Dip in wheat prices
By Ahmad Fraz Khan
May 02, 2011: WHEAT harvesting is gaining momentum in
Punjab, espec- ially in the southern part. According to
official estimates, nearly 40 per cent of harvesting in
these areas has been completed. But thrashing has not gone
beyond 10 per cent.
But wheat price in the market has started falling. According
to farmers, the price ranges between Rs790 and Rs830 per
40kg in the southern area. The officials, however, put the
price slightly higher. But they do concede that it was below
the official procurement price of Rs950 per 40kg.
The price is crashing because the only buyer in the market
at the moment is the miller. The Punjab Food Department and
the Pakistan Agriculture Service and Storage Corporation (Passco)
have delayed their procurement drive to the end of April on
the pretext that weather has delayed crop maturity and its
harvest by 10-15 days.
No one really understands the logic behind their decision.
They had made all preparations – purchase of gunny bags,
setting up of procurement centres, moving their staff to
such centres and launching media campaign to inform the
growers that they were in the field to procure wheat and
help stabilise its support price. Obviously, the move must
have cost the two bodies a bit extra to demobilise their
staff which they had moved to the centres.
What was the harm in starting the drive on time even if the
crop arrival was negligible? By doing so, they could have
assured the farmers and other players that they were there
to procure wheat and ensure its support price. By opting to
pull out, they have not only pushed the market down but also
left the farmers vulnerable to millers manoeuvring.
Now, by all practical purposes, both the organisations would
start procurement in the first week of May because end of
April is a weekend and the month starts with May Day.
Thus, by the time their staff settles down, wheat harvesting
would have gained enormous momentum and they would start the
drive with a glut, which they, in no way, would be able to
handle because of the cumbersome and time consuming process.
Growers fear that the price crash would continue throughout
the procurement drive as official calculations about the
crop size are grossly underestimated. They are being made to
suite the procurement plans, rather than suite the crop
The Punjab Crop Reporting Wing maintains the crop size at
18.165 million tons, which is around the same size as that
of last year (17.90 million). Whereas farmers insist that
the crop size this year would be much higher, may be around
20 million tons. They count many factors that might have
boosted the size of the crop on average from three to five
maunds per acre this year.
According to farmers, if the yield goes up by one maund over
last year`s production, Punjab would have 18.56 million tons
of wheat. If it goes up by two maunds, the end yield would
be 19.22 million tons, and if it goes up by three maunds,
which is more likely, the crop size would grow to 19.88
If the last scenario turns out to be true, there would be a
huge glut in the market. Out of 19.88 million tons, the food
requirement is around 10 million tons. Another 800,000 tons
are needed for seed purposes and about 500,000 tons for
The Passco would purchase 1.3 million tons and the Punjab
Food Department 3.5 million tons. It takes care of around 16
million tons, leaving a tradable surplus of around four
million tons in the market. Historically, the millers and
traders never purchase more than 1.5 million tons. Even if
they buy 1.5 million tons, there would still be a massive
2.2 million tons in the market. That is precisely the point
where the farmers` fears lie and they have been pressing for
higher official targets.
Instead of raising procurement targets, all official efforts
are riveted on downsizing the crop size estimates this year.
No grower or farmers` body agrees with the estimates of the
Crop Reporting Wing, but the entire official planning is
based on them. The official logic is that out of 18 million
tons, around six million tons would become tradable surplus,
out of which Passco and the Food Department would purchase
4.8 million tons and private buyers another 1.5 million tons
and the entire crop would be taken care of. Which scenario
turns out to be true, only time would tell.
But if the farmers are proven right, the political and
social cost for the government would be massive. It needs to
cover its flanks and have a second defence line ready if the
crop size exceeds its projection.
Courtesy: The DAWN