S P E C I A L R E P O R T

FAO/WFP FOOD SECURITY ASSESSMENT MISSION TO NEPAL

25 July 2007

• Mission Highlights
• INTRODUCTION
• 1. EXECUTIVE SUMMARY
• 2. SOCIO-ECONOMIC SETTING, FOOD SECURITY SITUATION AND AGRICULTURE OVERVIEW
• 3. FOOD PRODUCTION AND AVAILABILITY, NATIONAL AND SUB-NATIONAL SITUATION
• 4. FOOD MARKET AND ACCESS, NATIONAL AND SUB-NATIONAL SITUATION
• 5. NUTRITION AND HOUSEHOLD VULNERABILITY TO FOOD INSECURITY
• 6. AGRICULTURAL DEVELOPMENT CONSTRAINTS AND OPPORTUNITIES
• 7. RECOMMENDATIONS
• APPENDIX I     APPENDIX II     APPENDIX III     APPENDIX IV

Mission Highlights

INTRODUCTION

At the request of the Ministry of Agriculture and Cooperatives of Nepal (MoAC), a joint FAO/WFP Food Security Assessment Mission visited the country from 20 March to 8 April 2007. The overall objective of the assessment was to have a better understanding of chronic and transitory (disaster-affected, short-term) food insecurity by assessing the 2007 winter cereal crops, current food availability, market access and food utilization situation in the country at national, sub-national and household levels so that appropriate actions can be taken by the government and the international community to minimize the impact of potential food insecurity.

The Mission held meetings with relevant institutions, including government, international agencies, donors, non-governmental organizations (NGOs) and the private sector, and reviewed available data and information on food security from different sources. Field trips covered 20 districts, located in four development regions and three ecological zones (Terai, Hills, and Mountains) with focus on the most food insecure areas in the Mid-Western Hills and Mountains (with chronic food insecurity) and in the Eastern and Central Terai (affected by droughts and floods in 2006).

The Mission observed crop-growing conditions and assessed the yields under different categories and assessed the impact of 2006 droughts and floods on food availability. Extensive interviews were conducted with farmers, millers, local government officers, agricultural research institutes, seed and fertilizer companies, and local NGOs regarding short- and long-term food production and supply problems.

The Mission visited customs points along the Indian border and interviewed officers, traders (grain, vegetables, livestock and inputs) in Kathmandu and local markets, millers and farmers in the fields to obtain first-hand information regarding formal and informal trade in food and agricultural inputs and their impact on food security.

Extensive interviews were also conducted with households to obtain information on food consumption, nutrition and health, and coping status (remittances, non-agriculture activities, changes in food consumption, assistance by government, WFP, NGOs, etc.). In addition, telephone interviews were conducted with government officials in districts that the Mission could not visit. Prior to its departure to rural Nepal, the Mission held debriefing sessions with government authorities and UN agencies in Kathmandu.

With assistance from the Household Survey Unit of the Central Bureau of Statistics (CBS), the Mission conducted household-level food consumption, poverty, under-nourishment analyses by using Nepal Living Standards Survey II (2003/04) data, which is the second multi-topic national household survey conducted by the CBS.

The FAO team comprised Dr Cheng Fang, Dr Ramesh Sharma and Mr Raphy Favre. The WFP team included Mr Siemon Hollema. Two FAO local consultants, Mr Rajendra Pratap Singh and Dr Govind Pandey, participated in the field trips and made contributions to the data collection and analysis. In addition, Mr Subhash Singh and Ms Kanta Kanal from WFP assisted in arranging field visits.

We would like to thank MoAC for its strong support to the Mission and CBS for its data support. We gratefully acknowledge the considerable assistance provided by Mr Ram Hari Gaihre, the CBS’s Household Survey Section officer; and Mr Ravi Kumar Dangol and Ms Purna Laxmi Rajbhandari, of the Agribusiness Promotion Programme of MoAC.

This Mission was made possible through financial assistance by the Department for International Development (DFID). The views expressed in this report do not in any way reflect the official opinion by DFID, MoAC or CBS.

1. EXECUTIVE SUMMARY

Nepal is characterized by low levels of human development and incomes. According to the 2006 UNDP Human Development Report, Nepal ranks 138 among 177 nations in terms of the Human Development Index, and 156 in terms of GDP per capita in Purchasing Power Parity (PPP$). Both indicators rank Nepal the lowest among its neighbours.

