Can Russia-Ukraine conflict facilitate Pakistan’s vegetable oil self-sufficiency?

by Jia Wei

As Ukraine and Russia are the top two exporters of sunflower seed oil, the military conflict between them has led to sharp spikes in vegetable oil prices among food commodities. The FAO Vegetable Oil Price Index averaged 248.6 points in March, up 46.9 points from February and hitting a new record high. Pakistan, the world’s largest vegetable oil importer, has also seen vegetable oil prices skyrocket recently. It inevitably pushed up domestic inflation.

Pakistan’s annual vegetable oil consumption amounts to 5 million tons, while the share of some less-consumed vegetable oils such as mustard oil is about 400,000 tons. Thirty percent of the demand is satisfied by domestically produced oilseeds, while the remaining seventy percent is met by imports. Due to the increase in import prices, it is a severe test for Pakistan’s foreign trade deficit and foreign exchange reserves.

Pakistan, which has a large area of land suitable for growing olive trees, has been producing olive oil since 2010 with the help of countries such as Italy and Spain. Currently, it produces about 1,500 tons of olive oil and 830 tons of table olives per year, all of which are consumed domestically. Pakistan has set a target of producing 16,000 tons of olive oil by 2027. Will this fulfill the country’s idea of “vegetable oil freedom”?

Earn Rs 400,000 per acre

Syed Yousaf Ali, a farmer with a 100-acre estate, has been growing olives since 2006. In his opinion, the olive tree has low requirements of land. “Poor land and drought are nothing. The only thing matters is that the olive tree requires well drained, unpolluted soil.”

Another farmer, Malik Shafiq, described the olive tree as a “tough plant”. It was an uneven wasteland when he started planting it a decade ago. “It is not affected by the worst weather conditions. It can grow in the wasteland, and the cost is half that of other crops.”

Farhan Pasha, the scientific officer in charge of the olive program at the Barani Agricultural Research Institute, told China Economic Net (CEN) that the main areas in Pakistan fit for olive cultivation are Balochistan, Khyber Pakhtunkhwa (KPK) and Punjab, in addition to Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan (GB). Pakistan has 10 million acres of land suitable for olive cultivation, which is almost twice as much as Spain, the world’s largest olive oil producer. As olive trees are able to survive in dry, arid conditions not fit for other crops normally, they don’t compete with other fruit trees, grain crops or oil crops in these areas.

To encourage olive cultivation, the Pakistani government has planned to issue olive oil marketing and branding certification to the private sector. The goal of it is to plant over 50,000 acres in the country by 2022. Now, Pakistan is the only South Asian country to be included in the International Olive Council.

Inam ul Haq, who works as a horticulturist at the Barani Agricultural Research Institute in Chakwal, told CEN that the local government has spared no efforts to subsidize olive cultivation. “Since 2015, the Punjab government has been providing subsidies to local gardeners to turn the Potohar region into ‘Olive Valley’, that is, providing olive saplings free of charge for plantation.”

In the past five years, nearly 1.4 million olive trees have been planted in Potohar region, covering almost 9,000 acres of land. The project has made use of less fertile and undeveloped land. In addition, the government has offered up to 70% subsidy on the installation of solar power systems and nearly 60% subsidy on drip irrigation systems, with an estimated 800 families getting benefits and turning their less fertile land into olive groves. The government has also provided 50% subsidy to agricultural machines that may be needed during harvest seasons, such as shakers.

The advantages of growing olive trees are obvious. On the one hand, they can meet local demand for edible oil while reduce trade deficit, on the other hand, they mitigate climate change and effectively address the challenge of water security. It is no wonder that provincial governments have introduced subsidies to encourage olive cultivation.

Due to its favorable climate and geographical location, the quality of olive fruit produced in Pakistan is among the best around the world despite its late start. The main parameter used to define olive oil quality is acidity. If the acidity is less than 0.8%, it is marked as extra virgin olive oil according to the International Olive Council, which is the highest grade of olive oil. And a lot of Pakistani olive oil can meet this standard. According to Inam ul Haq, the quality of olive oil produced locally in Pakistan is almost the same as that of well-established olive producing countries. Farhan Pasha told CEN that Pakistani olive oil from Quetta won the highest grade at a recent competition held in Italy.

Due to edible oil shortage in Pakistan, olive oil produced locally has been mainly for domestic consumption, without surplus for export. Benefiting from the high demand for olive oil in the country, these farmers have gained a lot in recent years. According to Syed Yousaf Ali, as the olive sells for Rs 120 per kilogram for oil production and Rs 150 per kilogram for pickle making, he can get about Rs 200,000 per acre. Or if he produces added-value products, the olive oil sells for Rs 4,000 per liter, or it sells cheaper without quality report, for Rs 2,500, then he can make about Rs 400,000 per acre. “If we don’t grow olive trees, we can’t make Rs 10,000 even if we pull out all the grass and sell it.”

“Planks and bottles” epitomize Pakistan’s olive sector

Pakistan’s olive industry is not without its difficulties. In our interviews, Pakistani farmers had yearned for olive cultivation mechanization.

