The government is unlikely to revise wheat support price upward for 2009-10 despite Ministry of Food and Agriculture's (Minfa) own acknowledgement that input cost has increased by 15 percent, sources told Business Recorder. They said 'Guaranteed Minimum Price' (GMP) of wheat for 2009-10 would range from Rs 950 to Rs 960 per 40 kg, against last year's Rs 950 per 40 kg.
Public sector wheat procurement target for 2009-10 is expected to be fixed 6.5 to 7.5 million tons. The reason may be sustained government criticism by politicians from urban areas for enhancing wheat price, which ultimately resulted in reduction of sugarcane cultivation area and the consequent sugar crisis.
Pakistan harvested a record wheat production of 24.03 million tons from sown area of 9.05 million hectares (22.36 million acres) during 2008-09. The production level showed an increase of 14 percent over last year's (2007-08) achievement of 21 million tons and increase of 6 percent in the area sown under wheat.
This was made possible, to a great extent, by a very attractive wheat procurement price of Rs 950 per 40 kg, announced well before sowing of the crop in September 2008. The government policy paid off and the country was able to turn around the food security position in the country by surpassing the production level of 24 million tons.
Sources said that the government lent further support to the farming community in the shape of setting a higher wheat procurement target (6.5 million tons) for the public sector and allocating fertiliser subsidy to the tune of Rs 32 billion. Di-Ammonium Phosphate (DAP) fertiliser prices were capped at Rs 3050 per bag by providing subsidy of Rs 2200 per bag.
Additionally, federal and provincial governments launched 'grow more wheat campaigns' as a national movement and concerted efforts were made for dissemination of information on best agricultural practices for enhancing wheat productivity.
According to sources, an unprecedented commitment was demonstrated by the government to ensure wheat Guaranteed Minimum Price (GMP) of Rs 950 per 40 kg to the growers by procuring 9.231 million tons wheat through Pakistan Agricultural Services and Storage Corporation (Passco) and provincial Food Departments against previous year's procurement of 3.917 million tons. Public sector wheat stocks touched a record level of 10.06 million tons (including a carryforward of 0.828 million tons). Looking at the abundance of wheat stocks and with a view to encouraging value-addition in primary commodities, the government allowed export of wheat products including wheat flour to the tune of 200,000 tons of wheat and restrictions on wheat movement across provinces/districts have also been removed.
The Ministry of Food and Agriculture (Minfa) is of the view that policy interventions by the government led to a major turnaround in wheat production, freedom from wheat imports and achieving stability in food security. These trends need to be sustained in the years to come.
Sources said that future forecast of world wheat production, demand, and stocks depict a stable situation. The local market price of wheat is also expected to remain stable in view of comfortable domestic supply and demand situation. However, the need is to be cautious because in the backdrop of climate change the sustainability of food security has become a challenging task.
According to sources, it will be relevant to mention that in India rice, an equally important food security crop like wheat, badly suffered due to below normal monsoon rains (lowest in 25 years). In India, rice area was reduced by 20 percent compared to previous year and production is expected to slide by 15 percent, forcing the country to import rice instead of exporting the commodity. There is thus all the more reason to keep up the momentum of sustainable growth in wheat production for ensuring food security.
Apart from ensuring availability of inputs for wheat crop the government has decided to announce GMP for the next crop (2009-10) well in time. Accordingly, Agriculture Policy Institute (API), an attached department of Minfa, has carried out a detailed analysis and reached the conclusion that the GMP of wheat fixed last year at the rate of Rs 950 per 40 kg should be kept unchanged. The determination of GMP is based on the following criteria: (a) cost of production; (b) import parity price; (c) export parity price; and (d) domestic price.
API is of the view that cost of production analysis of wheat for the year 2009-10 estimates at Rs767 per 40 kg for the Punjab and Rs782 per 40 kg for Sindh at market level shows an increase of about 13-19 percent over last year due to hike in land rent, tillage charges, price of seed, daily wages and cost of harvesting/threshing etc.
Based on fob (free on board) Gulf price of US hard red winter wheat during August 2009, the import parity price calculates to Rs 1063 per 40 kg for Punjab and Rs 983 per 40 kg for Sindh. During 2008-09 the import parity price calculates to Rs 1187 per 40 kg for Punjab and Rs 1107 per 40 kg for Sindh.
Based on fob (free on board) Gulf price of US hard red winter wheat the export parity price calculates to Rs 684 per 40 kg during August 2009 and Rs 796 during 2008-09.
The domestic market prices averaged around Rs 917 per 40 kg in Punjab and Rs 961 in Sindh during last season. The existing average wheat price is Rs 1000 per 40 kg.
Sources said that GMP and procurement target has already been approved by the task force on agriculture in its meeting on September 10, 2009 at Islamabad. The Task Force comprises Minister for Minfa (Chairman), and Federal Ministers for Finance, Industries and Production, Foreign Affaires, Commerce, Privatisation, Railways, Information, Deputy Chairman Planning Commission, Minister of State for Finance and Economic Affairs and Secretary Finance as members.
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