Research Analyst, PAGE
Oct 11 - 17, 2010
Flour milling is one of the major food processing industries of Pakistan. The total flourmill capacity in the country stands at 7.5 million metric tons. The local manufacturers supply 40 per cent of the total grain processing equipments. Packing machines, fans, elevators, feeders and bag sewing machines for flour milling plants are manufactured locally. More than a dozen manufacturers in the private sector produce complete flour milling and rice husking plants of small capacities.
WHEAT HARVESTED AREA
PROVINCE AREA (MILLION HECTARES) Punjab 6.896 Sindh 1.020 Khyber Pakhtunkhwa 0.745 Balochistan 0.367 Total 9.028
At farm level, storage consists of mud bins, metallic bins, concrete rooms, jute bags and wooden boxes. Wholesalers also practice open storage by putting bagged grain on plinth, which is covered with tarpaulin for protection.
There are about 1,000 flourmills in Pakistan, which meet the consumption needs of about 40 per cent of the population, with the balance met by on farm consumption. The disbursement of government-owned wheat to the flourmills is managed in an effort to ensure that sufficient wheat is available throughout the country throughout the year.
The government has set this year's wheat procurement target at 7.5 MMT, which will cost the government about $2.2 billion.
Wheat is grown by about 80 per cent of all farmers on close to 40 per cent of the total cultivated area in the country. Wheat production in marketing year (MY) 2010/11 (May/April) is forecast at 22.5 million metric tons (MMT), down about six per cent from last year's record production level of 24 MMT. The projected decline in production is attributed to lower rainfall and less availability of irrigation water. In spite of these factors, this year's crop is forecast to be the second largest harvest on record as farmers continued to plant wheat in response to the government's attractive procurement price.
The government procurement price for wheat was set during MY2009/10 at Rs950 per 40 kg ($297/MT), and was maintained at that level for the 2010 procurement season (April-June).
Wheat flour or "atta" is the staple food for most Pakistanis, supplying 72 per cent of caloric energy in the average diet. Per capita wheat consumption is estimated at around 124kg/year, which is among the highest in the world. With a population of 170 million people, and a population growth rate of 1.5 per cent per annum, Pakistan needs an additional 300,000 MT of wheat each year in order to maintain per capita consumption at its current level.
Pakistan's wheat consumption is increasing at a slower rate than population growth. Consumer preference is shifting from traditional flat bread to western-style loaf bread particularly in urban areas where western bread is viewed as a convenient breakfast food. Traditional home-ground flour is also losing favor to commercially milled flour. The change in preference from higher whole grain to lower extraction flour is translating in to greater consumption of wheat. Demand for specialised products is also increasing in response to changing lifestyles which are more receptive to western-style fast food chains in the country.
Pakistan maintains a ban on the import and export of wheat. In view of limited storage capacity and the procurement target of 7.5 MMT, there is mounting pressure to lift the ban on wheat exports. All Pakistan Flour Mills Association (APFMA) has urged the government to allow the export of wheat products and proposed a subsidy of $50 per ton to facilitate the export of wheat to Afghanistan. The association argues that the proposed subsidy is less than what the government would have to pay for continued storage. The Punjab province has also requested the federal government to allow wheat exports through the private sector to clear stocks and stabilise the market in advance of the 2010 wheat procurement campaign.
GOVERNMENT WHEAT PROCUREMENT TARGET
PROVINCE TARGET (MILLION TONES) Punjab 4 Sindh 1.5 Khyber Pakhtunkhwa 0.3 Balochistan 0.1 Passco 1.6 Total 7.5
It has also been proposed that following the end of the procurement season (June) and after assessing the country's wheat needs the government should auction off surplus stocks. It should be noted, however, that significant exports of wheat would render Pakistan's wheat supply situation increasingly tight. The federal government is reviewing the crop situation and expected to take a decision on the wheat export issue shortly. Consequently, MY2010/11 wheat exports are forecast at 300,000 MT, consisting largely of informal trade with Afghanistan. Under the current scenario, Pakistan is not expected to import wheat in the coming marketing year. However, this situation could change depending on the actual size of this year's crop.
Government controls wheat-marketing system. Wheat prices and the movement of wheat are controlled at the provincial and district levels. The federal government should control the market through a minimum guaranteed support price. The government should also procure wheat from farmers at the support price and then release wheat to the provinces for sale to the flourmills at the government fixed issue price.