Research Analyst
Aug 6 - 12, 2012

Wheat is Pakistan's most important agricultural crop, which is grown by about 80 per cent of all farmers, and covers close to 40 per cent of the total cultivated area. Wheat production in the marketing year (MY) 2012-13 (May-April) is forecasted at 23.0 million tons, down five per cent from a record production level of 24.2 million tons. The forecasted production level is almost at par with the average of last five year's production. The projected decrease in production is due to a reduction in crop area, reduced availability and use of irrigation water and production inputs and low rainfall pattern. The 23.0 million ton production forecast represents potential production and assumes no further deterioration in the condition of the crop before harvest scheduled to begin in April.

The Government of Pakistan raised the procurement price for the current year's crop from Rs.950 per 40 kg ($276/ton) to Rs.1050 per 40 Kg ($292/ton) but the farmer's organizations still maintain that the increase in the procurement price is not in line with the increase in input prices.

Area harvested is three per cent lower than last year and is estimated at 8.66 million hectares. Wheat area harvested is witnessing a declining trend and has decreased by five per cent during the last two years. Government reluctance to raise the procurement price in accordance with the increase in input prices and recent trend of early sowing of cotton (February-March) are the main reasons for the reduction in the planted area for wheat.

The use of fertilizer during the 2011/12 wheat crop season registered a declining trend due to shortage of urea and high cost of phosphate fertilizer. The use of fertilizer during the 2011 wheat growing season decreased by 19 per cent as compared to last year.

In product terms, urea use decreased by 13 per cent while DAP decreased by 27 per cent. Water availability for irrigation during the 2011-12 winter growing or Rabi season was 16 per cent below normal compared to 12 per cent during last year's season. Low rainfall during November and December last year was not very conducive for wheat germination and could ultimately impact yield. Wheat sown in the arid zones will be more susceptible to the low rainfall pattern. Stored water for irrigation is held mainly in two large reservoirs, Tarbela and Mangla, for use during the summer and Rabi seasons. About two-thirds of the country's irrigation water is sourced from snow and glacier melts, with the balance supplied by tube wells and seasonal monsoon rains. Since the completion of the nation's irrigation system in the 1970s, demand for water has increased by more than 50 per cent, while storage capacity has decreased by about one-third due to silting. This has left per capita water availability at a fraction of its earlier levels. As a result, chronic shortfalls in water available for irrigation are expected to impose an increasingly larger constraint on Pakistan's agricultural prospects. The impact of water shortages is traditionally more severe in the Sindh province than in the Punjabregion. Many parts of Sindh's ground water are alkaline and not fit for irrigation, thereby necessitating a greater reliance on canal water. In the Punjab province, where extensive tube well irrigation is utilized, the crop is generally considered to be in normal condition as of March 2012. With the bulk of the Punjab crop about to enter the grain-formation stage, moderate temperatures and sunlight during the month of March will be critical for the success of this year's output.

Pakistan has a variety of breads, often prepared in a traditional clay oven called a tandoor. The tandoori style of cooking is common throughout rural and urban Pakistan and has strong roots in the region. 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 has traditionally been estimated at around 124kg/year which is among the highest in the world. Pakistan's wheat supply situation remained stable throughout MY2011-12 mainly because of two successive good harvests and steady wheat stocks. Wheat/flour prices were also relatively stable, during MY2011-12 thus enabling Pakistan to avoid issues of food insecurity during a year of high inflation.

It is estimated that, Pakistan's wheat consumption is increasing at a slower rate than population growth. The present market price of wheat flour in Pakistan is around $314/ MT which is about ten per cent higher than prevailing world prices. Pakistan's wheat milling industry is privately owned. There are about 1,000 flour mills in Pakistan, which meet the consumption needs of about 40 per cent of the population, with the balance met by on farm consumption. Principal milled products include midda and atta.

The Government of Pakistan lifted its ban on the export of wheat in December 2010 and allowed the private sector to export wheat. During 2010-2011 Pakistan exported 1.5 million tons of wheat. The export momentum continued during the first half of MY 2011-2012. However, due to declining world wheat prices during the latter half of the marketing year, Pakistan's wheat became uncompetitive in the world market and the pace of exports could not be sustained. Pakistan's MY 2011-2012 wheat exports are estimated at 800,000 tons. It is also estimated that during MY 2012-13 Pakistan will export approximately 300,000 tons mainly to Afghanistan. Afghanistan has been a traditional wheat export market for Pakistan. 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 prices are presently ten per cent higher than the world prices and the GOP is considering a proposal for subsidizing wheat exports.