Archive for March 15th, 2011

Growing wheat for exports

Post Source: Dawn economic and business review

By Ahmad Fraz Khan

THERE seems to be some confusion in official circles on how to handle the domestic and international wheat trade. First, the ministry of food and agriculture had forwarded a proposal to export two million tons of wheat from its strategic stock of three million tons, thus bringing the strategic stock to one million tons. It could have in addition to one million tons that Punjab was in the process of exporting. The minister, whose ministry had read international situation, assessed domestic market and recommended additional exports, refused to go along. Second, the meeting could not agree on ‘what constitutes strategic stocks’ despite debating the issue for quite a while. If a nation does not know what could be the ‘quantity of its strategic stocks for a grain that forms staple for it,’ how can it plan its food security and international trade?

Third, the Economic Coordination Committee (ECC) also could not take decision on the quantum of wheat procurement despite a summary from the ministry for 6.57 million tons. The inability to take the decision was that ‘since the federal food ministry would be devolved to the provinces in June, it was better to let the provinces decide the quantum.’

The logic seems unsound for two reasons; first, the devolution would come in June, whereas procurement is completed by May end.

Second, it has always been the federal ministry that pieces together a national picture – requirement and arrangements – and conveys it to the provinces. In the absence of such determination, who would assess the national requirement, arrange finance and buy the stocks.

Does Federal Finance Minister Abdul Hafeez Shaikh, who shot down the proposal by the federal ministry of food and agriculture, expect Punjab to do it? If so, who would then be held responsible if anything goes wrong? All this is happening for a grain that forms staple food for 180 million people. The confusion reflected in the ECC meeting was in fact the result of lack of any sound institutional framework to deal with agriculture, leave alone wheat, trade. What our current leadership must realise is that agriculture trade has become as important as agriculture itself.

If one can produce a crop but cannot sell it, the crop is bound to become a liability rather than an asset. During the two years, wheat has proven the point. The balance between domestic production and the world demand is a matter of institutional response.

The government needs to plan wheat crop and its trade in emerging international trends, and try to form an institution on the pattern of say Australian wheat board. The current international price trend, according to institutions like FAO and the World Bank, is likely to hold for next five years. It is a positive setting for launching an effort to make Pakistan a better market player on the globe.

Pakistan must plan its wheat crop on the domestic front where it is increasingly loosing comparative advantage to other crops like cotton and cane. A drop in acreage this year despite massive floods uprooting cotton and cane and clearing fields early testifies the loss. Pakistan needs to maintain wheat advantage on domestic front. How? It needs to be planned. On international front, it needs to create a niche in the international market to keep selling the crop every year, and turn it into national advantage.