Nepal experienced a turbulent socio-economic situation during the 11-year insurgency, which cost an estimated 13 000 lives and inflicted considerable physical, psychological, social and economic damage. The historic agreement of November 2006 between the Seven Party Alliance (SPA) and the Nepal Communist Party (Maoists) paved the way for a promising opportunity to achieve lasting peace and to address the underlying causes of the conflict. It has also opened a window of opportunity for agricultural and rural development.

Agriculture is the mainstay of the economy, providing livelihood for more than 80 percent of the population and accounting for some 40 percent of Gross Domestic Product (GDP). Industrial activities are dominated by the processing of agricultural products including jute, sugarcane, tobacco and grains.

Nepal is vulnerable to several types of natural disasters such as droughts, floods, landslides, windstorms, hailstorms, cold waves, disease epidemics, glacial lake outburst flood (GLOF), fires and earthquakes. Drought, hailstorms, floods and landslides are by far the most serious ones and the most recurrent natural disasters, annually causing significant material and human losses.

The Mission assessed the 2007 wheat and barley production, which were being harvested in many parts of the country in March and April. Prospects for both crops are favourable and output is forecast at above average levels due to timely and sufficient rainfall during the winter season of 2006/07 and no significant damages by hailstorms and other disasters. In aggregate, it is expected that total wheat and barley production will increase by more than 7 percent. However, local drought conditions and hailstorms have badly affected production in several areas in the Far- and Mid-Western Hills and Mountains.

In 2006, adverse climatic conditions significantly affected cereal production in Nepal, especially in the Eastern and Central Terai, which was badly affected by drought. Overall, paddy rice production, the most important crop in Nepal, is estimated to have declined by 13 percent nationally, and between 20 percent to 50 percent in some districts of the Eastern and Central regions. Total cereal production (rice, maize, millet, wheat and barley) in 2006 is estimated at 5.96 million tonnes, 4.5 percent below the previous year and 1.7 percent below the average of the previous five years. By region, 2006 aggregate cereal output is estimated to have declined by 16 percent in the Eastern Terai, 9 percent in the Central Terai, and 5.3 percent in the Western Mountains. The worst affected districts include Saptari (down by 30 percent) and Siraha (down by 28 percent) in Eastern Terai, and Mahottari (down by 21 percent), Dhanusha (down by 20 percent), Rautahat (down by 12 percent) and Sarlahi (down by 12 percent) in the Central Terai.

Cereal (including potato in cereal equivalent) deficit in 2006/07 (November/October) at the national level is estimated at 225 000 tonnes, compared to some 23 000 tonnes in the previous year. Commercial imports are anticipated at 110 600 tonnes to cover some deficit in urban areas and the Terai. The total food aid requirement is estimated at 114 400 tonnes, including 1 400 tonnes in Western Mountains, 19 200 tonnes in Mid-Western Mountains, 31 000 tonnes in Far-Western Mountains, and 62 800 tonnes in Far- Western Hills. The anticipated food aid imports by NFC and WFP of 101 800 tonnes will cover most of the remaining import deficit.

Lack of access to food is the core long-term food insecurity issue in the Hills and Mountains of the Far and Mid-Western Regions because of very low purchasing power and extremely high market prices. Food deficits in these areas will not lead to an increase in private imports, and are not expected to be met from either NFC or WFP due to very high transportation costs which prohibit sufficient quantities of food from being transported to these deficit areas.

Of the uncovered deficit of 114 400 tonnes, WFP is expected to provide 8 864 tonnes under its emergency operations, 33 517 tonnes under its country programme and 39 405 tonnes for food assistance to conflict-affected populations. NFC provided 38 000 tonnes in 2006, and subsidized distributions in 2007 are projected at around 20 000 tonnes.

In terms of size, the Central region has the largest deficits (281 000 tonnes in Central Hills and 113 000 tonnes in Central Terai) because of the highly urbanized capital region of the Kathmandu Valley located in this region. On a per capita basis, the food grain deficit areas are concentrated in the Far- Western Hills (142 kg/person), Far-West Mountains (143 kg/person), Mid-Western Mountains (158 kg/person), and Western Mountains (165 kg/person). Imports of food grains to these areas are mostly limited to subsidized rice distributions through NFC, food aid and small quantities carried by returning migrant workers. Local food production is therefore a key factor to achieving food security in these areas. Local crop failures due to drought, hailstorms or landslides can seriously affect food availability and cause acute food crises.

A total of 42 out of the 75 districts in Nepal are estimated to be food-deficit in 2006/07. Of these, there are 13 districts with per capita cereal production of less than 150 kg. By decreasing order of severity of food deficit, these districts are Kathmandu, Humla, Lalitpur, Bajura, Achham, Dolakha, Bhaktapur, Mahottari, Kalikot, Baitadi, Bajhang, Dolpa and Rautahat. There are a further 14 districts with per capita cereal production of between 150 kg to 180 kg, which is well below the national average and minimum requirement.

