The 'surplus' wheat

The Ministry of Food and Agriculture has finalised a plan to export two million tons of "surplus" wheat, a news report, quoting official sources, has said. As Pakistan's wheat stocks this year stand at a record 10 million tons, the case for export of the commodity will be presented at the next meeting of ECC of the Cabinet, to be held in a few days.
Punjab, the country's biggest wheat producing province has, meanwhile, procured 5.8 million tons of wheat, and has surplus stocks of around 2.5 million tons. PASCO has also procured over two million tons of the commodity. Sources quoted in the report have claimed that no subsidy will be given on export of wheat, as Pakistan's wheat, widely known for its rich nutritional content and taste, can fetch a much better price if properly marketed in the international market.
The ministry of food and agriculture had initially not allowed wheat export, and had instead given the go-ahead for the export of only two lakh tons of wheat, value-added. (However, the proposal was found impracticable mainly due to insufficient storage space in the country). Quoting relevant data will help put things in proper perspective.
Pakistan needs 21 million tons of wheat for its domestic consumption, Afghanistan needs another 500,000 to 600,000 tons to meet its requirements, while 1.5 million tons is required as seed to be used for the next crop. Further, 0.5 to one million ton is required for manufacturing poultry and cattle feed. All these requirements add up to approximately 23.5 million tons.
If the wheat production estimate of 25 million tons is treated as credible, after meeting all the requirements, the country will be left with one million tons of wheat for export, including the carryover stock from the last wheat season, as the buffer stock.
However, things on ground have not been as neat as this would suggest. In fact, inconsistency in wheat trading policy has been a regular feature of the country's agricultural management policy over the past several years, which has prevented market stabilisation. In addition to hoarding, speculative trading by mega market and non-market players has often generated artificial shortages. Such malpractices have been fairly common in the absence of a centralised regulatory authority, which has either generated a market glut or shortages.
It will be recalled that the government had allowed the private sector, in 2006, to import one million tons of wheat, without apparently taking into account the fact that the country had achieved wheat production of 21.612 million tons the previous year, which was a record yield.
There are two primary causes of the problem: one, lack of adequate storage space; and two, absence of a foolproof crop assessment mechanism. Our storage capacity stands at around 5.5 million tons in the public sector and 1.4 million tons in the private sector, which is clearly insufficient for meeting the needs of the entire agricultural sector. Why no serious attempt has been mounted, over the decades, to make the construction of adequate storage space an integral part of the agricultural policy remains a big question mark.
Storage capacity, in fact, ought to have been made an integral part of the food security programme, which was never done. The situation demands a two-pronged policy shift: first, the government should start putting greater emphasis on the export of the wheat, value-added, such as flour, semolina (suji), bread and an array of bakery items, which can fetch much higher foreign exchange.
(There is a huge market for Pakistan's wheat value-added in Bangladesh, Iran, Turkey and Afghanistan, which can be tapped to earn additional foreign exchange.) Secondly, and simultaneously, policy focus should be shifted to a fast-track construction of specialised storage space, which will yield rich, long-term dividends for the economy.
Another problem has been the use of an erratic and defective crop assessment methodology, despite the fact that Agricultural Research Council scientists have developed a model based on time-tested data of 28 years (1975-76 to 2002-03), collected from secondary sources. By using this model, policymakers can predict the exact yield of a particular crop or forecast area, which would be sown during the next crop season. This will help in taking correct and timely policy decisions.
There is a perception that wheat crop estimates are often manipulated to project a higher GDP growth rate. The fault lies with the data collection system that has been practiced over the years, which often does not conform to ground realities. The government should shift the policy focus on developing an infrastructure to tap the agriculture sector's huge value-added potential, which can be exported to earn foreign exchange, and less on commodity exports as an easy way to earn foreign exchange.