Wheat output: overstated?

Six weeks ago, BR Research had argued that claims of highest ever wheat production would make it impossible to justify need for import later during the year. Two weeks later, the Finance division doubled down on output estimates earlier released by National Accounts Committee, confirming that the country had achieved 27.3 million tons of wheat production during FY21, an increase of 8.1 percent over the previous year; highest year-on-year growth over the last decade.

Less than a week later, on June 16, the ECC in its meeting approved MNFS&R’s summary for import of 3 million tons of wheat for FY22, ostensibly to build strategic reserves for the country. Note that before the latest harvest season began, public sector wheat stocks stood at 1.85 million tons, as PASSCO and provincial food departments insist that national procurement target of 6 million tons was met with relative ease, due to steep increase in minimum support price. Together with imports, that would take available public sector stocks during the year to 11 million tons, highest since FY17, when wheat prices in international market stood at $175 per ton, compared to $300 per ton today. Why is MNFS&R on a buying spree at a time when global commodity prices are on a bull run and the country has witnessed record output?

That Pakistan’s wheat output has rebounded in FY21 is not disputed. Open market buying of domestic wheat is taking place in the vicinity of Rs 1900 to Rs 2,100 per 40kg, close to weighted average official rate (Sindh fixed support price at Rs2,000 per 40kg, for rest of the country Rs 1,800). Farmers did not deem the government rate insufficient, and weren’t shy off selling to Food departments, unlike in previous years. If international wheat prices stay under $310-325 per ton, incentive for smuggling may also remain minimal due to low arbitrage.

Moreover, USDA in its June 2021 country report estimated opening stocks at 3.8 million tons (incl. of stocks held with private sector). Together with production of 27.3 million tons and imports of 3 million tons, national supply for FY22 would stand at 34 million tons. Even if exaggerated population estimate of 235 million is used as baseline, this means per capita availability would rise to 144kg, highest since the year 2000 and 16 percent higher than last 10-year average. At a time when rising food imports have frustrated this administration’s attempts to curtail widening trade deficit, is there any sense for government to enter the market as a strategic buyer?

Unless, by overstating the crop output, someone somewhere in the public sector apparatus has overplayed their hand. Recall that in late April 2021, the Federal Committee on Agriculture had released its provisional estimate of national wheat output, placing it at 26 million tons. That would have translated into 2.3 percent growth over previous year, limited but in line with independent estimates. Yet, the output was revised upwards by an additional 1.3 million tons overnight before the NAC meeting, which was not endorsed by MNFS&R until a week later. A month has passed since, but no official explanation has been forthcoming as to how acreage or yield made such an impressive rebound.

Except, exaggerations have a way of betraying themselves eventually. The release of provisional district wise estimates by Crop Reporting Services, Punjab gives a sneak peak into what may have taken place. Caution is warranted as what follows is a speculative attempt to make sense of available data, readers are free to reach completely different conclusions. But at least, an explanation must be demanded from officialdom over what has truly transpired.

Since at least 1972, all official documents by government of Pakistan and public sector bodies use a standardized conversion for weights and measurements. This standard conversion is usually a part of official statistical documents such as The Annual Economic Survey, Agricultural Statistics of Pakistan, Livestock Census, Annual Cotistics (Cotton), and others. As per Pakistan Annual Economic Survey of 2020-21 released last month, the standardized official definition of 1 maund = 37.324 kilogram. Now here is the kicker: the crop reporting services of Punjab, in its latest wheat output survey (available here), has changed the standardized definition, and revised definition of 1 maund to 40kg used only for the year FY21!

According to channel checks by BR Research, government estimate of crop output is based on surveys by provincial enumerators who conduct sample survey on tehsil, taluka, and district level. While the first two crop surveys take estimates of area cultivated in acres, the final survey takes a survey of yield – in maunds. These district level estimates, taken in acres (2.47 acre equal 1 hectare according to PES), and maund, are then converted to metric units in hectares and tons at provincial level.

Here is the second kicker. According to historic data still available on Punjab Crop Reporting Services website, wheat yield and output for the last 30 years has been calculated in maunds per acre where maund is held equal to 37.3242kg (available here). The more curious among readers feel free to dryrun historic conversions to test the following theory.

Because yield and acreage are input variables in crop surveys (and production the output variable), the change in conversion value can lead to an upward revision of output for Punjab by nearly 1.4 million tons. If this hypothesis is incorrect and Punjab’s wheat output for FY21 in maund has been converted at 37.3242kg, then it only raises further questions: how can a 3.5 percent increase in acreage lead to an 8 percent rise in provincial output, especially if yield declined to 31.3 per maund per acre from 32.3 maunds last year, according to CRS data?

Once again, it is emphasized that the hypothesis offered here is speculative in absence of more evidence. But unless government has better explanations to offer, the story of highest ever output also sounds equally unbelievable. Even if wheat output of 26 million tons (as earlier estimated by FCA) was achieved – instead of 27.3 million tons - kudos to both federal and provincial governments for managing to reverse the trajectory of Pakistan’s staple grain production. How tragic if the oversight or overzealousness of few has bungled up the requirement for import by overstating provincial output. Worse, if the same has also taken in other provinces.