S.KAMAL HAYDER KAZMI,
Research Analyst, PAGE
May 2 - 15, 2011
Wheat is an internationally traded commodity. A little over one fifth of the world wheat production is traded worldwide. By 2020, world demand for wheat is expected to be 40 per cent higher than that of its level in the later half of the 1990s. But, the resources available for wheat production are likely to be significantly lower. The challenge for increasing wheat supplies is much greater in the developing countries than it is in the developed world.
Most of the developing countries have agrarian economic structures. But, industrially developed countries as a group have attained through their farm support policies an artificial advantage over the developing countries, particularly in cereal production. Furthermore, wheat exports increased for EU-27 up 1.0 million tons to 22 million tons, based on the strong pace of exports licenses, and its competitive position given Russian and Ukrainian exports restrictions. The largest increase in wheat imports is for Turkey, up 0.5 million tons to three million tons, as the government decreased the wheat import tariff from 130 per cent to zero per cent until May, 2011.
With the Russian grain export ban, the Turkish flour millers need an alternate source to fulfill their demand for high protein wheat. The United States appears to be the main beneficiary of the Russian export ban, exporting substantial amounts of wheat (925,000 tons in commitments this year compared to 38,000 a year ago).
Wheat imports also increased in several countries based on the pace of recent shipments. In Indonesia, Morocco, and Yemen, wheat imports were up 0.3 million tons each to 5.6, 3.9, and 2.6 million tons, respectively.
Exports for Brazil were up 0.6 million tons to 1.7 million, reflecting the high pace of exports of subsidized low-quality wheat to Algeria, Egypt, and Libya. At the same time, Exports also increased for Argentina by 0.5 million tons to 7.5 million. Argentina is expected to ship more in the coming months, before the wheat harvest begins in the northern hemisphere. The high pace of Argentine wheat shipments to new markets such as South Africa, Turkey, Iran, North Africa was noticed. Canada's wheat exports reduced by 0.5 million tons to 17 million tons, Ukrainian wheat exports were down another 0.5 million tons to 3.5 million and Mexican wheat exports were also down 0.3 million tons to 0.7 million tons respectively.
Wheat is a Pakistan's most important agricultural commodity. In Pakistan, production of wheat has experienced sharp fluctuations with periods of near self-sufficiency in wheat followed by periods of unsatisfactory performance. These fluctuations have been caused mainly by the vagaries of weather, which in spite of a highly developed irrigation network in the Indus Basin casts a long shadow on the fortunes of the agricultural sector.
Pakistan is presently exporting wheat at around $335 per metric ton mainly to Afghanistan, Bangladesh, Myanmar, Yemen, and East Africa. Afghanistan has been a traditional wheat flour export market for Pakistan. However, it appears that Afghani traders are switching to alternative suppliers mainly the Central Asian Republics. A probable reason for this partial switch was the ambiguity of Pakistani trade policy.
It should however be noted that due to inconsistent trade policies, Pakistan has not proved itself as a reliable supplier for Afghanistan. As a result, Afghanistan traders turned to alternate suppliers mainly Central Asian Republics. Pakistan's wheat/flour exports to Afghanistan are estimated to reach around 300,000 million tons during FY2010-11.
The government of Pakistan lifted its ban on the export of wheat in December 2010 and allowed private sector to export wheat. The decision was made in response to a request made by the Punjab provincial government, which at that time had over 5.7 million metric tons of wheat stocks. The government has also announced that there will be no ban on the export of wheat during the 2011 procurement season.
Under the current scenario Pakistan is expected to export 1.2 MMT during FY2011-12, however this will ultimately depend on the actual size of this year's crop.
Wheat production in FY 2011-12 (May/April) is forecast at 23.5 MMT, down two per cent from last year's production level of 23.9 MMT.
The current year's wheat crop is forecast to be the third largest harvest on record. After the floods there were concerns about significant reduction in the wheat area planted. The apprehension was based on the assumption that land in the flood affected regions might not be ready in time for wheat cultivation. But, ensuing weather conditions coupled with farmer and government efforts resulted in timely sowing of wheat in critical areas. The government procurement price remained attractive to the farmers which was set during FY 2009-10 at Rs950 per 40 kg ($276/MT), and was maintained at that level for the 2010 crop and for 2011 procurement season (April-June).
Improved soil moisture, favorable weather conditions coupled with adoption of improved agricultural practices and increased use of fertilizer can help to prop up yields. Wheat area harvested is two per cent (8.9 million hectares) lower than last year.
Pakistan maintains a largely government controlled wheat marketing system. Wheat prices and the movement of wheat are controlled at the provincial and district levels. The government should ensure the availability of wheat at affordable prices in the local market instead of drooling at the dollars earned from the exports of staple food.
WHEAT AREA HARVESTED BY PROVINCE
PROVINCE AREA (MILLION HECTARES) PERCENTAGE OF TOTAL AREA Punjab 6.836 76 Sindh 1.041 12 KPk 0.686 8 Balochistan 0.327 4 Total 8.890 100