Malik Nasir Mahmood Aslam comments about the impending difficulty of the wheat crisis in Pakistan
We are certainly going to face yet another wheat crisis in Pakistan as the agricultural areas known for growing wheat have been badly affected by the recent flooding and the reports are that the wheat crop is going to be much below the yearly average. Fears over reduction in the acreage and crop yields were being expressed even before the catastrophic floods which have grown only louder during the last few weeks and have added to the worries of the policymakers.
Moreover, the increase in input costs due to currency devaluation along with high fuel prices has pushed farmers away from the crop upon which hinges Pakistan’s food security. The uncertainty created by the delay in the announcement of the procurement price is forcing growers to look for alternative crops with shorter harvest cycles but offering better returns.
All this is taking place when large parts of wheat growing areas are badly affected by devastating floods and soil remains unfit for sowing with floods having flushed away large stocks of seed. With demand likely to stay robust, the supply might have to compromise on quality with plenty of substandard quality seed sown on a large scale has a far-reaching impact on crop health.
The anticipated result is that the wheat crop could lose around 10 percent area to floods. In wake of these factors, it is very surprising to note that the government issued a highly optimistic production target of 28.4 million tons from an area of 9.3 million hectares completely ignoring ground realities.
Wheat Crisis In Pakistan
It is a pity to observe that Pakistan maintained food autarky for many decades and now the situation has deteriorated to the point where the country is required to import a larger quantity of wheat over the next several months. This is not good news for a country struggling to keep its head above water in the face of the worst-ever balance of payments crisis.
The issue may be viewed from a pragmatic perspective and it should be taken into account that Pakistan’s wheat worries refuse to go away and so does its penchant for policy mistakes. In the recent past both the federal and provincial governments competed over the wheat crisis in Pakistan prices with the result that unending volatility crept up in the already unstable market that increased manifold and an overheated wheat market set the flour market alight.
As it happened Sindh was the first to throw a spanner in the works when it increased the wheat procurement price from Rs.2,200 per 40kg to Rs.4,000, a whopping increase of 45 percent. Punjab was next to raise the bar: from Rs.2,200 per 40kg to Rs.3,000, an increase of 26.67 percent, just three days after Sindh’s decision. The federal government sided more with Punjab.
And now three of them were locked in negotiations to find a middle path: chances were that both provinces may settle at a rate of Rs.3,500 per 40kgs, an increase of 37.14 percent. All these prices, or even the debate around them, have impacted the market in two ways: set the price ablaze and put a premium on hoarding. These politically-driven experiments were being carried out in a market that was volatile ever since the wheat crisis in Pakistan year started.
To begin with, production fell this year to 26.40 million tons from 28.42m tons last year — a gap of 2m tons. The national calculations put the consumption at 29m tons, and the federal government decided to import 3m tons to bridge the gap. Though all the provinces had procured wheat, they were reluctant to release it early for fear of facing shortages later.
Punjab went for releases as early and subsidized it by around Rs.500 per kg. Against the now standard release at Rs.2,300 per 40kg, it started releasing at Rs.1,765 to keep a lid on the flour prices: selling a 20kg bag at Rs.980 — just under Rs.50 per kilogram.
While early releases kept the flour price checked, the general perception of shortages and difficulty procuring imports activated hoarders. Although Punjab’s releases were minimal (16,000 tons a day) because it’s 5m tons of stocks were enough to flood the market, hoarders further squeezed supplies as prices started spiraling.
On the prodding of the federal government and price pressure, other provinces have released wheat. While this helped the market, it did not ease it to the required level. All provinces fear delayed imports and being left without stocks towards the end of the season.
With the country already facing prospects of significant food shortage due to climate-induced floods, the coalition government is desperately calling upon the global community for taking collective action for food security on World Food Day.
Despite taking all such action what is needed is to undertake the long-overdue overhaul of the agriculture sector and rectify the wrong, short-sighted policies. With states worried about their own food security amid surging inflation and food shortages due to the Ukraine war, Pakistan must focus on fixing its neglected agriculture. The Weekender