Cereal markets in most of the Terai and Hill areas are integrated with Indian markets, and the staple food prices are mainly determined by Indian markets. However, the rice prices in the Mountains are consistently much higher and food markets are highly isolated. The monthly prices for three years from May 2004 to April 2007 show that the rice price in the Mountain markets was on average 177 percent higher than the rice price in the Terai markets of the Mid-Western region and 123 percent higher than in the Eastern region.

Rural poverty is a key factor affecting food security in rural Mid-Western and rural Far-Western regions, with poverty incidence at 46.4 percent and 45.6 percent, respectively, according to estimates by CBS, WFP and World Bank. Based on the Mission’s estimate, people living in the mountains spend (on average) more than 65 percent of their income on food, compared with a national average of 36.9 percent.

The incidence of undernourishment as measured by insufficient caloric intake is very high in Nepal. At national level, based on the Mission estimate, the proportion of undernourished population is estimated at 40.7 percent, with the minimum caloric intake requirement of 2 124 kilocalories per day set by the CBS. Not surprisingly, the Far-Western and Mid-Western rural region have a much lower mean dietary energy consumption (2 250 kcal and 2 310 kcal, respectively, compared to 2 405 kcal of national level) and thus the highest incidence of undernourishment (about 50 percent). Consistently, the share of population with severe deficiency in food energy intake as measured by the threshold level of 1 910 kcal/person/day and 1 810 kcal/person/day is also much higher compared to rural population of the Eastern, Central and Western regions.

The Mission is concerned about the very high levels of malnutrition in Nepal, especially in the Mountain and Hill areas of the Far- and Mid- Western regions, where generally more than 60 percent of children are stunted and 50 percent are underweight, and in the Terai where on average 17.7 percent of children under five suffer acute malnutrition.

Food insecurity in the surplus areas of the Terai and lower Hills is foremost an issue of economic access. Although the incidence of poverty in these areas is generally lower than in the Hills and Mountains of the Far- and Mid-West, the concentration of poverty (as measured by the number of poor people per square kilometre) is very high. Based on the Mission’s observations, the income inequality is likely to be higher in the Terai than in the Hills and Mountains. Vulnerable communities such as Dalits, Adivasi Janajatis and Kamayas (bonded labourers) often struggle to access sufficient food. The result is that the Terai is characterized by very high wasting levels above emergency levels. Other factors responsible for high food insecurity and malnutrition in the Terai include: limited nutritional knowledge, inappropriate hygiene and caring practices and gender division within the household, which places women in a disadvantaged position.

An FAO report (2004) on vulnerable groups in Nepal identified a total vulnerable population of more than 9 million people based on their livelihood (marginal farmers, agricultural labourers, rural service castes, porters and urban poor). Marginal farm households in the Hills and Terai represent the largest vulnerable group, followed by rural service castes, agricultural labourers in the Terai, marginal farm households in the Mountains, porters and poor urban households. Within these livelihood classes, women, children, indigenous peoples and members of the lower caste groups (Dalit and Janajatis) are among the most food insecure.

Long-term food security in Nepal remains problematic. Agricultural production has not kept pace with the growth in population, and average yields are low compared to neighbouring countries. There is an urgent need for investment in seed research and supply, and in the expansion of irrigation facilities. Increased agricultural production generates strong backward and forward linkages in rural Nepal – leading to a variety of rural non-farm activities that are very promising, based on recent trends.

Immediate improvements in food security and employment conditions are key determinants for the success of the peace process. The Mission would like to stress that with chronic food insecurity in many part of the country, substantial and widespread gains in food security are a pre-condition to achieving sustainable peace. In addition, the Mission underlines the importance of closely monitoring vulnerability factors that could jeopardize the peace process.

2. SOCIO-ECONOMIC SETTING, FOOD SECURITY SITUATION AND AGRICULTURE OVERVIEW

2.1 Socio-economic situation

Nepal is a least developed country and the poorest nation in South Asia. According to the 2006 Human Development Report, Nepal ranks 138 among 177 nations on the Human Development Index. Its per capita Gross Domestic Product (GDP) is estimated at US$232 (average of 2003 to 2005, in 2000 constant price), 44 percent below that of Bangladesh, 58 percent below India, 59 percent below Pakistan, 76 percent below Sri Lanka and Bhutan, and 83 percent below China (Table 1). Nepal has the lowest growth rate among its neighbouring countries. Annual per capita GDP growth is estimated at 2.0 percent from 1979/81 to 2003/05. The economic performance was even worse in the last several years, at –2.7 percent, 1.3 percent, 1.6 percent and 0.7 percent, respectively, from 2002 to 2005.

