Persistent wheat crisis

The other day I was listening to the television news, surprisingly rather astonishingly, I heard that 'atta' in Karachi has not only been selling at Rs 19 per kg but it was not easily available: It further stated that a similar situation exists in other cities. Even in Islamabad and Rawalpindi the situation was no different.
If my memory is not be-failing me, the wheat crisis even existed, though on a small scale before the new wheat crop started coming into the market in April-May, 2007. The Government had earlier announced that the size of the new crop would be 23.5 (later revised to 23.3) million tons, a record crop never harvested in Pakistan. Because of this rather happy situation, the Government announced it would export about 1.5 million tons of wheat.
Past experience shows that the prices of wheat start falling with the arrival of the new harvest coming into the market. But unfortunately this did not happen this year despite the fact that the Government claimed, that the size of the new crop would be larger than in any of the previous years and that would be in addition to stock carried forward from the last year's stock. But a strange, rather rare, phenomenon took place this year as with the arrival of the fresh crop in the market, its prices tended to rise unabated instead of showing any sign of decline.
The Government had planned to procure about 5 million tons to meet the requirements of the armed forces, other provinces, Azad Kashmir and Northern Areas in addition to meeting the domestic demand during autumn and winter, till the fresh crop finds its place in the market in April-May. Despite all the efforts, the Government failed to reach the set target of procurement.
This unusual post-harvest situation made many experts, media and the others concerned to think that the crop size, as being claimed by the Minister for Food and Agriculture, was not correct, and that the estimates made were quite optimistic as the production was believed to be much less.
The Government tried to explain that this tragic situation had arisen because the private sector purchased much larger quantities than what they normally did to meet their requirements until September when the Government used to issue wheat quotas to the flour mills. They also claimed that smuggling had been going on, and that hoarding was taking place on a large scale.
However, the above reasoning don't hold good to analysis. Firstly, if the crop reaped was as large as claimed, the prices should have started coming down after the arrival of the new crop, as has been the practice in the past and not tended to increase. This phenomenon is experienced, not only in Pakistan, but I believe, in all other countries. Secondly, the Government did not succeed in procuring the targeted amount primarily due to non-availability of the produce in the market. The authorities seemed to have got worried and, therefore, they then decided not to export. As the prices still did not show any sign of decline, the Government then decided to import.
It seemed that the Government got rather confused and did not know what should exactly be done. This is evident from the fact that on one occasion, it decided to export, then it decided not to export, and then again, it decided to import. This exercise of 'hide and seek' continued for a number of months. The import of the crop and larger releases of stock to flourmills than the normal did not help in arresting the rising trend in prices.
The present situation is that the whole nation is facing shortage of atta, with rising price and its unavailability. Daily slogans are being chanted against the Government, which is adversely affecting the prestige of the Government, more so when the elections are fast approaching.
As mentioned above, one of the reasons given by the Government for the shortage of wheat in the market was that hoarding had taken place on a large scale. This reasoning cannot be maintained because the hoarders, big or small, should have sold and got rid of their stocks when the prices were prevailing at such an unthinkable level.
Keeping the stock over a long period of time, they have to bear additional cost of interest for every passing day on the loan they got from the banks; there was also the danger of the damage caused to the stock due to the infestation of stored pests like 'susri' ( to which wheat grains are highly susceptible) and their control. The other important reasoning given by the authorities was that smuggling has been going on, on an unprecedented large scale. It is rather unthinkable that the Government seemed to be failing in stopping or controlling it because if the Government could control the militants in FATA, Tribal areas, Swat and alike, how is it that the Government has not succeeded in showing its writ on this critical issue which is used daily as a food item.
Taking account of all the relevant factors reasoned above, one comes to the conclusion that the estimates of the crop issued by the Ministry of Food and Agriculture were over optimistic. Even today, the authorities seem shy to accept this truth. Some critics say that this figure of 25.3 million tons or so has to be maintained at all cost, because it is on this basis that the GDP growth of about 7 percent can be justified, as agriculture sector contributes about 22-22 percent to it.
