Smallholder Farmers in Pakistan's Agricultural Crisis

Agriculture remains the bedrock of Pakistan’s economy, contributing nearly 22.7% to the GDP and employing 37.4% of the national workforce (Pakistan Economic Survey, 2023–24). It not only provides sustenance and livelihoods to millions of rural households but also supports the country’s industrial and export base through cotton, rice, and other primary commodities. Yet, despite its central role, Pakistan’s agricultural sector faces an escalating crisis driven by the unprecedented surge in the cost of essential inputs. The sharp rise in prices of fertilizers, certified seeds, pesticides, diesel, and electricity has created a perfect storm that threatens the sustainability of smallholders farming the backbone of rural productivity.

For instance, fertilizer prices have doubled over the past three years, while the cost of diesel and electricity, both essential for irrigation and mechanization, has made even basic farming operations prohibitively expensive. Farmers who once managed modest profitability are now trapped in a cycle of debt, forced either to reduce cultivated areas or to compromise on input quality, resulting in lower yields and declining incomes. This vicious cycle is weakening Pakistan’s capacity to ensure food self-sufficiency, particularly for staples like wheat, maize, and rice.

Moreover, the crisis has social and economic ripple effects. Rising input costs not only squeeze farmers’ profit margins but also drive-up food inflation, pushing nutritious food further out of reach for low-income households. The disparity between input costs and output prices has also widened, discouraging rural youth from pursuing farming as a viable livelihood. Without timely interventions such as targeted subsidies, improved market regulation, and access to affordable credit, the country risks a deepening agricultural downturn. Addressing this issue is not just an economic imperative but a national security concern, as Pakistan’s food sovereignty and rural stability depend on protecting and empowering its small farmers.

The Input Cost Squeeze: A Statistical Reality

The profitability of small-scale farming in Pakistan hinges on a few critical inputs such as fertilizers, seeds, fuel, pesticides, and electricity. However, in recent years, their escalating costs have pushed farmers into a deep economic crisis. According to the World Bank (2024), Pakistan experienced a staggering 40% inflation in agricultural input costs over the past two years far exceeding the rise in output prices for key crops such as wheat, rice, and cotton. This imbalance has led to a severe contraction in profit margins, leaving millions of smallholders struggling to sustain production.

The crisis is especially acute for small-scale farmers, who constitute nearly 80% of Pakistan’s farming community. A survey by Rauf et al. (2024) revealed that almost 90% of smallholder households reported significant financial distress due to rising input prices. Many have been forced to scale back fertilizer applications or delay irrigation cycle choices that directly reduce yields and undermine long-term soil fertility. The cumulative effect has been a drop in both productivity and income, deepening rural poverty and food insecurity.

Several structural and macroeconomic factors are driving this situation. On one hand, global supply chain disruptions following the COVID-19 pandemic and the Ukraine crisis have inflated fertilizer and fuel prices. On the other hand, domestic currency depreciation and persistently high energy tariffs have multiplied production costs. Locally, governance failures and market concentration add further pressure. Research by Zulfiqar et al. (2024) identified fertilizer cartels and monopolistic control of input supply chains as major structural impediments, allowing price manipulation and hoarding.

As a result, small farmers face an impossible choice to reduce input use and risk lower yields, absorb unsustainable costs, or rely on high-interest informal loans. This “input cost squeeze” is not just a short-term financial strain but a systemic threat to Pakistan’s agricultural sustainability, food security, and rural livelihoods.

Why Small Farmers Are Especially Vulnerable

Small and marginal farmers, typically cultivating less than 12.5 acres, form the backbone of Pakistan’s agriculture, yet they are also the most exposed to rising input costs and economic instability. Their vulnerability stems from a combination of financial, structural, and environmental factors that compound one another. With limited financial buffers, these farmers operate on razor-thin profit margins, meaning that even a modest increase in fertilizer, diesel, or electricity costs can obliterate their income. The State Bank of Pakistan (2023) reported that the cost of wheat production surged by over 25% within a single year, primarily due to input price inflation. Such increases leave smallholders unable to recover their investment, forcing many to scale back production or abandon farming altogether.