Table 1: Per capita real GDP and growth in South Asia and China

Growth of the Nepalese economy is determined largely by the growth of its agricultural sector. Although the share of agriculture in total GDP has been declining over the years, it is still the single largest sector in the economy, accounting for 38 percent of GDP at present (Table 2). Out of the total population of 25.9 million (2005), some 80 percent reside in rural areas and pursue agricultural activities. In the non-agricultural sector, manufacturing, trade and commerce, transport and communication, finance, real estate and community and social services are important sub-sectors. The manufacturing sector is limited largely to low-end consumer items such as carpets, garments and handicrafts, and further development of this sector is constrained by Indian competition, poor infrastructure, a limited local market and the lack of direct sea access. Tourism, traditionally the largest component of the services sector, has fallen behind the finance and real-estate sectors since 2000, due to the impact of the conflict.

As a landlocked country with a low level of development and high dependence on imported capital goods and oil for energy, Nepal faces a chronic deficit in merchandise trade. However, since 2002 the current account has registered small surpluses due to increased remittances from Nepalese working abroad and continued inflows of foreign aid. During March 2005, the government estimated that more than half a million Nepalese were working abroad. Foreign aid has a significant influence on Nepal’s development, with a share in public sector development expenditure of 60 percent.

Table 2: Nepal - Key economic indicators, 1998-2006

2.2 Nepal’s characteristics related to food security

Geography and agro-ecological settings

A landlocked country, Nepal is situated between India and China and covers an area of 147 480 km². Only about 17 percent of Nepal’s total land area is suitable for agriculture; 2.5 million hectares with a cropping intensity varying from one to three crops per year. Altitude increases from south to north and ranges from 70 m in the Eastern region (Kanchan Kalan) to 8 848 m (the highest point on earth) in the Himalayas. Differences in elevation result in diverse climatic belts, ranging from humid subtropical in the plains to alpine in the north. The country is subdivided into three major ecological regions. Twenty-three percent is occupied by the Terai plains in the southern belt, 42 percent by the Hills in the middle belt and the remaining 35 percent by the Mountains in the northern belt. These regions have distinct geological, soil, climatic and hydrological characteristics. As a result, land use patterns within these zones are distinctly different:

• The Terai consists of flat and fertile alluvial land that extends from the Indo-Gangetic plains. Altitude is from 70 m to 800 m. Thirty-eight percent of the total land area is cultivated. Since, technically, most of the Terai can be irrigated and crops can be cultivated all year round, it has greater potential for productivity growth than the other ecological regions. It is referred to as the "grain basket" of Nepal. Water resources, fertility and flat terrain permit the cultivation of a variety of crops such as paddy, wheat, maize, sugarcane, jute and vegetables.

• The Hills lie at an altitude between 800 m and 1 800 m and comprise steeply sloped lands with many small valleys. Only 10 percent of the land area is cultivated. This region comprises several attractive valleys and basins such as Kathmandu, Pokhara, Hetauda, Surkhet and several others, like the Dang valley. These valleys, especially the Kathmandu valley and Pokhara, support a relatively high percentage of the Hills population. Maize is the single most important crop in the Hills. Paddy is grown on irrigated land during the summer season.

• The Mountains lies generally above 1 800 m. Only 2 percent of the land is suitable for cultivation. Since this region is mostly steep, rugged and cold, it is sparsely populated. People’s main occupation is raising livestock. Subsistence cultivation is practiced and only one crop per year or three crops in two years is possible. Vegetables are cultivated as cash crops in a few areas with access to markets. However, the vast majority of the Mountains are remote and access to markets and roads is limited.

Data related to crop cultivation and production at national level are collected by the Ministry of Agriculture on the basis of district boundaries which are delineated on administrative considerations. The 75 districts of Nepal are categorized in three ecological zones (Terai, Hills and Mountains) and five development regions. In terms of population, some 48.5 percent live in the Terai, 44.2 percent in the Hills and only 7.3 percent in the Mountains.