It is high time that the authorities should start thinking, rather seriously, about the data being used by them, not only in the agriculture sector, but also in other sectors of the economy. Here the author would like to confine himself to the one relating to agriculture. The figure of 25.3 million tons of production this year, as well as those made in the previous years, are not only being questioned by some of the economists, intellectuals, and other writers within the country, but also by the international organisations like the World Bank, the Asian Development Bank and other institutions.
The Ministry of Food and Agriculture gets these estimates from the provinces through the Federal Bureau of Statistics who used to scrutinise this data in the past but has not been the case any more, it now acts only as a post-office. MINFAL also does not seem to be going into the analytical details, but they can do so if they so decide.
Presently the production, area and yield of important crops like wheat and rice are being gathered through the Crop Reporting System which is in vogue since early nineteen-fifties in the Punjab and Sindh where crop reporting organisations have overtime a weaken set up within the Agriculture Departments. In the former province, it is carried out rather on a systematic system whereas in the latter province it is not the case. The other two provinces obtain data through their extension staff, which is not considered satisfactory, at all. Therefore, the whole system needs to be reviewed and all provinces asked to follow it once it is finalised.
The Crop Reporting System started sometime in the early fifties by Dr Sukhatema, the Director General of Statistics, in the Government of India. The design and size of the sample and the method were originated and designed by him. One is doubtful if any substantive improvement therein has been made since then. The review of the system should be done on a priority basis by the Federal Bureau of Statistics in association with the provinces.
Any improvements suggested would go a long way in the gathering of statistics so important for our policy-making makers. It will also bring confidence in our performance, both nationally and internationally. If possible, mechanism of estimating production of other crops should also be worked out.
The wheat crop is harvested in March-April and it is not until May or June when final data about its size, etc become available, whatever the extent of its accuracy. In order to have a reasonable idea of the crop during its growing period, its flowering and ripening phases, till the ultimate results become available, a Committee (which can be given any name - Crop Assessment Committee, Crop Monitoring Committee, etc) be set up, headed by an independent Chairman, like the Chairman of Pakistan Agricultural Research Council, with members of all provinces and stakeholders which should meet at intervals or as frequently as the Committee may decide. It should provide informal views about the status and likely size of the crop to the Government. This would prevent making wild guesses about the crop.
This would also give time to the authorities to think a plan about their likely future actions, whether to export, import the crop or not. Nawab Yousaf Talpur, when Minister for Food and Agriculture, set up a Cotton Crop Assessment Committee which worked for five years with good success to achieve the objectives; the stakeholders were not to make their own assessment in order not to disrupt the market functioning. It served the purpose for which it was set up.
The Minister of Food and Agriculture who followed him became uneasy about this Committee and its Chairman and therefore named himself as the Chairman of the Committee. This resulted into its eventual death. The marketing of cotton now again functions in an erratic manner as it did in the past. This is evident from the experience of the last few years.
Price is determined by the supply and demand relationship, but here I have not touched the demand side. I intend to discuss this in one of my articles with a view to see if any improvement can be made therein.
In sum, one can say that the most important factor that has contributed to the present unfortunate situation of wheat crisis is the inaccurate estimates of wheat crop production, because the policies based on this could not stand the realities at the grassroots level. No doubt, other factors played their part also to the existing situation, but their contribution was not that significant.
The Government should seriously think about improving its data in the agriculture sector to bring in confidence not only amongst the domestic economists and writers, but also of all international agencies concerned like IBRD, Asian Development Bank and alike. It should set up an independent Committee to periodically assess the condition of the crop at various stages, from sowing, flowering, ripening and harvesting till the ultimate results become available. This would help the authorities to plan future programmes and policies of the crop.
(The writer is former advisor to the Chief Executive of Pakistan on Food & Agriculture; and Founder Chairman, Agriculture Prices Commission (APCom).