Access to finance remains a major hurdle. Most small farmers are excluded from formal banking systems due to a lack of collateral or credit history. As a result, they turn to informal moneylenders and input dealers (arthiyas) for seasonal loans at interest rates often exceeding 30% per cropping cycle (Chaiya et al., 2023). This reliance on high-cost credit perpetuates a cycle of indebtedness, trapping farmers in chronic financial distress.

Moreover, the fragmented nature of Pakistan’s agricultural markets weakens farmers’ bargaining power. Small producers depend heavily on intermediaries to sell their crops, capturing only a fraction of the final retail value. This market asymmetry prevents them from adjusting prices to offset soaring input costs. Adding to these economic constraints, climate-induced disasters such as the catastrophic 2022 floods and erratic rainfall have increased the need for supplemental irrigation, fertilizers, and pest management, further inflating costs (Rauf et al., 2024; FAO, 2023).

Consequences for Livelihoods and National Food Security

The escalating cost of agricultural inputs in Pakistan has triggered a chain reaction with deep implications for both rural livelihoods and national food security. As input prices soar, many smallholder farmers, already operating on razor-thin margins, are compelled to reduce their use of essential fertilizers, certified seeds, and pesticides. The Food and Agriculture Organization (FAO, 2023) has reported a notable decline in fertilizer application rates across Pakistan, warning that this trend could undermine soil fertility and reduce long-term productivity. Lower input use directly translates into reduced yields, declining crop quality, and stagnating farm incomes, trapping farmers into a cycle of underproduction and poverty.

At the national level, these micro-level struggles culminate in macroeconomic consequences. The cumulative decline in productivity across millions of small farms threatens domestic food supply stability. As yields of staple crops such as wheat, rice, and maize decline, Pakistan is forced to rely increasingly on costly food imports, straining foreign exchange reserves and exposing the economy to global price volatility. The resulting food shortages contribute to inflationary pressures, disproportionately affecting low-income households and exacerbating rural poverty. In effect, the cost crisis input is not just a farmer’s problem, it is a national food security emergency in the making.

Addressing this challenge demands coordinated, evidence-based policy action. Expanding access to low-interest credit, regulating input markets to dismantle monopolies, and localizing fertilizer and seed production are critical steps toward stabilizing costs. Equally important is promoting climate-smart agriculture (CSA) practices that enhance efficiency, conserve resources, and build resilience to climate shocks. Furthermore, revitalizing agricultural extension services and strengthening market linkages through infrastructure and digital innovation can empower farmers to secure fairer prices. By pursuing these reforms, Pakistan can safeguard smallholder livelihoods, stabilize its food system, and move toward sustainable agricultural resilience.

Conclusion

Pakistan’s smallholder farmers stand at the epicenter of a deepening agricultural crisis driven by the relentless surge in input costs. What was once a modestly profitable livelihood has now become a daily struggle for survival. The soaring prices of fertilizers, seeds, pesticides, fuel, and electricity have created a crippling cost structure that undermines farm productivity, erodes income stability, and pushes rural families into debt. This “input cost squeeze” is not merely an economic issue it is a structural threat to Pakistan’s food sovereignty, rural development, and national stability.

The vulnerability of small farmers who constitute nearly 80% of Pakistan’s agricultural base reflects broader policy and institutional shortcomings. Inadequate regulation of input markets, limited access to affordable credit, and weak extension services have left farmers at the mercy of inflationary pressures and exploitative intermediaries. If left unaddressed, the result will be declining domestic production, rising import dependence, and worsening rural poverty.

However, the path to recovery remains within reach. Pakistan must urgently implement targeted reforms: regulate input monopolies, expand low-interest agricultural financing, promote local input production, and foster adoption of climate-smart and resource-efficient practices. Strengthening market linkages and extension support can empower smallholders to compete and thrive. Protecting these farmers is not just an act of economic prudence it is essential for ensuring food security, social stability, and a sustainable future for Pakistan’s agriculture.

References: Chaiya et al; FAO; Government of Pakistan; Rauf et al; SBP; World Bank; Zulfiqar et al.

Please note that the views expressed in this article are of the author and do not necessarily reflect the views or policies of any organization.

The writer is affiliated with the Department of Agricultural Economics, Sindh Agriculture University, Tandojam and can be reached at kashikaimkhani@gmail.com

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