Climatic settings

Annual rainfall varies from about 250 mm in rain-shadow areas such as the Mustang valley to over 5 200 mm in Pokhara. Distinct wet and dry seasons alternate over the year. Over 80 percent of the annual rainfall occurs during the four months of the monsoon season, which lasts from June to September. During summer, the maximum temperature in the Terai is more than 40°C while it is about 28°C in the Hills. The snow line lies at about 5 000 m. Annual rainfall tends to decrease slightly from east to west and increase with elevation from south to north and on south eastern slopes, which act as a windward for monsoon winds. Rainfall decreases drastically across the Himalaya range, which extends into Tibet.

Western Nepal receives less rainfall than the eastern side and the monsoon rain tends to start later and retreat earlier. The Hills of the Eastern and Central development regions receive monsoon rain approximately one month before the Terai and the Hills of the Far- and Mid-Western development regions. Isohyets of 1 500 to 2 500 mm cover most of the Eastern region while those in the Far- and Mid-Western regions are between 1 000 to 1 500 mm. During the winter, however, rainfall is more reliable in the west than in the east, resulting in higher importance of winter crops in the western part of the country.

Political and social stability

Nepal has experienced a turbulent political situation following an 11-year insurgency that cost an estimated 13 000 lives and inflicted considerable physical, psychological, social and economic damage. The peace agreement of November 2006 between the Seven Party Alliance (SPA) and the Maoists paved the way for a promising opportunity to achieve lasting peace and address the underlying causes of the conflict. It is also providing an opportunity for agricultural and rural development.

Porous border with India and market linkages

Nepal is virtually an open economy vis-à-vis India. As a result of the long and porous border with India, and the Nepal-India Trade Treaty under which trade in primary agricultural products between Nepal and India is free of customs duty and quantitative restrictions. This relationship is seen by analysts both positively and negatively. In the context of agricultural development and food security in Nepal, the positive aspect is the guarantee of a large and growing Indian market for Nepalese agricultural products. The importance that India attaches to stability in cereal supply and prices is also seen positively because this contributes to similar stability in Nepal given strong integration between the two markets. On the negative side, it is very difficult for Nepal to set or influence the prices of tradables independent of those prevailing in India. This limits Nepal’s policy choices. Also seen negatively is the worsening competitive position of Nepalese agriculture vis-à-vis India, in part due to high agricultural subsidies in the latter.

Natural hazards

Nepal is vulnerable to several types of natural disasters, including droughts, floods, landslides, windstorms, hailstorms, cold waves, disease epidemics, glacial lake outburst flood (GLOF), fires and earthquakes. Droughts, floods, hailstorms and landslides are by far the most serious and recurrent natural disasters and annually cause significant material and human losses. Based on official disaster statistics, floods and landslides from 1998 to 2002 occurred some 256 times on average in one year and affected on average 24 264 families annually. The middle Hills are mainly prone to landslides and hailstorms while the Terai region is prone to floods and fire. Windstorms, thunderbolts (lightening strikes) and heavy snowfall also affect many areas of the country on a regular basis, causing loss of human lives and considerable damage to the standing crops. While earthquakes are not frequent, Nepal has experienced several destructive earthquakes, with more than 11 000 people killed in four major earthquakes in the past century.

2.3 Overview of Nepalese agriculture

Crop calendar

Table A1 and Map A1 in Annexes I and II provide an overview of the main cropping patterns for cereals. On the whole, the availability of irrigation water is the main determinant of the choice of crops and the planting season. Thus, in the Terai in areas with reliable irrigation, three paddy crops can be grown (spring, summer and late summer), while two crops of paddy can be grown in the Hills (summer and spring). Maize can also have three planting seasons in some places in the Terai (spring, summer and winter) and two in the Hills (spring and summer). In the Hills, early maturing maize varieties offer greater crop rotation flexibility and opportunities for higher cropping intensity. Wheat and barley are planted between October and December while harvest starts in the Terai in spring and ends in the Mountains in early summer. Finally, millet is cultivated as a main summer crop in the Mountains and as a relay crop in the Hills (mostly after maize).

In the Hills, the lands/terraces located on the lower part of Hills slopes near the rivers are generally irrigated. In these areas, rice is the major crop in summer followed by wheat in winter (similar to that in the Terai) while on the rainfed upland areas, maize is the major crop. Therefore, the proportion of rice, maize and wheat at district level depends on the availability of irrigation facilities.

Overall aggregate performance

Agriculture is the mainstay of the economy, providing a livelihood for more than 80 percent of the population and accounting for 40 percent of the GDP. In comparison with many other countries of Asia, the structure of the Nepalese economy has not changed much – the share of agriculture in total GDP fell by only 5 percent over a period of about 15 years, from 44 percent in 1990-92 to 39 percent in 2003-05. Moreover, industrial activities are still dominated by the processing of agricultural products like jute, sugarcane, tobacco and cereals. As a result, agricultural performance is also a strong determinant of industrial GDP.