At present, there are several traditional methods used in the harvesting of olive fruits, including knocking, hand harvesting and chemical ripening harvesting. In Pakistan, hand harvesting is mainly adopted. In addition to inefficiency, the labor cost increases the burden of farmers and the prices of olive oil. “We have to step on ladders to pick olives, which is time consuming, and we’ve seen other countries have adopted mechanical harvesting, but we haven’t,” said Malik Shafiq.

What Malik Shafiq has seen is a professional olive harvester that has been adopted in European countries in recent years. The operation principle is to pick the olives by pulling back and forth two rows of curved wires. It is suitable for large olive groves in plain areas. Its price is not cheap.

Dr. Ramzan Ansari, who is in charge of olive research at the Barani Agricultural Research Institute, sees agricultural machines are what Pakistan lacks. “If we talk about agricultural machines, nursery tools, olive harvesting, and orchard hygiene, we inevitably mention China. I think this is an area we can cooperate with China.”

If you search for “olive oil” on Pakistani e-commerce platforms, the first batch of items that comes up is not Pakistani olive oil, but a variety of low-priced imported olive oils. Most of them are olive-pomace oil – a blend of refined olive-pomace oil and virgin olive oils. Meanwhile, Pakistani farmers are hardly able to get good prices for their quality olive oil, for they still have a long way to go in terms of marketing. Surprisingly, who would have thought that it is the unremarkable bottle that hinders olive oil sales.

“We need bottles.” This was the voice of many farmers during interviews. Syed Yousaf Ali told CEN that due to the lack of colorful bottles for oil, they have to use all the bottles available to fill the oil. “Even the wine bottles that are available in the market, people use them.”

Malik Shafiq complained that if a person wants to buy 1,000 or 5,000 bottles, there is nowhere to buy. “I went to the glass factory and tried to order a few hundred exclusive bottles, but they refused because they produce no less than 200,000 bottles at a time, which is quite a large sum that no farmer can afford.” Syed Yousaf Ali is now trying to import bottles from China to get rid of the dilemma of “oil without bottles”.

Besides bottles, local farmers hope that the government will do more to create a local business card of “quality olive oil” to help sales.

Syed Yousaf Ali, who has sent his son to study business and computer, has planned to get more sales channels through e-commerce. However, he admitted that it was not easy to enter global market.

“Marketing is a completely different sector. A farmer can’t do everything by himself. What he can do is either marketing the product or adding value by processing the fruit. If business investors enter this sector and do value-added production and then marketing, it can make positive contribution to this sector and the society,” Syed Yousaf Ali said.

At Malik Shafiq’s farm, he has taken the initiative to sell olive oil. “We put up a wooden board in front of the farm for advertising our products, and people who see it come to buy it.” He said that government departments have never bought olive oil from small farms, and he felt that centralized government buying was vital for small farmers. Dr. Muhammad Azhar at the Barani Agricultural Research Institute is even more blunt in saying that the government should try to package Pakistani olive oil according to international standards and bring it to the market. “This is the responsibility of the private sector.” Meanwhile, he hopes that marketing companies from China should develop business in Pakistan.

Pakistani olive oil eyeing cooperation with China

In fact, Dr. Muhammad Azhar’s idea has long been accepted by Chinese olive oil businessmen, as China is the country with the highest growth rate of olive oil consumption in recent years. Last year, the consumption of olive oil exceeded 60,000 tons, of which about 30,000 tons were imported. 95% of the oil product imports came from EU countries, of which Spain accounted for 80%. Long Yongzhu, Deoleo Regional Sales Manager in China, described China’s olive oil market as having “huge potential”. “It is a market with growing consumers, rising at 7% to 8% per year. At the same time, consumers are curious about foreign products and changes, especially in first-tier cities where consumption habits are starting to shift.”

As for the emerging olive oil production area, China’s demand for Pakistani olive oil is high. Zhou Ning, Marketing Director at Green Organic Food, said that as long as Pakistan has market demand or export demand, cooperation with China is absolutely no problem.

In addition to market, Pakistani farmers need Chinese agricultural technology and investment. Syed Yousaf Ali told CEN that he is now using a Chinese machine that picks olives of different sizes. “Compared with other agricultural machines around the world, Chinese machines are inexpensive. If you have other demands, they offer customization, even if it’s a small order.” Farhan Pasha, on the other hand, hopes to cooperate with China in terms of cold-pressing technology, pest control and other agricultural technologies.

Against the backdrop of successful cultivation of cash crops such as chili peppers, a joint venture between China and Pakistan for olive cultivation and processing is also a viable solution. Inam ul Haq has included Chinese investment in his plans. “In the future we plan various joint ventures with Chinese counterparts as we can take advantage of their expertise, since the world understands their knowledge and praises them.” Dr. Ramzan Ansari believes that it would be a win-win result for both countries if they receive assistance from China and start production here.

On a macro level, the cooperation between the two countries in the olive industry holds even greater potential. Dr. Ramzan Ansari suggested that some areas with high agricultural potential, including the Potohar region, could become exclusive agricultural zones under the CPEC. “Besides olives, we can produce fruits like grapes and peaches in the agricultural zone. We can help farmers promote high-value agriculture.”

Pakistan’s nascent olive oil industry, although a late starter, has played a visible role in Pakistan’s food security and even economic recovery, as Inam ul Haq said, “if we can stop importing olive oil and make ourselves self-sufficient, then it will be an olive revolution for us. ”

The article is translated by Fu Bo.