3.2.1 Wheat Area allocation and Yield . ..... Lodhran, Vehari, Rahim Yar Khan and Karachi. ... Producers' wheat area allocation, seed sources and yield.
Durum Wheat Value Chain in Pakistan: Scanning current picture and exploring future potential
Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
Durum Wheat Value Chain in Pakistan: Scanning current picture and exploring future potential
Authors: Tariq Saleem, CIMMYT- Pakistan Research Associate, Socioeconomics Program Akhter Ali, CIMMYT- Pakistan Agricultural Economist, Socioeconomics Program Krishna Dev Joshi, CIMMYT- Pakistan Wheat Improvement Specialist, Global Wheat Program Imtiaz Muhammad, CIMMYT- Pakistan Country Representative for CIMMYT- Pakistan
International Maize and Wheat Improvement Center (CIMMYT), Pakistan Office, NARC, Park road, Islamabad, 44000 Phone: +92 51 9255522-23-24, Fax: 92 51 9255434
This report is made possible by the support of the American people through the United States Agency for International Development (USAID). The contents are sole responsibility of the International Maize and Wheat Improvement Center (CIMMYT) and its partners, do not necessarily reflect the views of USAID or the United States Government.
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Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
Contents EXECUTIVE SUMMARY ......................................................................................................................... 5 Key Findings ....................................................................................................................................... 5 Recommendations.............................................................................................................................. 8 1- INTRODUCTION & BACK GROUND .............................................................................................. 10 1.1 Wheat Value Chain in Pakistan: ................................................................................................... 10 1.3 Purpose of the study.................................................................................................................... 12 1.4 Goal/Objectives ........................................................................................................................... 12 2- METHODOLOGY ............................................................................................................................. 13 3- SURVEY RESULTS........................................................................................................................... 14 3.1 SEED COMPANIES ...................................................................................................................... 14 3.1.1. Awareness & Willingness ..................................................................................................... 14 3.1.2 Business & Price expectations .............................................................................................. 15 3.1.3 Constraints and Suggestions for Durum Business ................................................................. 16 3.2 PRODUCERS/GROWERS .............................................................................................................17 3.2.1 Wheat Area allocation and Yield........................................................................................... 18 3.2.2 Wheat varieties & Seed Sources ........................................................................................... 19 3.2.3 Contract Farming: Willingness & Involvement ...................................................................... 19 3.2.4 Vermicelli Home preparation ............................................................................................... 19 3.2.5 Durum Wheat: Awareness, Cultivation and productivity ...................................................... 20 3.2.6 Durum Wheat Willingness .................................................................................................... 21 3.2.7 Durum wheat adoption constraints ...................................................................................... 22 3.2.8 Farmers’ Suggestions ........................................................................................................... 23 3.3 CONSUMERS .................................................................................................................................. 23 3.3.1 Pasta Awareness, Purchases & Preferences .......................................................................... 23 3.3.2 Durum pasta: awareness, willingness and prices .................................................................. 26 3.3.3 Pasta consumption constraints ............................................................................................. 27 3.4 Restaurants ................................................................................................................................. 27 3.5 Seed Dealers ............................................................................................................................... 28 3.5.1 Seed Business Situation........................................................................................................ 28 3.5.2 Willingness for durum wheat seed business ......................................................................... 29 3.5.3 Constraints and Suggestions ................................................................................................ 29 2
Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
3.6 Wheat Millers .............................................................................................................................. 30 3.6.1 Millers preferred buyers........................................................................................................ 30 3.6.2 Willingness for Durum wheat milling.................................................................................... 30 3.6.3 Millers’ suggestions .............................................................................................................. 31 3.7 Food processing Industry ............................................................................................................. 31 3.7.1 Flour availability and Pasta processing ................................................................................. 31 3.7.2 Durum wheat awareness, expected demand and price suggestions ..................................... 32 3.7.3 Pasta products’ business trends ............................................................................................ 32 3.7.4 Market development & Future expectations ........................................................................ 33 3.7.5 Constraints and Suggestions ................................................................................................ 33 4- Conclusions & Recommendations................................................................................................... 34
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Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
ACRONYMS AND ABBREVIATIONS AIP
Agricultural Innovation Program
CIMMYT
International Maize and Wheat Improvement Center
GDP
Gross Domestic Product
MIS
Management Information System
PASSCO
Pakistan Agricultural Storage and Supplies Corporation
R&D
Research and Development
SPSS
Statistical Package for Social Sciences
TCP
Trading Corporation of Pakistan
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Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
EXECUTIVE SUMMARY Conceived by Socioeconomics Program CIMMYT-Pakistan, the study “Durum Wheat Value Chain in Pakistan: Scanning current picture and exploring future potential”, seeks to map wheat value chain, gauge existing awareness of durum wheat, assess willingness of chief wheat value-chain actors and identify effective program interventions for successful and sustainable durum wheat value chain development in Pakistan. The target locations for the study include Faisalabad, Lahore, Sahiwal, Multan, Lodhran, Vehari, Rahim Yar Khan and Karachi.
