Wheat availability and price

Post Source: Dawn Economic and Business Review

The government is looking forward to a good wheat crop this year by offering growers a high support price. This year’s harvest combined with strategic stocks is expected to ensure comfortable availability of the commodity while the international market crash would help maintain relative price stability. But the issue of commodity financing shortfall estimated at Rs71 billion is causing some discomfort to the ministry of finance. And the recent advice of the State Bank of Pakistan to the government to reduce the wheat procurement target by two million tons for upcoming Rabi crop has not been received well in the ministry of food and agriculture (Minfal).

Commenting on the State Bank’s observation, senior officials at Minfal reacted strongly. “The release of funds for wheat procurement would only be stopped if the State Bank decides to play in the hands of the elements allergic to Pakistan People’s Party government and waiting for it to wrap up and go”.

“Wheat is a staple food and has to be made available at affordable prices to feed teeming millions. You can make do without other commodities but not wheat. The fact is that wheat is the most sensitive consumer item, with severe political fallout and needs to be treated as such”, an agricultural expert with PPP leanings said.

The country’s total wheat demand is projected at around 22 million tons to feed 180 million people. Market players insist that Pakistan also caters to the needs of an additional 10 million Pashtoons living across Torkhum border in Afghanistan. So the actual demand comes to about 23 million tons.

The total wheat supply this year inclusive of carry over stocks of three million tons from last year is expected to be about 25 million tons.

The current demand and supply projection of wheat indicates that one kilogram of atta will continue to sell at Rs30-35, depending on the quality and brand, unless transport cost or tax levies increase dramatically.

Last year, there was a bumper crop of wheat (23 million tons) on the back of high support price of Rs940 announced by the PPP government after assuming power in 2008. “This resulted in a massive shift towards wheat crop as reflected by higher acreage and yields”, said an officer of food department in Islamabad.

Dr Qadir Baloch, Agriculture Commissioner dismissed the suggestion of limiting the procurement of wheat. “The cabinet decided and the government has committed to pick up the crop to the last grain offered by peasants at the announced procurement price. Any change in the policy would be unfair and not advisable. It would create a trust deficit amongst tillers that can extrapolate into a full blown crisis”, he said.

“The international price of wheat was high at $700 per ton when the support price of Rs950 per 40 kg was announced in 2008. Now the price has come down to $250 in the international market. It would be absurd to buy it so expensive when it is available cheaper overseas”, said a free market champion critical of the feudal lobby that he believes, sways the PPP government.

“The wheat procurement price was hiked when the global market for it went up. I fail to see how is it fair to raise the price of a commodity (irrespective of its cost of production) and not bring it down with the fall in the global market. To me it is ‘head I win, tail you lose’”, said Iqbal Ahmed, another critic of the price subsidy.

In 2008, the world saw unprecedented commodity price hike. There was a move from the rural lobby to allow export of wheat to get farmers their share of boon. This was the background of sudden massive increase in the support price of wheat that year.

“Wheat shortage or unaffordable high price of wheat is devastating for us. Our meals are ‘roti’ based. I remember how hard it was to feed the family when ‘atta’ disappeared from the market in 2008,” said Razia Sultana, a nurse.

Dr Shakeel Ahmed, Wheat Commissioner, ministry of food and agriculture was unhappy with “speculative press” reports. “We know that plantation of wheat in irrigated fields has increased by two per cent but has fallen by 18 per cent in Barani areas. I feel it would be too early to project the size of the crop at this stage. But as you know agriculture is a roofless industry and much depends on weather conditions. Based on information reaching us, I foresee a good crop despite fall in acreage and less rain in November/December”.

On the issue of procurement Dr Shakeel said that last year government procured 9.23 million tons against the target of 6.5 million tons. He informed that the government this year has set the target at 7.5 million tons. “How much it would actually pick up depends on a combination of factors and would be irrelevant to predict”.

“Things are looking dismal right now. The wheat crop needs to be watered on time. It is our main crop of the year. The lack of rain is a disaster for those of us who depend on wheat,” Muhammad Fiaz, a farmer from the Vehari area of Punjab reported to have said.

Abdul Kalim Baakza, chairman, Wheat Exporters Association of Pakistan sounded indifferent. “The government lacks clarity of vision and a comprehensive policy package for wheat. Many a times, it buys more than required at high rates. The stocks very often get damaged and are disposed off in a hurry at below the cost price”.

Chaudhry Mohammad Yousuf, Chairman Pakistan Floor Mills Association was also not too enthusiastic. “I do not see atta price rising in the near future”, he said confirming comfortable demand and supply situation.

“We need a good crop to survive,” he said.

Wheat is the biggest staple food crop, with about 22 million tons consumed each year, according to official statistics. Since 2007, there has been a ban on wheat exports. Anis Majid, Chairman Karachi Wholesale Grocers Association reconfirmed views expressed by Chaudhry Yousuf.

Over 71 per cent wheat is grown in Punjab.

The current water shortage has been especially severe for farmers whose land is farthest from the network of canals which feed into irrigation systems across the Punjab. But the worst hit are the rain-fed areas.

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