Wheat price crisis

A farmers’ crisis is looking ever more likely as decisions taken by the caretakers and the incumbent governments — especially in Lahore and Islamabad — will cause the price of wheat to implode, due to a massive supply surplus. Low international prices mean that the exports would effectively be at a loss, leaving farmers and the government to absorb the margin. Farmers need prices to be well in excess of Rs3,900 per 40kg bag to make a reasonable profit, but international prices in recent months have been as low as Rs2,500 per bag.

The roots of the crisis go back to the Russian invasion of Ukraine. Russia’s blockade of Ukrainian ports led to a global food panic as Ukraine supplied about 10% of the world’s grain supply at the time, and Pakistan was arguably the country most reliant on Ukrainian wheat, as it represented 59% of our grain imports. The war caused wheat prices to rise in Pakistan. Some of the increase was offset by a grain export deal between Russia and Ukraine, but when this deal was on the verge of expiring in 2023, Pakistan and other importers began building up stocks in advance. Last year also saw a record amount of land in Pakistan dedicated to growing wheat. However, international prices were not affected as Ukraine had developed new export routes, and the other countries also had bumper crops. This made the caretaker government’s decision to import wheat look like a disaster, while the current government’s inability to set and finance a fair control price will destroy many small farmers.

The situation is so bleak that PTI and PML-N members of the Punjab Assembly actually found common ground, bashing the provincial agriculture minister over the government’s decision to not buy any wheat due to the existing surplus. Unfortunately, other provinces have also seen good crops, and storage capacity is limited, meaning that crops could go bad in the field. Only lately, the PM has directed Pasco to start lifting wheat stocks, raising the procurement limit to 1.8 million metric tones from 1.4. How far it will serve to avert the crisis remains to be seen given that the stocks held with the farmers total 4 million metric tons.

Published in The Express Tribune, April 28^th, 2024.

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