Wheat crisis

Wheat crisis appears to be deepening in Pakistan. According to a Recorder Report, wheat hoarding by millers and meagre supply of the commodity have pushed up its price by Rs 3000 to the historic peak of Rs 21000 per ton. A bag of 100-kilograms priced earlier at Rs 1800 was available for Rs 2100 on 3rd January 2008.
As a result, the millers also raised the wheat flour price by Rs 2 per kilogram to a new peak of Rs 28 per kilogram. At some local outlets or roadside mills in Karachi, wheat flour was available at Rs 30 per kilogram and that too after a long wait in the queues.
In some interior parts of the country, the commodity was reported to be in short supply and stores had no choice but to turn away the ordinary people empty handed. Some of the market sources were blaming the millers for exploiting the situation to their advantage in Karachi.
It was alleged that the government had increased the quota of imported wheat at subsidised rates to the millers but they were still buying the commodity from the open market. In anticipation of further rise in prices, the millers were reported to be holding sizeable stocks of wheat and in certain cases selling their wheat quota to other millers.
To meet local demand, the government had decided to import some 1.5 million tons of wheat from Australia, USA, Canada, Ukraine and other countries. However, prices in the international market at present are almost at an all-time high and global stocks are at very low levels due to shortfall in output in major producing countries and increase in world demand.
The situation is not likely to improve in the near future. It is feared that Pakistan may miss the wheat production target of 24 million tons for 2007-08 if the Barani areas, which contribute nearly 20 percent to the total production, are not blessed with rains in the next week or so.
The sowing in these areas has already been delayed because of the absence of timely rains. There are reports of shortage of water even in areas irrigated by canals. All of this may force the authorities to import wheat in large quantities during 2007-08 and 2008-09.
The unfolding wheat problem could become scary in the coming months, if not handled with care and the urgency it requires to overcome the crisis. Wheat is the main staple diet of the country's population and largest grain crop of the country.
Acute shortage of wheat or increase in its price beyond the capacity of ordinary people could trigger panic and protests all over Pakistan which may bring industrial activity to a grinding halt and undermine economic prospects of the country besides affecting social harmony in the society.
It may be mentioned that the present crisis owes its origin partly to certain bungling in policies in 2007. To start with, a highly optimistic estimate was made of the 2006-07 wheat crop probably to show a better economic performance as wheat contributes as much as about 14.4 percent to the value added in agriculture and 3.0 percent to GDP.
The size of the wheat crop was provisionally estimated at 23.52 million tons - highest wheat production in the country's history, which was 10.5 percent higher than the 2005-06 crop and 4.5 percent higher than the target. Such an optimistic view of the crop led to the decision to export it, which later proved to be wrong and foolish.
By the time the government decided to import the commodity, the prices in the international market had risen sharply and speculation in the domestic market had become rife. Keeping the past experience in view, the authorities, this time, needed to act more wisely and in time.
First of all, a more accurate estimate should be made of the size of the 2007-08 crop and the domestic consumption requirements has to be assessed after keeping in view the possibility of some smuggling to the neighbouring countries.
The requirement for imports, if any, needs to be firmed up as soon as possible and conveyed to the TCP/private sector for early shipment. Of course, wheat imports would affect the external sector account and the desire of the government to keep domestic prices within the reach of the common man will have fiscal implications, but this cannot be avoided.
The humanitarian, social and political dimensions of the problem are too great and hazardous to be ignored. Realising the gravity of the situation, there is no other alternative but to analyse the situation urgently and comprehensively with a view to making appropriate decisions for averting the looming crisis.