Wheat can rescue Pakistan!

Russia is weaponizing wheat again. Back in March 2022, the world’s TV screens carried images of burning wheat fields, damaged farm machinery, and collapsed grain silos in Ukraine’s wheat belt to the east—right next to the main theater of the Russia-Ukraine war at the time.

In July 2022, after many Ukrainian farmers had braved Russian shelling to harvest their wheat, Russian missiles hit wheat silos carrying the harvest at Ukraine’s port of Odessa on the Black Sea.

This sent global wheat prices to historic highs—even higher than the dizzying peak right before the Global Financial Crisis in 2008.

The crisis subsided with the signing of the Black Sea Grain Initiative agreement brokered by Turkey and the United Nations. With Ukraine harvesting its next wheat crop in July 2023, Russia departed from this agreement and rattled global grain prices again.

The question for Pakistan is: how come a war between a has-been superpower and a middling middle-income country is sending wheat out of the reach of so many of the world’s poor? The reason is the enormous achievement of both warring countries in increasing their wheat output and exports.

Over the past two decades, while the global wheat trade has doubled, Russia and Ukraine have nearly tripled their wheat exports. Pakistan has a seemingly permanent balance of payments crisis. Pakistan can leave the ranks of the world’s wheat importers and enter the list of the world’s leading wheat exporters within this decade.

Let’s take Russia first. After a couple of decades of success as a grain exporter, the then Soviet Union gradually became a net importer of wheat. The weight of its state-controlled approach to the economy began to sink the ship.

By contrast, in Pakistan, the 1960s and 1970s were boom time for wheat. With the Green Revolution came the MexiPak seed variety guided by the globally celebrated Dr Norman Borlaug, modern fertilizers, tractors, large-scale water infrastructure, etc. Dr. Borlaug had direct access to then-President Field Marshall Ayub Khan. The wheat economy Pakistan developed at that time had government performing key roles from seed to final marketing of wheat.

As a result, Pakistan nearly tripled its wheat output between 1960 and 1980 reaching nearly early million tons. But then this breathtaking growth slowed down. The wheat output of 1980 only about doubled by the year 2000 to cross twenty-one million tons.

Since then, wheat has been stagnant in Pakistan with production rising only twenty percent between the year 2000 and 2020 when it rose above 25 million tons. In these two decades, the acreage under wheat rose by five percent and wheat yields increased by just fifteen percent.

After the collapse of the Soviet Union in 1991, the new Russian state (the Russian Federation) could not sustain the massive agricultural subsidies of the Soviet era. The discontinuation of these subsidies meant a reduction in land under wheat and also in wheat production. So, even as an exporter of fuel, Russia became a major importer of wheat and other grains in the 1990s. This is where Pakistan seems to be today.

The OECD-FAO grain projection for 2021-2031 shows Pakistan importing two million tons of wheat nearly every year even after accounting for the slow increase in domestic production. By the end of this decade, Pakistan’s domestic demand is projected at thirty-two million tons while domestic production is projected at thirty million tons.

At the beginning of the twentieth century, with all its failings, Russia responded to its wheat predicament. The future of Russia’s fuel exports seemed to be in danger with the rise in fuel prices at that time giving an impetus to renewable energy in Europe and the USA.

This development, compounded with Russia’s huge grain imports, is understood to have nudged Putin’s Russia towards a search for alternative sources of export revenue. Russia’s priority became an increase in domestic grain production first for grain import substitution and eventually for grain exports.

This time, Russia brought a market-oriented approach to agricultural development with private ownership of land for large-scale farming operations. The continuing high prices of commodities till 2008 brought in funds for investment in farm mechanization, agri research, private investment in port infrastructure, etc.

Russian wheat production rose from thirty million tons at the turn of the century to sixty million tons in 2010. Exports went from less than a million tons a year at the turn of the century to over twenty-one million tons worth over five billion dollars in 2011.

In 2012, Vladimir Putin announced a national target of doubling wheat exports by 2020. Russia exported more than forty-one million tons of wheat in 2017-18 sailing past the United States to become the world’s largest wheat exporter. In 2022-23, Russia’s wheat production reached ninety-one million tons with exports above forty-six million tons!

The country fighting Russia also has an illustrious record on wheat. Ukraine is home to some thirty percent of the world’s ‘black soil’—rich in nutrients and most suitable for agriculture. But the Soviet economic system that prevailed in Ukraine had not utilized the black soil’s full potential—nomotivation for farmers to improve their productivity.

In 2005, Ukraine joined the World Trade Organization and began linking its agriculture sector to global markets. With a private sector-led approach to agriculture, Ukraine invited domestic and international grain traders to invest in developing the infrastructure for trading and logistics including robust collateralization of grains for loans through a warehouse receipts regime. This gave farmers and farming enterprises the incentive to increase their wheat output.

In 2006, Ukraine’s wheat output of nearly fourteen million tons was much less than Pakistan’s output of over twenty-one million tons. By 2021, Ukraine was able to increase its wheat production by nearly two-and-a-half times to cross thirty-two million tons while Pakistan could only reach past twenty-seven million tons that year.

To achieve this, Ukraine’s acreage under wheat rose by thirty percent but its wheat output per acre jumped by an astounding eighty percent! All in just 15 years!

Pakistan imported two million tons worth a billion dollars in 2022-23. What does Pakistan need to do to wipe out the wheat imports of two million tons per year projected for this decade? Just increasing the national average yield of thirty maunds per acre by twenty percent to reach thirty-six maunds per acre can eliminate the billion-dollar annual import of wheat. This would take Pakistan’s annual wheat output to 32 million tons without even increasing the acreage under wheat.

But Pakistan’s progressive farmers regularly achieve forty-five maunds per acre, if not more. How? Progressive farmers primarily have access to better seed followed by access to funding for a stronger fertilizer mix, timely application of the best crop protection chemicals, farm machinery, etc.

An emergency effort to increase Pakistan’s national wheat yield by fifty percent within this decade to forty million tons can cut the country’s trade deficit by $3.5 billion per annum, estimated at last year’s prices. The scientific potential for Pakistan’s wheat is much higher so the exports can be a multiple of this level!

Agriculture cannot be approached as a real estate issue. Like Russia and Ukraine, Pakistan needs to dismantle its Soviet-style wheat economy to bolster its own food security and then start exporting its wheat surpluses. Unlike the 1960s, this time government needs to get out of the way.

And this time, growth of wheat will not require government money. Laws and regulations need to be changed to allow private seed companies to invest and flourish. Investment in grain storage and port infrastructure will also come from the private sector. Armed with the right inputs and infrastructure, Pakistan’s farmers can quickly assume their duty on the frontlines of our battle for economic survival.

Copyright Business Recorder, 2023