Wheat import policy needs revision

In July 2004 the Government stated that the reasons for import of one million tons of wheat were "to bring down the prices" and to "create a reserve." Four months down the line, Pakistan is again in the market for import of another half-million tons, this time to "stabilise the prices" that refuse to come down and also to" build a strategic reserve."
Clearly the wheat crisis persists and this is largely because (a) the amount of shortfall in production has been seriously underestimated at the planning levels; (b) the supply side is distorted by distribution problems, emanating from the Punjab Government's steadfast refusal to allow the commodity to cross provincial boundaries; and (c) hoarding of this basic commodity continues, in anticipation of the shortfall in winter crop, arising from the known shortage of irrigation water.
But if the prices of flour in the urban areas have not come down and the supply of wheat to flour millers remains under pressure, the reasons for these can be traced also to the faulty policy applied by the Trading Corporation of Pakistan (TCP) to its import of one million tons of wheat in July and August 2004.
Tasked by government to quickly bring in supplies at the most favourable prices, TCP responded by restricting the bidding to offers from only the most expensive and most distant sources.
When the long delivery dates given by its favoured US and Australian shippers failed to solve the supply problem, TCP deviated from its own specifications, purchasing inferior quality Russian wheat for early delivery from the nearby Black Sea region.
Unfortunately, since this purchase was made at thirty percent higher than its prevailing international price, no benefit was derived by the exchequer, which had to dole out half a billion rupees in subsidy for the Russian wheat, or by the consumer, who ended up paying top prices in exchange for the lowest quality wheat available in the international market.
TCP's Black Sea deal was additionally distressing because, at the time, superior quality soft wheat from nearby sources was available at C&F prices that would have involved no subsidy intervention, thereby providing a cost advantage without compromise on quality.
And the fact that the Russian wheat was purchased not from any of the major international commodity traders, or a direct Russian exporter, but a Swiss-based company reportedly owned by Pakistani interests only adds to the disappointment.
Now, following Prime Minister Shaukat Aziz's directive to import another half million tons, a Commerce Ministry official is quoted as saying that "no decision has yet been taken (by Government) to import wheat from any specific country. Any country that will give a reasonable rate for required specification will be awarded the contract."
This naïve approach is surprising, because the political and economic necessity of having a reliable supply line for the availability of this basic commodity, and the need to protect our indigenous cultivation, the import of wheat something more than just a commercial transaction.
And in any case, it is well known that the selling price of wheat, as for any other commodity, is linked with its quality. You cannot get a better quality at lower than the market price, no matter what the production cost; by purchasing inferior wheat at a higher price you do not improve its quality.
Therefore the problems that the Ministry should be considering are whether, in the previous contracts for one million tons, the purchase rates were reasonable and whether the Russian wheat conformed to the "required specifications." Both aspects assume urgency and importance in light of TCP's publicly-stated announcement that its "future purchases of wheat would be sourced from the Black Sea region."
Despite TCP's claim, soft wheat from Russia or Ukraine is not of a quality comparable with that from origins such as the US, France, Canada or Australia. Not only is it considered unsuitable for bread-making, there is lack of quality control at the export destinations (where the selling and inspection agencies are usually the same entity) and this is why Black Sea wheat sells at a price on the average 25-30% below that of wheat from other origins.
As a matter of fact, both Russia and Ukraine import wheat from other countries to blend with their own for the purposes of improving the quality of the locally-produced flour.
Wheat is usually classified by the time of its planting (eg "winter" or "spring"), the hardness of the grain kernel (eg "hard" or "soft") and the colour of its kernel (eg "red" or "white) The colour of wheat has no bearing on its quality, both red and white wheat have the same nutritional properties, and any desired flour colour can be achieved by blending. Hard wheat is used mostly for making noodles and pasta, soft wheat is generally used for bread-making, including "tandoori" breads.
For purposes of making bread, the key quality is the "wet gluten" count, gluten being a unique enzyme in wheat protein that provides the "stickiness" required for bread-making.
Soft wheat from the USA, France, Canada and Australia all have the necessary wet gluten content as required for making the basic Pakistani naan and chappati, Black Sea wheat does not.
The reason why Black Sea wheat is considered of a lower quality is because it is contaminated by an insect "EurygasterIntegriceps," commonly known as the 'Sune Bug."
This attacks the wheat as the kernels are developing, injecting an enzyme that continues to digest the proteins as the wheat kernel develops. Wheat attacked by this insect will show a normal protein content, but this protein has been altered, or digested, in a way that prevents the formation of gluten. Kernels attacked by this insect are very difficult to detect visually and, while the protein content of the attacked wheat appears normal, its wet gluten content is zero.
Furthermore, when flour made from affected wheat is blended with non-affected flour, the enzymes remain present and active, thus adversely impacting the baking process.
Neither Russia nor Ukraine has been able to eradicate the Sune Bug. Importantly, they have failed also to take the appropriate post-harvest and storage quality control measures to separate their "clean" wheat from the "attacked" wheat, resulting in their export shipments being of mixed quality. If Russian and Ukrainian milling wheat is currently being imported into Europe and elsewhere in Asia in large quantities, this is because of the low prices, principally for use in the animal feed and starch industries.
Reverting to the Commerce Ministry official's remarks in regard to the wheat import policy, it would be nice to assume that the new import of half a million tons is a one-off transaction. But considering that, for a variety of reasons involving irrigation and farm inputs, Pakistan is likely to remain a net importer for some years to come, the Ministry might do well to take a closer look at the decision to source Black Sea wheat which, is clearly not of the "right specifications" for this country.
While doing so, the Ministry might take into account two other factors that will help to it to create a secure supply line.
Diversifying imports - where the Egyption model can be emulated. Each Egyptian Tender is open to all sources and classes of wheat, ensuring that the offers are competitive, price or source cartels are not formed, allowing Egypt to buy in quantities and qualities that can be blended to produce best results.
The experience of Egypt, and other African countries, is that soft wheat from France, when blended with other soft white wheat's, produces a superior quality white flour.
Protecting the indigenous crop - in 2002, Pakistan refused transit to Indian flour destined for Kabul in view, correctly, of the danger of "Karnal bunt" infection spreading to standing crops. Now it needs not only to take similar protective measures against the 'Sune Bug" but also to urgently evolve a policy in regard to genetically-modified wheat, commercial production of which is beginning this winter in parts of the USA and Canada and import of which can lead to the most serious consequences for the majority of farmers that rely on retained seed for their subsistence.