WHEAT EXPORTS AND PROSPECTS

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)
Feb 14 - 20, 20
11

After a three-year long ban on wheat exports, Pakistan has finally lifted the ban on exports of wheat and has exported 500,000 tons grains according to the latest figures.

The wheat parcels were mainly exported to Bangladesh and Myanmar while demand of Pakistani wheat is rising in other countries as well, especially Argentina and Australia where climatic variations greatly hampered the production of staple food. Pakistan is in a better position to meet the global mounting demands because of surplus stocks of last year, and thus, to earn profits by selling the commodity in international market reeling under food inflation.

Price of Pakistani wheat is relatively good as compared to other exporters. This has emboldened the likelihood of Pakistani wheat carving out its distinctive place in the foreign markets after a recess. "Pakistani wheat is now competitive," a Singapore-based trader told Reuters last month. He said traders were looking for cornering more stocks.

The government imposed ban over wheat exports in 2007 because of domestic shortages and high price of staple food in the country.

Critics slammed the government decision of lifting ban over wheat exports, anticipating food crisis in store as a result of export-driven local shortage. Instead of opting exports to sell out surplus stock, they advised, the government should set up modern silos to store the grain in order to pre-empt shortage in future and make flour available at suitable price for people stricken by spiking food inflation.

What do you call it inefficiency or improper utilisation of agriculture development funds on part of the government that such modern silos with effective cleaning, ventilation, and temperature control systems have not been established given the fact that Pakistan is the world's ""top-ten producer of wheat. Such modern silos are, if any, limited in numbers and unable to wheelbarrow surplus.

Unfair trade practices including hoardings and smuggling are common causes of shortage of wheat/flour or any other richly produced commodities in the country. Representatives of poultry feed mills appealed the government to supply wheat at export price to them so that they could pass on price benefits on chicken products to the consumers.

Reportedly, the government has green-signalled export of two million tons of wheat because of excessive wheat of last year in its stocks. It is interesting to note that last year's floods squeezed the wheat production by 3.5 per cent. In spite of this, if there happens to be an excess, then it is an indication of self-sufficiency of the country in wheat production and high improbability of genuine shortage and price hike.

The government is also much optimistic about good wheat production for Rabi season 2010-11. It has set 25 million tons wheat production target for the current season. The production is almost 1.5 million tons more than the country's requirements of 23.5 million tons. Rainfalls are the major driver of growth in outputs.

During July-June of ongoing financial year, exports of all commodities generated 13.2 billion dollar, depicting staggering surge of 23 per cent as compared to 10.7 billion dollar in the corresponding period last year. The commodities included rice, sugar, raw cotton and others.

Pakistan's wheat production had increased six times to 23.7 million tons in 2007 from 3.9 million tons in 1950, according to Pakistan Agricultural Research Council (PARC). It is worthwhile to mention that wheat production potential in the country is yet to be tapped. A report by PARC said national average of wheat yield could escalate to 10 tons per hectare if genetically modified technology is applied. Hybrid wheat seeds are used in parts of the country, but yield hovers around paltry 2.6 tons per hectare. Punjab produces 76 per cent of total national wheat production.

The ministry of commerce chalked out recommendations to enhance exports from the country and forwarded them to economic coordination committee for approval. Theses recommendations mainly consisted of ways to increase exports of agriculture products and value added textile sector.

The government is hopeful that exports for the current fiscal year will increase as July-Dec export figure is showing the growing trend. The government is however not focussing onto the incentives to exporters without whose contentment rise in exports would remain a pipedream. Alternatively, if growth is recorded it would be below the latent potential and capacity of exporters. The fact was lamented by a senior government official. He said the government had resolved to fund Rs27 billion for the implementation of three-year Strategic Trade Policy Framework (2009-2012), yet nothing was materialised in this regard, reported APP. It is an irony that 3-year trade policy that was publicised for its ability to revolutionise export sector remains an abeyant document. It has not been activated, and according to analysts, whatever growth in exports Pakistan has achieved was because of fast-eroding value of Pak rupee against US dollar and appetite of raw materials in the international markets.

The government also intends to focus on increasing trade with China. Trade with China is growing rapidly and that is a good sign. However, the trade is mainly in China's favour. It is importing less than exporting to Pakistan. Pakistan's exports to China compose of semi-finished products and raw materials, textile, ores and mineral products, leather, seafood, and medical and surgical instruments. Textile sector form the largest share in total exports from Pakistan and depending on supply of agriculture inputs for production of garments and apparels earns the country more than US$10 billion revenue per year.

Wheat exports can scale up exports revenue for Pakistan. Since there is, according to an estimate, 60 to 70 per cent yield gap in wheat, reduction of this gap will certainly augment national outputs. Importantly, the government should not override its main responsibility of ensuring certainty in wheat supply in the country while encouraging exports. Wheat export target is seamlessly close to remaining stock minus national requirements. This calculation should be restrained in unleashing crisis this year. There is a need to contain supply-side triggers of price hike.