Figure 1 shows growth rates of real agricultural and real non-agricultural GDP for recent years. The average growth rate of agricultural GDP during the 2000/01 to 2005/06 period was 2.8 percent. This is indeed low and only slightly above the population growth rate. What is also equally striking is the very high degree of fluctuation from year to year. The growth rate was 5.5 percent in 2001/02 and only 2.2 percent in the next year. Likewise, it was 3.9 percent in 2003/04, only to slide back in the next year.

The performance in 2005/06 was the worst in recent years. The main reason for the poor performance was the adverse weather conditions that affected mainly paddy, wheat and barley, despite significant growth in cash crops like potato, jute, sugarcane and vegetables, as well as livestock products. Agricultural performance influences industrial GDP to some extent and this sector also suffered considerably.

Figure 1: Trends in the growth rate of real agricultural and real non-agricultural GDP

Although the focus of this analysis is on the most recent years, the fact remains that the functioning of normal economic activities began to deteriorate after 1996 due to the insurgency. Not only were production activities and markets disrupted, but also the delivery of vital development programmes suffered considerably and ceased in many areas. These negative effects accumulated over time, reducing the ability of the economy to withstand shocks.

The conflict not only stalled the creation of additional physical infrastructures, like irrigation, but also destroyed many existing infrastructures. Many agricultural service centres, responsible for the delivery of agricultural services in the villages, stopped functioning.

Cereals, pulses and oilseeds

The growth rate of cereal production, at 1.2 percent over the past five years, has remained frustratingly low and below the growth rate of the population. Moreover, cereal yields are low by regional standards. As a result, competitiveness in domestic markets is continually undermined, and import dependency is growing over time. The reasons for the low productive cereal sector are well known – limited irrigation and missing or inadequate agricultural inputs and product markets (like credit) lead to low adoption of modern technology.

Among cereals, paddy is the most important crop contributing to half of total cereal production and 16 percent of the total cultivated area. Over 70 percent of paddy is produced in the Terai. Paddy production has stagnated over the past five years, growing merely at 0.2 percent per annum. Average yield at 2.56 tonnes/ha is low by regional standards. Lack of year-round irrigation and technology are the main constraints to increasing paddy production.

Maize is the second most important cereal, contributing 25 percent of the total cereal production. Importantly, maize is the only cereal with production growth (3 percent per year) exceeding population growth during the past five years. Most of the increase is due to yield, suggesting growing adoption of hybrid varieties imported from India. Yet, yield levels remain relatively low at 2.09 tonnes/ha in 2006/07. Hybrid maize varieties are highly regarded by Nepalese farmers but availability of seeds is a major constraint. Most hybrids are informally imported from India but replacement rates are low. Hybrid varieties can be used only once and farmers have to buy them every year.

Wheat is the third most important cereal, contributing 20 percent of total cereal production in 2006/07. Over 60 percent of wheat is produced in the Terai. The growth of wheat production has been disappointing, averaging 1.7 percent per annum during 2002-2006. Average yield of 2.04 tonnes/ha is low by regional standards. Wheat yields suffer from the same factors as listed for paddy above, i.e. lack of reliable irrigation, inclement weather and lack of improved technology. In the Far- and Mid-Western Terai, where winter rainfalls are more reliable, rainfed wheat yields tend to be higher.

Millet is a minor cereal, contributing only 4 percent to the overall cereal production in 2006/07. Production growth has virtually stagnated in the past five years (0.6 percent per annum).

Barley is a marginal cereal and in 2006/07 contributed to only 0.4 percent of total cereal production. Over 50 percent of barley is produced in the Mountains. Both area and production have decreased over the past five years: by 1.1 percent and 2 percent, respectively.

Pulses are an important source of protein in the Nepalese diet. The growth rate of production of pulses and oilseeds in recent years has fallen far below the rate of population growth. The production growth rate of pulses averaged 1.4 percent during the past five years. Lentils, which account for 60 percent of pulse production, grew at a rate of 1.4 percent. Oilseeds (mainly mustard) cover approximately 190 000 ha. Oilseed production has been sluggish, growing at 0.6 percent per annum during the past five years. Yields are very low, at about 740 kg/ha.

