“Supply and
Demand for Cereals in Nepal: 2010-2030”
Citation: Prasad, S. K., H. Pullabhotla and A.
Ganesh-Kumar. 2011. “Supply and Demand for Cereals in Nepal: 2010-2030”. Report
prepared for the Cereals System Initiative for South Asia (CSISA), Discussion
Paper 01120, International Food Policy Research Institute, Washington D.C.
Abstract:
This paper
attempts to estimate the future supply and demand for cereals in Nepal. While
there has been considerable research in the past examining the agricultural
sector in Nepal, to the best of our knowledge there has been no analysis of the
supply-demand scenario for food grains in the country. The analysis undertaken
in this paper attempts to bridge this gap in the literature by estimating
supply and demand models for the three most important cereals in Nepal’s food
basket: rice, wheat, and maize. The supply projections have been carried out on
the basis of a single-crop production function model using data for the period
1995–2008. For estimating the demand function and projecting future demand,
data from the Nepal Living Standards Survey II (NLSS II), undertaken in the
year 2003/04, are used.
The forecasting
exercise undertaken here provides a possible picture of rice, wheat, and maize
production and demand under business-as-usual, optimistic, and pessimistic
scenarios for the years 2010, 2015, 2020, 2025, and 2030. These future
projections show a persistent shortfall in the domestic production of rice in
Nepal to meet the total demand. Under the pessimistic set of conditions the
rice demand in Nepal is projected to be more than double the domestic
production in the year 2030. Under the optimistic scenario, production deficit
is about 41 percent. In the case of wheat and maize, however, our model
estimates a persistent surplus in the domestic production over total domestic
demand, going up to as high as 75 percent for wheat and 64 percent for maize
under optimistic conditions for the year 2030.
Overall, the
prime concern for Nepal in ensuring sufficient food supply for the future
appears to be with regard to rice, as evidenced by the substantial deficit
between the projected supply and demand for rice. Our estimates show that the
gap between the domestic production and direct demand by households for rice is
likely to vary between 19 percent and 80 percent. It appears that even with
accelerated irrigation and increasing fertilizer supply, this deficit in rice
would remain. However, technological inputs such as improved seeds, which are
not adequately captured in our model, could help increase the yield frontier
and help meet a part of this deficit in the future.