Key Findings Seed companies’ network and infrastructure
Seed companies engaged in large scale wheat-seed businesses are located in Rahim Yar Khan and Jhang districts. These companies have established proper processing and storage infrastructure and have developed a handsome number of registered growers. Majority of these firms are marketing seed through dealers’ network. Some seed companies are also found engaged in wheat milling as well. Seed companies’ durum wheat awareness and willingness Majority (60 Percent) of seed companies’ representatives reported that they have even never heard about durum wheat. And those possessing durum wheat information/knowledge are not involved in durum seed business, except Jalander Seed Company. An overwhelming majority (70 percent) of respondents pointed unawareness and unavailability of durum seed as driving factors for non-existence of durum seed in the market. However, a sizeable proportion (63 percent) of seed companies showed good gesture for going into durum seed business. Seed companies’ business & price expectations Amongst seed companies’ representatives who portrayed willingness for durum business, two third didn’t respond on expected durum seed business and only one third (33 percent) gave their sales’ projections subject to availability of certified durum seed possessing competitive yield potential in relation to existing best performing bread wheat varieties (Galaxy 2013, Faisalabad 08, Abdul Sattar, TD1 etc.). Seed companies’ reported constraints & suggestions The seed companies’ representatives pointed out durum marketability (50 percent) followed by yield potential (27 percent) as the foremost constraints in durum wheat adoption. Different consideration/suggestions by seed companies’ representatives include Contract farming for durum seed development, Competitive yield potential of durum in relation to best performing bread wheat varieties, Cultural practices & Inputs required for cultivation of durum wheat, Govt. role in creating enabling business environment, Provision of premium price to durum growers and taking all relevant stakeholder on board in devising durum wheat value chain programmatic frame work. Producers’ wheat area allocation, seed sources and yield Slightly less than half (45) percent of the respondent farmers are allocating more than 3/4th of their operational land to wheat. Thus study finding proves that a major proportion of operational land is being spared for wheat. As regards wheat yield, majority (77 percent) of them reported increasing trend over the time. Moreover, the growers reported application of quality inputs in proper quantity as the foremost reason of yield improvement. Looking into seed source of the 5
Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
farmers, 36 percent keep their own seed, 27 per cent take from fellow farmers and 28 percent purchase seed either from local seed companies or govt. research institutes. Producers’ contract farming willingness & involvement Relatively large proportion of respondent farmers (54 per cent) is found not involved and have never been in contract farming. But a vehement majority (80 percent) of the farmers exhibited interest in going into contract farming with any well reputed national or international seed company. Producers’ preparing vermicelli at home Almost 59 percent of the farmers are not making vermicelli at home and only 41 percent confirmed vermicelli preparation at home in very limited quantity at special occasions like Eid. Producers’ durum wheat awareness, cultivation and yield Of the total interviewed farmers, 32 percent have awareness about durum wheat and all of them cultivated it at small scale. On average, the durum growers cultivated durum wheat on 6 acres of land and obtained average yield of 57 maunds per acre. However, the progressive durum growers pointed out sever stem rust susceptibility of the variety that caused lodging at crop maturity and led to difficulty in manual harvesting and added grain losses. Jalader Seed Company (a local seed company) introduced durum wheat with the name of Rustum special and distributed its seed to contract growers during Rabi season 2012-13. The farmers looked satisfied with its physical features. Reportedly it has hard bold grain with relatively more weight and attractive yellow color. But the farmers who used its grain for chapatti making, highly complained about its unsuitability for it. Few farmers also reported that Rustum special crop residue is relatively hard and is unfit as animal feed.
Producers’ willingness for durum wheat Different combinations of assistance opportunities were given to the respondent farmers to gauge their willingness for durum wheat adoption. Interestingly more than two third (77 percent) of the farmers consented to cultivate durum wheat subject to provision of free seed and training with guaranteed market for durum wheat grain. While scanty proportion of farmers (23 percent) look for some subsidy in inputs (fertilizers) as well.
