lowest terms of trade in all of Pakistan, although, there was a slight 6.7 6.0 6.6 Wheatkg / dailywage 5 5.4 6.2 increase compared to the previous month. The terms of trade in Fig-5 Oct 08 Oct 09 Jan July 08 July 08 Sep Nov 08 Dec 08 have been defined as the quantity of wheat flour that can be bought with 08 Aug Pakis tan Fata Multan Pes haw ar the income derived from one day of unskilled labor. The terms of trade indicates the ability of poor households to access food.

4. International wheat prices fluctuating Fig- 6 Wholesale prices of wheat 35 International wheat prices increased during the month of January, 30 although they remained quite volatile. The increase reflects a smaller 25 g than expected wheat harvest in Argentina, where the Government has 20 suspended new export permits, and a reported decline in the area 15 planted to wheat in 2009 by some large producing and exporting Pak Rs / k 10 5 countries, including the EU and the United Sates. However, abundant J-08 J-08 J-08 J-09 F-08 S-08 N-08 D-08 supplies following the record world wheat harvest in 2008 continue to M-08 A-08 M-08 A-08 O-08 Lahore Karachi World price Pr oc Pr ic e put downward pressure on prices. The US wheat (No.2 Hard Red

Fig- 7 Wholesale and import parity in Karachi Winter, f.o.b. Gulf) averaged USD 256 in January 2009, seven (7) percent higher than the December 40 average but 33 percent lower than the average price one year ago and 50 35 30 percent below the peak price of February 2008. 25 20 Average wholesale wheat price in the local market was Rs. 23.7/kg, 15 PAK RsPAK / kg 10 during January 2009, a decline of four (4) percent compared to the 5 previous month. While a two percent increase was reported for Delhi, J-08 J-08 J-08 J-09 F-08 S-08 N-08 D-08 M-08 A-08 M-08 A-08 O-08 wholesale wheat prices in India remain considerably lower than in Karachi World price IPP-Kar Pakistan.

5. Cross border trade

FATA witnessed a food crisis in the recent months due to security problems and higher prices in neighboring Afghanistan. The cross-border trade of wheat, wheat flour, rice and edible oil appears to have increased during January 2009, as reported by traders and monitoring of trade volume.

1 WFP started collecting food price data in FATA from 20 locations, Mohammand (Haleemzai, Baizai, Lakaro,Yekka Ghund), Orakzai (Sangra, Meshti mela ,Kalaya,Ghiljo ,Feroz Khel),Khyber (Jamrud, Shalman, Bara, Landi kotal, Mulagori), Kurram (Sholozan, Burki, Melana, Sadda, Alizai) of four agencies since July 2008, to complement the existing FBS data.

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APPENDIX: PRICE TABLES

Annex-1 Retail prices for Pakistan, FATA and Kabul - January 2009 Commodities Unit Lahore Multan Karachi Peshawar Quetta Mohamnd Khyber Orakzai Kurram *Pakistan Kabul 1. Wheat Flour Kg 22.3 23.8 25.9 29.1 28.6 45 29 31 41 25.2 47.2 2. Broken Kg Rice 46.1 50 44.4 51.9 47.5 - 42 72 45 47.8 52 3. Irri-6 Rice Kg 47.4 30.4 32.3 47.5 35.5 49 50 51 75 38.8 105.9 4. Fine rice / Kg sella plain - - - - - 100 90 112 89 97.8 - 5. Dal Channa (Yellow Peas) Kg 58 60.1 60.9 63.4 59.5 70 65 76 72 60.4 77.3 6. Pakwan Liter Edible oil 140.8 140.8 140.8 141.3 141.3 133 82 104 123 110.5 98.1 7. Pakwan Kg Ghee 130 130 130 138.4 136.7 91 91 92 88 130.6 - 8. Dalda Kg Ghee - - - - - 110 138 111 108 140.3 - 9. Sugar Kg 39.5 38.6 38.2 39.6 38.1 46 38 45 43 39 - 10. Maize Kg - - - - - 16 44 33 39 33 - 11. Potatoes Kg 15.8 14.2 15.6 19.7 18.2 25 24 24 25 16.2 - 12. Onion Kg 23.4 19.6 21 27.1 22.4 35 23 31 26 22.4 - 13. Tea Kg 400 400 400 400 400 306 317 291 298 397.7 - 14. Chicken Kg 77.2 89.6 118.8 92.8 98.9 128 151 127 194 95.3 - 15. Beef Kg 141.6 141.7 165 137.7 160 130 151 219 147 147.9 - Kg 16. Mutton 285.4 246 285 240 280 - 377 285 197 267.8 - * Prices are weighted by Population

ANNEX -2 INTERNATIONAL AND WHOLESALE PRICES FOR WHEAT Lahore Karachi Delhi Int. Price \ a (USD/mt) (USD/mt) (USD/mt) (USD/mt) Jan-08 308.3 326.7 282.7 376.8 Feb-08 253.2 294.0 282.3 438.6 Mar-08 252.7 293.5 277.4 481.5 Apr-08 257.9 298.1 266.4 388.8 May-08 273.7 325.5 255.7 350.2 Jun-08 277.4 341.4 253.7 357.5 Jul-08 272.0 338.3 257.2 342.8 Aug-08 261.5 325.0 257.2 343.0 Sep- 08 253.8 315.4 231.8 308.0 Oct-08 280.0 374.5 222.4 257.0 Nov-08 268.3 365.0 221.8 268.3 Dec-08 272.9 358.5 237.3 227.0 Jan-09 273.8 334.0 242.6 256.0 \ a: Wheat (red, hard winter, no.2, US golf FOB)

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