Cash crops and farm diversification

Cash crops, which include fruits, vegetables, potatoes and sugarcane, account for roughly 20 percent of the total cultivated area. Cash crops have significantly increased over the past five years with a 3 percent annual increase in area, led primarily by increasing demand. Fruit cultivation has significantly increased by 3.7 percent per annum over the past five years. Both tropical/semi-tropical and temperate fruits have achieved similar growth rates. The expansion of the cultivated area of temperate fruit over the past five years is remarkable given the lack of road connectivity, as these fruits are cultivated in remote Mountain areas.

The Nepal Living Standard Survey (NLSS) data show that farms were more diversified in 2003-04 than in 1995-96. The extent of diversification varies across ecological regions and farm sizes. Small farmers in the Mountains and small and medium farmers in the Western Hills were found to be most diversified among the different farm groups. Fruit and vegetable production has increased in importance for small and medium farmers in the Western Hills and Mountains and among small farmers in the Terai. Fruits and vegetables accounted for 15 percent of gross crop output in the Western Hills and Mountains, and 7-8 percent for medium and small farmers in the Eastern Hills.

Livestock sub-sector

The livestock sector contributes about 31 percent of the agricultural GDP, which is projected to rise to 45 percent by about 2015, the end of the Agriculture Perspective Plan. Within livestock, dairy accounts for 63 percent of the total value added, followed by meat (32 percent) and eggs (5 percent). Livestock and livestock products are not traded much and account for about 11 percent and 6 percent, respectively, of total agricultural exports and imports. According to the 2003/04 NLSS data, livestock accounts for about 20 percent of total agricultural income, after crops (50 percent).¹ However, livestock is important for farm households as livestock is an integral component of the mixed crop-livestock-forest farming system of Nepal and plays other important roles as an asset to mitigate short-term shocks such as droughts.

Commercial livestock production is expanding fairly rapidly in areas close to large population centres. The poultry industry has been a leading sub-sector in commercialization, with strong backward and forward linkages covering marketing activities, animal health and feeds. The commercial pig industry is small but expanding. The milk sub-sector has been doing well overall, with marked seasonal differences in production and supply. Seasonal surpluses are converted to ghee where milk collection is not possible.

Livestock rearing represents an important part of the livelihood strategy of rural Nepalese households. Virtually all farm households own livestock. According to the 2003/04 NLSS, between 1995-96 and 2003-04, there was a shift in the composition of livestock herds owned by farm households. Farms shifted into raising more poultry (up 18 percent) and small ruminants (sheep and goats, up 29 percent) and fewer cows (down 15 percent) and buffalos (down 10 percent).

According to the above survey, income from crop sales stagnated, while income from livestock rearing increased. Real income from livestock production grew 2.4 percent a year on average between 1995-96 and 2003-04. Growth in livestock income has helped to offset some of the decline in income from crop production. The survey also found that a larger number of livestock owners are selling livestock products and that a significantly larger proportion are now using veterinary services, indicating greater commercialization in the sector.

The livestock sub-sector suffers from low productivity due to poor genetic material, shortage of feeds, poor management, animal health and access to markets in the Hills and Mountains. The Study on Nepalese agriculture² shows that improved livestock breeds account for only 8 percent of cattle, 21 percent of buffalo, 6 percent of sheep, 14 percent of goats, 40-77 percent of pigs and 50 percent of poultry. These percentages are increasing as farmers introduce new animals and use improved semen, notably in accessible areas where there is a higher response to market signals. According to the 2002 ANZDEC study, the livestock sub-sector in Nepal suffers from a 34 percent deficit of Total Digestible Nutrients (TDN) and hence lack of feeds is a serious limiting factor.

3. FOOD PRODUCTION AND AVAILABILITY, NATIONAL AND SUB-NATIONAL SITUATION

3.1  Food crop production in 2006

Main summer crop season affected by adverse weather

For the 2006 summer crop, the main problem was the variation in the spatial and temporal patterns of rain. Although the monsoon started earlier than usual, rain intensity was weak with below normal precipitation and dry conditions in the districts of Saptari, Siraha, Dhanusa and Udayapur. During July, Eastern, Central and Western regions received 40 percent less than normal precipitation. The Far- and Mid-Western regions had above normal rainfall during this period.

August was a particularly dry month with the entire country facing a shortage of rain. Exceptions to this general pattern were areas in the Far- and Mid-Western regions which received more than 180 percent of normal rainfall. Heavy rainfall on 27 August caused floods and landslides in Western, Mid-Western and Far-Western districts of Banke, Bardiya, Nawalparasi, Jajarkot, Surkhet, Bajura, Achham, Doti, Baitadi and Darchula.

Precipitations for September and October of 2006 were about normal or above normal in most parts of Nepal.

