LAHORE:
Print, online and social media are abuzz with the handling of surplus wheat in Punjab province.
The soil of Punjab produces about 75% of the total wheat production in the country. The government has fixed the support price at Rs 3,900 per 40 kg for this year. It has a designated company called Pakistan Agricultural Storage and Services Corporation (Passco), which buys wheat from farmers, stores it and releases the desired quantity as and when required by a deficit province.
In order to ensure food security, the government imports wheat and stores it as a safety stock. The purpose of buffer stock is to maintain prices.
Considering the available imported stock of wheat, the government has reduced the target quantity to be purchased by farmers.
The international wheat price is hovering around $6.1 per bushel. The price was $8 in July 2023 and touched a nadir of $5.3 in March 2024. The price has recovered in the last month.
It has been reported that the Pakistani government has imported wheat from September 2023 to March 2024. As a result, the government has excess stock at the moment and plans to buy a set amount of wheat from farmers.
Given the specified amount of wheat that Passco will purchase, there is a surplus of commodities in the domestic grain market. The price of wheat ranges between Rs 2,800 and Rs 3,400 per 40 kg, depending on the arrival of the staple in the market. If the arrival is accelerated, the market will face a lower wheat price.
Although some farmers deliberately delayed harvesting the crop to some extent, they could not get the desired price. Smallholder farmers cannot wait long since they have to realize the yield of their crop to start fresh cultivation. They do not have sufficient funds to adopt a wait-and-see strategy.
Reading The minister hints at an increase in the target for wheat supplies
On the other hand, large farmers have the financial strength, they can even store their produce and wait for prices to improve.
The government responded in various ways. First, he announced a certain amount of wheat to be purchased from farmers. Second, the provincial government suppressed the farmers’ protest. Third, he has formed a committee to investigate the matter and transferred two officials.
The question arises: has the situation improved for the farming community?
Media commentators, analysts and journalists are of the view that the government should have stopped buying wheat after December 2023 as there was a decent production forecast. He is of the view that government officials have given benefit to a vested interest group which has pocketed a huge amount from this wheat conundrum and this situation calls for investigation.
Considering all this, domestic finance capitalists rule the roost. They look for opportunities to make quick profits from them. They usually speculate in the real estate market, and the grain market is no exception.
Similarly, international finance capitalists are active in the international grain market when policy rates are low. Since policy rates are currently high, international commodity prices are falling.
In short, financial globalization provides opportunities for international and domestic financial capitalists to make quick profits. The government usually bows to the power of international funding.
However, a strong and stable political government can withstand this pressure and provide commodities to the people at stable prices. Let’s see how policymakers respond to these conundrums in the coming months.
The author is an independent economist who worked at SDSB, Lahore University of Management Sciences (LUMS)
Published in The Express Tribune, May 13u2024.
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