Producers’ constraints and suggestions The possible constraints pointed out by the respondent famers include yield potential, climatic adaptability of the crop, grain marketing, suitability for chapatti & bread making and the role of government in creating enabling environment for its development. While suggesting measures in durum wheat development, slightly less than half (47 percent) farmers perceive that the provision of subsidized inputs would be helpful in introducing durum wheat among the farming community. Further, disease resistivity and high yield potential would be desired features of a new wheat as reported by 21 and 16 percent farmers, respectively. Each, good price, proper crop duration, buy-back guarantee, suitability for chapatti making & backing would also be considered as desired features as reported by 11 percent farmers. Consumers’ pasta awareness and purchase preferences Of the total interviewed consumers, a vehement majority (92 percent) are found to be consumers of pasta food. While commenting on information/aspiration source for pasta, more than half (54 6
Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
percent) of overall consumers reported TV advertisement as a mean of information and slightly less than one fourth (23 percent) got ambition from friends & family. Reportedly, consumers prefer to cook pasta at home rather than going to restaurant. Noodles followed by vermicelli, macaroni and spaghetti etched out as the most frequently cooked items at home as reported by 100 percent, 73 percent, 64 percent and 55 percent consumers, respectively. Consumers’ durum awareness, willingness & price expectations Most of the consumers (73 percent) are found unaware of durum wheat, whereas slightly more than one fourth (27 percent) reportedly have some knowledge and/or information about durum wheat. A vibrant majority (64 percent) are found less conscious about attractive color and high protein contents of durum pasta rather they preferred the option offering relatively less price.
Consumers’ highlighted constraints & suggestions A vast majority (67 percent) of the consumers mentioned lack of awareness as the foremost impeding factor for pasta products to be included as regular food item in households’ daily meal menu. Contrary to general perception about easy cooking methodology of pasta products, a significant proportion of consumers perceive that non-familiarity with cooking techniques could be a hindrance in popularizing these foods, particularly among rural community. Whereas one third of the respondent households pointed unaffordability and non-development of taste & fashion of the consumers and unavailability of quality pasta products would be leading barriers in out scaling pasta foods among all sections of society. Restaurants as wheat value chain stakeholders The role of restaurants as an active stakeholder in wheat value chain is insignificant. A scanty number of traditional restaurants, only in big cities, have included noodles, macaroni, spaghetti and shells in their menu cards. Whereas, few chines and Italian chains, specialized in noodles’ dishes, are serving a very limited elite class of society in big cities (Islamabad, Lahore and Karachi). Dealers as wheat value chain stakeholders A large proportion (80 percent) of dealers reported that they are dealing in certified seed business taken from local seed companies. None of them have any information about durum wheat. They, however, consented to sell durum wheat subject to supply of certified seed from a well reputed seed company. Millers as wheat value chain stakeholders In the light of current survey, milling is proved to be the most important and challenging component in durum wheat value chain development. The survey findings note that milling is not necessarily linked with food processing industry. Here is another actor named wholesaler that purchases white flour (fine Maida) and supplies to food processing industry. A very few millers have established their own food processing units as well. Millers are found unaware of durum wheat. Relatively large proportion (60 percent) of the mill owners intended to invest for durum wheat milling subject to ensured marketability of durum semolina. All of the millers suggested that premium sale price should be fixed for durum semolina as it would require additional investment to install specific milling machinery. Food processing industry and pasta production in Pakistan
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Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
Fewer number of food processing industries, primarily concentrated in Karachi, are found involved in its processing. K.S. Sulemanji Esmailji & Sons (Pvt) Ltd, M. Sulemanj and Bake parlor are the foremost pasta food processing industries based in Karachi. Major proportion of domestic supplies across the countries are being shelved by these firms. And a very nominal proportion of their products are being exported to Middle East, UK, UAE, Sri Lanka, Canada, Afghanistan and South African countries. Interestingly, pasta processing is not nascent in Pakistan as K.S. Esmailji & Sons and M. Sulemanji are engaged in pasta processing since 1970s. Food processing industries’ durum awareness, expected demand and price suggestions Of total five visited food processing industries, four are found well aware of durum wheat and showed deep interest in domestic development of durum wheat. Once their willingness to purchase durum flour was probed, they replied in affirmative and even one of them (M. Sulmanji) intended to convert their whole export-products on durum wheat. The food industry representatives also suggested that the price of durum wheat grain should be same as that of bread wheat, at least for first two seasons.
