Surplus production should ease the mounting price inflation


Mar 21 - 27, 2005

Nature seems kind to Pakistan by bringing sufficient rains, which helped country harvesting the highest ever, wheat and cotton crops this year.

According to an assessment, the wheat crop is expected to yield over 22.2 million tonnes besides 15 million cotton bales this year. The final crop assessment, however, has yet to come.

The domestic need of wheat this year was estimated at 20.8 million tonnes that means the surplus should ease the mounting pressures on flour prices, much sought relief by the common man.

During the current fiscal, the government had imported wheat worth US dollar 230 million to meet the shortfall in domestic production consequently rocketing price both of the grain and flour.

The government, it may be mentioned had imported around 1.17 million tonnes of wheat from Australia, Russia and Canada after production of wheat declined to less than 19 million tonnes, creating an acute shortage in the market.

Bulk of the imported wheat had already arrived as a consignment of the order placed from Australia of around 250,000 tonnes and another shipment of around 150,000 tonnes from Canada was expected to reach Pakistani ports soon. This quantity was enough to meet the local demands till the domestic crop arrived in the market, a source in the Ministry of Agriculture told this correspondent.

Once the local wheat is harvested and starts arriving in the market, the last of the shipment of about 100,000 tons from Canada out of the total order placed would not be required and the country could afford to cancel the order to save around US dollar 20 million in foreign exchange.

It was Trading Corporation of Pakistan under instruction from the government bought the wheat from three countries at the rate of US$ 200 per tonne which was cheaper than the wheat imported about two years ago, said a source.

The arrival of imported wheat brought down the rising process of flour in the market. A 100 kg bag of wheat, which sold at Rs1,085 before import, came down to Rs1,035, registering a decline of Rs1.25 per kilogram at retail outlets.

With the start of wheat harvesting in lower Sindh, an upward trend in wheat production, calculated at 80 kg per acre has been noted and that is a source of satisfaction for the Government of Pakistan. The experts who foresee an upward trend in wheat production across the country, estimating a bumper wheat yield of over 22 million tonnes this year whereas the projected safe target was set at 20.2 million tonnes for Rabi crop this year.

However, the said projected target of the government was set by keeping in mind the lower water availability and based upon the national average wheat yield of stagnating 2,437 kilograms per acre from a massive acreage of over 8.29 million hectares.

"Thanks to timely raining during the season of wheat sowing as the barani (rain-fed) areas contribution to the total wheat production may exceed from 2 million tonnes," said an expert on wheat in the Ministry of Food and Agriculture.

Dwindling wheat yields in the last few years have increased food insecurity and provincial disharmony in the country on the one hand and massive wheat imports on the other. This situation is affecting the national kitty rather badly as during the current financial year import bill of wheat is over $300 million. So the government this year was in no mood to take any chances and initiated efforts well before the sowing of the wheat crop to meet the rising food requirements through domestic means. Secondly, it dawned upon a few leading lights of the government that instead of favoring the Australian or Central Asian farmers through wheat imports why not pass the benefit to the local farming community.

This resulted in the announcement of enhancing wheat support price from Rs350 per 40 kgs to Rs400 in September last year. The intention was to induce farmers to grow more wheat that usually sown in November-December period. The actual aim was to enhance the stagnating national average yield of 25 maunds per acre to at least 1,200 kg per acre to meet the rising food requirements of the country. Extremely cautious, the government approved an expensive proposal of the Agriculture Ministry to launch for the first time in the history of the country an awareness campaign for the farmers to grow more wheat. A Rs60 million advertisement campaign was also placed in the national media during the month of November and December that highlighted the benefits of sowing crop before mid November and mid December.

Wheat production in Pakistan has shrunk during the last few years as the farmers in the Indus plains keep picking their cash crop cotton as late as January. The delay in sowing wheat crop, lack of water availability and changing weather pattern all played an important role in diminishing wheat yield. All these hurdles were to be addressed through the awareness campaign in rural areas in the future now.

Official estimates revealed that 60 percent of the wheat area was sown before mid November and remaining by mid December. The government also had to give a subsidy of Rs550 per bag by supplying 100,000 tonnes of imported urea fertilizer at domestic equivalent price of Rs450 per bag. The government had to import urea to meet the shortfall in the domestic market at the time of wheat sowing. The government also kept a lid over diesel prices till December end so those farmers could use generators for tube wells to irrigate their fields in the absence of water inflows in canals.

All said and done, the fact remains, that mounting price inflation had seriously eroded the purchasing power of the common man which calls for immediate corrective measures to give a sigh of relief to the inflation-hit people.