Paddy, maize and millet production

Paddy was the crop most affected by last year’s adverse climatic factors. Paddy is generally transplanted in June/July with the monsoon rains and harvested in October/November. A delay in the monsoon or a dry spell at planting time, as occurred in the summer of 2006, can significantly affect the area planted and production. Overall, paddy rice production declined by 13 percent compared to average. Water shortage during the transplanting season resulted in late planting and land left fallow, particularly in the Eastern Terai. Table 3 shows reductions in paddy production in the most affected districts (Table 4 shows estimates by sub-region).

Table 3: Changes in paddy production in the most affected districts

The floods that occurred on 27 August, and which mostly affected the districts of Banke and Bardiya, damaged farmers’ land near river banks. However, as flood receded rapidly in these districts, many paddy fields did not suffer but instead benefited from the flood water, which contributed to some recovery from a dry summer. Yet Banke and Bardiya experienced paddy crop losses of 10 and 7 percent compared to the five-year average.

The prospect for spring paddy being planted on irrigated land in March-April 2007 is good due to above average access to irrigation water following good rainfall during the winter of 2006/07.

Overall, maize production was not negatively affected by the dry spell during the summer of 2006. Instead, production increased by 12.1 percent compared to the five-year average (Table 4). This outcome is explained by different crop calendars and land used for the maize crop:

• In the Eastern Hills, maize is planted on sloping rain-fed land, during the pre-monsoon rains, and is usually relayed with millet, potato and other crops, and harvested before the end of the monsoon rains. By June, the maize crop was already significantly developed and could better resist temporary lack of rainfall. Some 70 percent of maize is produced in the Hills.

• In the Terai and lower Hills, irrigated maize is planted in winter/spring in rotation with rice, while rain fed maize is planted in summer in rotation with winter crops (wheat, oilseeds or pulses). Only the latter category, which is a minor part of the maize crop grown in Nepal, was affected by last summer’s dry spell. In Banke and Bardiya, rainfed maize is cultivated upland and therefore the flood damage on maize remained limited.

Millet is generally planted late in the Hills as a relay crop after maize and as a main crop in the Mountains and was therefore not affected by the dry spell of the summer of 2006, and production was average (Table 4).

Table 4: Nepal - Area, production and yield of the three main summer cereals by Region and Agro-ecological Zone, 2006

Other crops

The impact of the 2006 summer dry spell and floods on pulses and oilseeds could not be assessed but it is likely that the impact was limited as these crops are mainly cultivated during the winter in the Terai or intercropped (pulses) during the summer season with maize in the Hills.

The impact of the 2006 summer dry spell and floods on cash crops could not be assessed, but it is likely that the impact was limited as cash crops are mainly cultivated on irrigated land. Furthermore, it is likely that the floods that affected Banke and Bardiya districts had limited impact as cash crops are generally grown during the winter in these areas.

Livestock

The impact of the winter 2005/06 drought and summer 2006 dry spell on livestock could not be assessed. Although there are anecdotal reports of losses of livestock in the Karnali region following the 2005/06 drought, the MoAC data suggests that the impact was marginal.

3.2  Main winter crop season in 2007

With average and above-average rainfall from October to December 2006, soil moisture was generally good for winter crop germination and growth. The levels of pests and diseases remained normal during the cropping season 2006/07. Yellow rust on winter wheat was reported in Taplejung and Tanahu districts. Yellow rust may possibly have affected those crops for which farmers used their own seeds for this winter cropping season. During the 2006/07 cropping season, the use of fertilizers and farmyard manure remained average. In the Hills, supply was reported problematic mainly for vegetable producers while in the Mountains fertilizer use remained marginal and farmyard manure application was average.

The use of improved seeds remained average for paddy and maize while a shortage of high quality improved seeds was reported for wheat in the Hills due to lower than average yield on seed farms during the winter of 2005/06. A higher proportion of farmers used their own wheat seeds for the winter 2006/07 cropping season. The supply and distribution of improved seeds is anticipated to be normal for the 2007/08 crop season for all cereal crops.

Wheat and barley production

The prospects for wheat and barley crops are above average due to timely and sufficient rainfall in winter 2006/07. An increase of 7 percent in production is expected compared to the five-year average (Table 5). There are pockets of lower production in the food insecure Mid-Western Hills (Rukum, Rolpa, Pyuthan, Dailekh and Jajarkot districts) and in the Far-Western Hills (Bajura district).

Table 5: Area, production and yield of the two main winter cereals in 2006/07 by Region and Agro-ecological Zone and changes compared to five years average (2001/02 to 2005/06)