Feb 16 - 22, 2009

Attaining food security has become a must in the fast changing geo-political conditions worldwide. Changing climatic conditions are playing havoc. countries being lush green and exporting food are becoming net importer of agriculture products. Pakistan also faces water shortage and its inadequate storage, inefficient use, wastages and no arrangement for recycling are compounding the problem.

This year shortage of fertilizers and their black marketing has resulted in imbalanced use. It is feared that during the current fiscal year the country may not achieve production targets of most of the crops and sector growth may remain flat or register a nominal growth, at the best.

Achieving self sufficiency in wheat is a must because not only the demand of huge population of this country has to be met but a significant part of the produce also goes to the neighboring countries. Domestic demand and smuggling, particularly to Afghanistan, when combined, shows that Pakistan must produce a minimum quantity of 22 million ton wheat this year and at all times have a reserve/buffer stock of 1.5 million tons. This year the government has fixed wheat production target of 25 million tons.

With reference to wheat Pakistan's recent experience has been horrendous because at one stage the country exported wheat at around US$250/ton but later on has to import it at almost double the price. Import is still going on and the top brass is still not sure how much more has to be imported. Import of wheat is eroding country's foreign exchange reserves.

Realizing the importance of wheat, present government fixed its support price at Rs 950 per 40kg and production target of 25 million tons. The support price looked attractive because at that time global wheat prices were hovering around US$ 500/ton. As the bubble bursts price of all the commodities including wheat nosedived. At present global prices are hovering around US$250/ton and all the stakeholders are becoming jittery. It is feared that farmers may not get more than Rs 750 as against the announced price of Rs 950 per 40kg.

Level of uncertainty has further gone up after the government expressed willingness to buy up to 6.5 million tons wheat due to limited storage facility. It is also feared that wheat yield will also be lower this year due to shortage and higher prices of fertilizer particularly the DAP. In an attempt to compensate for lower application of DAP most of the farmers have applied higher dosage of urea, which is expected to have adverse affects rather than benefits. Water availability is also low. All these factors clearly indicate that input costs will be higher and farmers must get corresponding return.

As the international as well domestic prices of wheat have come down considerably, it is a must that the government holds the policy. The available options are: the government buys the entire output at announced price or let the market forces determine the price. Both the options have their pros and cons. However, the ideal solution is that government ensures payment of announced price to all the farmers.

Some of the critics may say the fixing of price may be left at the market forces, because we are the firm believer in market based economy. Though their rationalization may carry some weight, the policy cannot be followed for the agriculture products, which are exposed to harsh and uncertain climatic condition. Around the world governments play the role of intervener, they become buyer when prices go below a fixed target and become a seller when prices go above the threshold. Pakistan government has been following this policy in case of cotton and the same should also be done in case of wheat.

In case the government allows the market forces to determine the price, no one would trust it in the future. One cannot doubt government's intention of attaining food security. Therefore, it must adhere to the commitment. A few cynics may say that paying higher price may put burden on the national exchequer. However, this does not carry any logic because the government has been paying subsidy on fertilizer and other products and paying subsidy to the wheat growers would not be irrational.

To ensure payment of right price to the small farmers, the government must announce the policy of buying each and every gram of wheat at the fixed price. It is feared that if the government buys a limited quantity only a few the feudal lords would benefit and all others would be unlucky.

Taking refuge behind limited storage facility does not carry any weight. If the government wants the farmers to produce more wheat, it has to offer them good price ample and fit for storage facilities, either owned by the government or acquired on rent.

The recent experience also shows lack of understanding of the key issues at the highest levels. If the government does not honor its commitment no farmer would trust its words in the future. Even the experts cannot tell how the commodity prices would move in the future. Therefore, attaining self sufficiency is must for containing price volatility.

In fact the country should produce higher quantity of wheat and try to export it because it is feared that some of the leading wheat producing countries may witness substantial reduction in output over the next couple of years.