Good wheat crop was made possible despite a drought
By SYED M. ASLAM
July 16 - 22 , 2001
Nature has been extremely benevolent to humans this
year. By now many of us realise that global wheat crop has been good
this year. Reports emanating from India, Bulgaria as well as here in
Pakistan show that all these, and many other countries, have been
blessed by a good wheat crop which is not only sufficient to meet
local demand but also leaves a sizeable portion for export.
PAGE highlighted the implications of allowing
the private sector participation in wheat exports for the first time
ever, a prerogative of the government agencies previously. This time
around it focuses on the challenges to find international market for
the commodity at a time when supply seems to exceed the demand.
The size of fresh wheat crop is on the rise since
the provisional estimate was put at 18 million tonnes some weeks ago.
It increased to 18.5 million tonnes and more recently to 19.1 million
tonnes as stated by the federal food and agriculture minister, Khair
Muhammad Junejo. What is comforting about the latest estimate is the
fact that it exceeds over 0.6 million tonnes, a figure on which the
GDP growth of 2.6 per cent had been projected. Some relief indeed,
particularly as the good wheat crop was made possible despite a
drought like situation and acute shortage of irrigation water.
The fresh wheat crop is beefed up strongly by a
carryover stock of 3.5 million tonnes thus putting the total quantity
of the commodity at 22.6 million tonnes, which is more than sufficient
to meet the local demand as well as export of a sizeable quantity. The
surplus has thus resulted in earmarking some one million tonnes for
exports and 2.5 million tonnes as reserve stocks of the 3.5 million
tonnes carryover stock.
This also explains why the government has allowed
the private sector to procure and export wheat without having to
resort to finance huge monies to lift the commodity from the farmers
previously. Allowing the private sector to participate in procurement
and export is also aimed at using the profit-driven private sector to
market the commodity internationally with least financial burden to
The good wheat crop has also resulted in the slow
procurement by the provincial governments and PASSCO (Pakistan
Agricultural Storage and Services Corporation) primarily due to lack
of storage facilities. On the other hand, the State Bank of Pakistan
has issued directive to the domestic banks to give credit to traders
in the private sector to the tune of Rs 10 billion for storage
facilities at a simple mark up of 15 per cent. This shows the reliance
of the government on the private sector in the wheat procurement and
Until recently, almost 3.5 million tonnes of wheat
had been procured by the provincial governments — 2.2 million tonnes
by Punjab, 790,000 tonnes by PASSCO, 433,000 tonnes by Sindh and
58,000 by Balochistan — against a target of total 4.6 million tonnes.
The contracts for the export of 405,000 tonnes of
wheat were reported in hand two weeks ago of which some 233,000 tonnes
was already being lifted two weeks ago. A consignment of 35,000 tonnes
of wheat had already been shipped to sanction-hit Iraq under the
oil-for-food programme. The remaining 65,000 tonnes shipment to the
same country is to be lifted this month.
Despite the reports of wheat exports gaining
momentum earlier this month much still remains to be done to find
markets for the commodity internationally, particularly amidst the
excessive supply at present. Certainly the farmers, particularly the
medium and small ones who depend heavily on credit from crop and crop,
are anxious to sell the crop as fast as possible to pay their dues.
Keeping the stocks for longer period of times mean enduring more
expenses thus reducing the profit margins for the traders and
exporters. This highlights the need to find markets which are not only
receptive but also offer competitive prices.
What, however, is worrying is the fact that the
private sector enjoying its new find role is reported to procure and
export wheat from the farmers, particularly the unprotected small and
medium ones, to off-load wheat prices much below the officially fixed
support price of Rs 300 per 40 kilogram. This has already been
highlighted by PAGE a couple of weeks ago and is once again
repeated in the larger interest.
What is even more worrying is the fact that
unethical practice is going on with the active assistance and support
of banks, insecticides, pesticides and fertiliser sellers. The small
farmers are the worst hit victim of this unethical practice as they
have to acquire seeds, fertiliser, insecticide and pesticide on credit
at all stages from sowing to cropping. The same is also true for the
relatively bigger farmers who are dependent on loans from the banks.
Instead of wasting immense amount of energies to
deprive the farmers of a fair share the private sector would be better
off to use its vast amount of knowledge to find markets, new or
existing, which offer competitive prices.