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Pakistan is considering raising the price it pays farmers for wheat by at least 18 percent after failing to persuade to them to sell the grain for strategic stocks at current rates, a government official said on Thursday.
The government plans to build a 5-million-tonne strategic reserve from the 2007/08 crop, but farmers have complained the procurement price of 510 rupees ($8) per 40 kg is below domestic and international market levels.
"We have proposed to the government that it increases the support price to at least 600 rupees," said a senior official of the Food and Agriculture Ministry, requesting anonymity.
"Wheat has already started to arrive in the market in Sindh province but we have not been able to buy a single grain at the current price." Industry officials in Sindh said any hike in the wheat support price, as it is known, would push up flour prices by 40 percent in the domestic market.
The caretaker government, however, may leave the matter to the incoming coalition government, which is expected to be sworn in following an election of February 18, another government official said.
Pakistan saw a surge in wheat and flour prices in the domestic market after a shortage in September and had to import nearly 1.6 million tonnes for its stocks in spite of producing 23.3 million tonnes of wheat in 2006/07. Pakistan consumes about 22 million tonnes of wheat a year while nearly 1 million tonnes is sold to neighbouring Afghanistan and Iran, traders say.
For the financial year 2007/08, the government has fixed a wheat output target of 24 million tonnes. Farmers and food ministry officials say that target is impossible to achieve and estimate production at 21-22 million tonnes. Industry officials say lower-than-expected output may force the government to import between 1-2 million tonnes for stocks and domestic needs.

Copyright Reuters, 2008

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