Pasta products’ business trends Vermicelli, Macaroni, noodles and spaghetti reportedly etched out as the most demanded products. All pasta products are being sold in dried form primarily through wholesale distributors. Three premier industries namely K.S. Sulemanji Esmailji & Sons (Pvt) Ltd, M. Sulemanj and Bake Parlor are selling nominal proportion (10-30 percent) of their products in international market. They, however, perceive great export potential if their products compete in international market with respect to quality and price. As regards pasta business trends, reportedly it is expanding and the pasta products have become fusion foods on account of consumers’ education and media exposure. Market development and future expectations In order to promote their products, two of the visited industries are adopting all innovative market development techniques like sales’ promotion through electronic & print media, establishing display counters at super-malls and conducting cooking demoes at exhibitions & cultural shows. While rest of the firms are promoting their sale through their distributors. Majority of industrialist look pronounced business scenario for pasta processing industry in near future. Even few of them projected 8-10 percent business growth rate subject to enabling business environment in the country. Food processing Industries’ suggestions Industry representative stress need of creating durum wheat awareness among consumers to develop its local market. They were of the view that the customers are still not conscious about nutritional benefits of processed food rather they are more concerned about its taste and price. Some of the respondent industrialist perceive unavailability of durum semolina as principal hindrance to export quality pasta products in competitive international market. They further suggested that Research & Development should take into account all relevant stakeholders, particularly consumers. The program should embody some attraction for each value-chain actor.
Recommendations i.
On the basis of study findings, the project may take on board the private sector seed companies for seed multiplication, distribution and even buy-back to mill at their own or supply to specific 8
Durum wheat value chain in Pakistan
ii. iii. iv.
v.
vi.
vii. viii. ix. x.
xi.
xii. xiii. xiv.
xv.
Agricultural Innovation Program (AIP) for Pakistan
wheat millers/food processing industry. The seed companies with additional milling function could be the best option for taking on board while designing durum wheat value chain program framework. The murky durum business situation in country is signaling great potential to develop its market without any competition. The durum wheat breeder should ensure competitive yield potential to that of bread wheat varieties already being cultivated in target locations along with disease resistivity. The study finding clearly suggests development of a comprehensive durum wheat awareness program containing complete production technology package, nutritional composition, prospective markets and expected price of durum wheat. Considering the prevailing interest among the farming community, the project can easily link those farmers with potential seed company and/or seed companies in durum wheat-seed multiplication and grain production. The project may engage small and medium size industry involved in vermicelli-making at small scale but covering a huge rural market. This intervention will open a wide window for domestic marketing of durum wheat. The project should introduce those durum varieties that have been proved as rust resistant in Pakistan. The project need not to plan more for input subsidy rather focus on guaranteed sale of durum grain through developing strong linkages among durum wheat value chain actors. The study finding clearly dictates that the food processing industry should use these means to wide spread their innovative products. The project may have to convince all wheat value chain stakeholders to treat durum as bread wheat from price perspective. Increase in cost at any stage of value chain will lead to high price of finished products. Moreover, export possibilities of durum pasta will significantly generate foreign exchange and employment that will spur economic growth of the country. The project should focus households as target customers while developing and marketing durum wheat value-added products. Durum wheat suitability in cereal foods development (for infant children) will definitely grab a significant share of existing market. The project may not necessarily take dealers on board in developing wheat value chain. The project initially should take on board those millers that have their own food processing units as this will reduce the chain. These very limited number of pasta processing industries can easily be taken on board in designing durum wheat value chain development program. In order to make the program successful and sustainable, a committed team leader should lead the whole program. Complete coordination of seed companies, millers and food processing industry will certainly lead to success and sustainability of the project.
