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Wheat exports: better prospects

Good wheat crop was made possible despite a drought like situation

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 government.

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 export trade.

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.