The uncompetitive wheat industry

Pakistan's wheat exports remain meager, with the month of October showing just under a thousand tons exported as per PBS data - not a lot, but an increase over the same period last year when exports were zero. And given that the export subsidy expired in September, its a surprise the number wasn't zero again!

As per news sources, there is between 8-9 million tons of wheat stock that has nowhere to go. Mohommad Yousaf of Pakistan Flour Manufacturers Association Sindh told BR Research that the international price of wheat is around $200 per ton, while the same in Pakistan is $330. He added quite pessimistically that exports for the coming few months might be nil.

By far, Afghanistan is our largest market for wheat - around 6 lac tons exported annually. However, industry sources say that this market is being lost to India and other players because of lack of efficient policies. The problem occurs when you keep a support price so high that the exports become uncompetitive (as is the case with sugar as well). Instead, why not subsidize the farmers directly?

Then there are domestic issues as well. An industry source told BR Research that security is an issue as traders can't send their wheat to Quetta, where there is Bhatta culture. Moreover, he added that corruption is a problem as the export subsidy is not always passed down to the mills.

From the supply side, the wheat stock looks good this year as well - Business Recorder reported earlier this week that wheat cultivation would be completed till mid-December, and the target of 26 million tons appears to be in sight. With falling commodity prices and the added surplus, it might be time to revise some of the policies.