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Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
Durum wheat value chain in Pakistan: Scanning current picture & exploring future potential 1- INTRODUCTION & BACK GROUND Pakistan is predominantly an agricultural country. Where agriculture contributes 21.4 percent to overall GDP of the country and employs 46 percent of total labor force. Of the total farmers’ crop area, 40 percent was allocated for wheat during last Rabi season 2012-13. Occupying largest cropped area, wheat contributes 10.1 percent to value-added products and 2.2 percent to overall GDP of the country. Wheat grain is primarily used as staple food across the country with annual consumption of 27,450 tones1. Like other cereal crops, wheat possesses high protein contents along with significant amount of starch and sugar. Hence, majority of the rural households consume it as a complete diet, with very small proportion of supplemented food. Bread wheat (Triticum aestivum), Durum wheat (Triticum turgidum) and Emmer wheat (Triticum dicoccoides) are the three major types of wheat that are being grown in different ecologies of the world. Bread wheat is a well-known wheat type, as used for making commonly used bread (chapatti) in major part of the world. The farmers as well as other players involved in wheat production, trade, processing, marketing and consumption in Pakistan are not very much familiar with other two types of wheat i.e. durum and emmer wheat. The durum wheat is a type of wheat that has relatively hard, bold, yellow grain with high protein contents, hence, suitable for making pasta products (Noodles, spaghetti, macaroni, Lasagna, shells, fettuccine and vermicelli), Bulgur, Couscous, bread etc.
1.1 Wheat Value Chain in Pakistan: Value addition is a process of increasing economic value and consumer appeal of an agricultural commodity. It is a production/marketing strategy driven by customer needs and preferences. Value‐ added is used to characterize food products converted from raw materials through processes that give the resulting product an “incremental value” in the market place, either through higher price or expanded market. Examples of wheat value‐added products are bakery and pasta products. The purpose of value addition in agricultural commodities is to make more money, meet changing tastes and preferences of consumers and compete by differentiating a product in a highly competitive market. Pre-production steps of wheat value chain includes seed research and distribution. For this, Public sector research organizations and private seed companies play lead role. While the basic components of wheat value chain are inputs, production, trade, processing and marketing. The major actors involved in wheat value chain can be brought under three main categories i.e. value chain supporters, value chain players and value chain influencers. The value chain supporters are those who never directly deal with or own the products, but whose services add values to the product e.g. Business advice, training, trade promotion; Technical services (Training, R & D, MIS, Logistics); financial services (Credit, Leasing services). The value chain players are those who directly deal with and own the product, i.e. producers, dealers, processors, wholesalers/retailers, consumers. While the value chain influencers include regulatory frame work,
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http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Grain%20and%20Feed%20Annual_Islamabad_Pakist an_3-31-2014.pdf 10
Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
policies, infrastructure, at local, national and international level, affecting the business positively or negatively i.e. Regulatory and administrative; Laws and regulations, quality and quarantine measures, customs and taxes, incentives, free trade agreements etc. It is always vital to understand governance structure in a value chain. It is about determining the power dynamics of different players. Each value chain is different according to its length, the transformation process involved, the organization of the chain players, the competence of its actors, etc. In existing wheat supply chain of Pakistan, non-market oriented players like Pakistan Agricultural Storage and Supplies Corporation (PASSCO) and provincial food departments, as well as, sales-oriented small business are involved. Provincial food departments are involved in wheat marketing in Pakistan. They set quotas for wheat supply based on milling capacity, license flour mills and impose ban on inter-districts wheat mobility to minimize illegal exports, particularly to Afghanistan, Iran, India and other central Asian states. Trading Corporation of Pakistan (TCP) imports wheat during shortage era.
Wheat Value Chain in Pakistan
Seed Companies
Research Stations
Producers/Farmers
TCP (wheat exports)
Dealers/Wholesalers PASSCO/Provincial food dept.
TCP (wheat imports)
Wheat millers Distributors
Food processing industry Retail Shops
National consumers (Household + Restaurants)
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Durum wheat value chain in Pakistan
Agricultural Innovation Program (AIP) for Pakistan
1.2 Food Industry in Pakistan Food industry is the second largest in Pakistan. It accounts for 27% of its value-added production and 16% of total employment in manufacturing sector. With an approximate 169 million population, Pakistan holds eighths largest market in the world. 75% of rural-based food manufacturers are in so-called informal sector (with difficulty in accessing raw material, skills, education and management). Pakistan’s food sector is changing significantly with major shifts in life styles and traditional eating habits. Average consumers spends 42 percent of ones’ income on food. The retail sale of processed foods are expanding by 10% per annum and currently are estimated about US$1.4 billion with imports constitutes about US$325 million. Super markets are gaining popularity and accounts for 10 percent of total retail sale. Additionally, Pakistan hosts number of western-style food chains reflecting popularity in the country.
1.3 Purpose of the study Pakistan is blessed with diversified ecologies from high humid regions (>1000 mm average annual rainfall) to semi-arid and dry regions (24 years) 36%
Young (18-24 years) Children (
