Wheat, flour prices rise by up to 10-20%

Despite no imminent shortage, item goes dearer in a matter of few days

KARACHI:

 

Despite no imminent shortage of wheat and wheat flour, their prices have skyrocketed by up to 10-20% on the outlook for a possible delay in the sowing of the staple crop in October and doubling of the grain support price to Rs4,000 per 40/kg by the Sindh government for the next cultivation season.

The wheat flour price has increased by Rs20-25 per kilogram in a matter of a few days to Rs120-125/kg in Karachi, according to people and grocery sellers.

Pakistan Bureau of Statistics (PBS) reported on Friday the wheat flour price increased on an average by 7.51% nationwide to Rs106.38/kg in the week that ended on September 15 compared to Rs98.95 in the prior week which ended on September 8.

Similarly, the wheat (grain) price surged 14% in a week to Rs88/kg compared to Rs77.42/kg in the prior week.

"Wheat has jumped 30% in three months (as per PBS)," Ismail Iqbal Security Head of Research Fahad Rauf said on his Twitter handle.

According to the bureau, Hyderabad and Karachi are the top two expensive markets for grain and its flour.

Interestingly, Karachi remains an expensive market for the main food item despite the fact it is the city of ports that facilitates import of the grain throughout the country.

"Sindh has fixed wheat support price (minimum purchasing price) at Rs4,000/maund (40 kg) versus Rs2,200 last year. Punjab and K-P want it at 3,000,"  Rauf said.

The support price announced for the cultivation season should begin in late December in Sindh and not for the grain on sale in the market at present.

Wholesalers, however, have started increasing the grain and its flour prices on speculation that farmers would miss growing targets due to inundated water in the fields and the country would produce the grain much lesser than its requirement estimated at 28-30 million tons for the next year.

The country produced around 26 million tons last year against estimated demand for about 27-28 million tons. The grain is available on sale in the markets at present.

Meanwhile, the analyst said that the Sindh government has almost doubled the grain support price for the next season to encourage farmers to sow the crop in as many larger areas as they can so that it would be a bumper crop against the fear of a possible shortfall.

Secondly, the high price would help the government stop its transportation to other provinces and its smuggling to neighbouring countries including Afghanistan.

Punjab and K-P, however, think the wheat support price should be set at around Rs3,000/40kg for the next season as 4,000 is too high.

He said Punjab and KPK's demands stand justified as provincial governments may not revise the support price for the seasons to come after the next one when the situation would be favourable.

He suggested the provincial government should provide subsidised seeds and fertilisers to farmers to support them in these testing times to help them instead of increasing wheat support prices.

The results of the increase in wheat and wheat flour price would be horrible as it will not only make the inflation whizz past a record of decades but would also raise the question of food security at household levels. People’s income has remained low compared to the 47-year high inflation reading of 27.3% recorded in August 2022.

Rauf further said the government was meeting the small shortfall of the grain through imports these days.

"Wheat prices are downward sticky so the decision should take into account future expectations of crop production and international price," he said.

The import of wheat has spiked 11-time to 622,515 metric tons in the first two-month (Jul-Aug) of the current fiscal year 2023 compared to 57,000 metric tons in the same two months of the last year, according to the Pakistan Bureau of Statistics (PBS).

The wheat import bill rose 19-time to $310.76 million in the two months under review compared to $16.46 million in the same two months of the last year.