Confusion prevails about crop prices

Farmers urge govt to discuss plans for charting viable course of action

KARACHI:

Pakistan has agreed with the International Monetary Fund (IMF) to stop fixing the minimum purchase price of agricultural products including the staple crop of wheat and discontinue the decades-old practice of procuring essential commodities as buffer stocks, putting food security of a nation of over 240 million people at risk.

Other essential commodities for which the pricing mechanism and procurement drive will be abandoned in a phased manner over a period of three years are sugarcane, cotton and fertilisers.

The government has caved in to pressure from the IMF despite knowing that a large number of countries including the United States and India have followed such practices in some form to keep prices of commodities stable and build stocks to ensure their availability at affordable prices throughout the year.

The worst part is that Pakistan's government has agreed to do away with support prices and commodity procurement without taking farmers on board. It is switching over to the so-called free market mechanism in a unilateral action, leaving a huge community of growers high and dry.

Very little information has been formally disseminated about the reforms the government is undertaking, resulting in peasants and middlemen, who facilitate the transportation of crops from fields to markets, managing the agriculture sector on mere speculation and rumours.

This situation is feared to badly impact the planning for crop cultivation, leading to a decrease in sowing and harvest. The less-than-required production will force the government to import commodities to overcome the shortfall by spending millions or even billions of dollars.

This is contrary to efforts of Pakistan's government as well as the IMF to conserve precious dollars and cease the provision of excessive subsidies to improve the nation's financial health.

It is pertinent to mention that the Punjab government did not procure any wheat in the harvesting season of 2024. This provincial government move helped it to significantly bring down wheat and wheat flour prices and push down headline inflation to a single digit.

However, the absence of procurement and unattractive prices prompted many wheat growers to switch over to other cash crops like sunflower in a bid to stave off losses in the current sowing season – from October 2024 to March 2025. To meet consumer demand for the staple, the government will eventually have to import more wheat.

Earlier, India attempted to deregulate agricultural markets in isolation, without consultation with farmers in the late 2020s, by adopting structural reforms like discontinuing procurements and support prices, but it was forced to shelve the plan after growers came out on streets to stage protests and sit-ins, which lasted many months.

Talking to The Express Tribune, Sindh Abadgar Board President Syed Mahmood Nawaz Shah complained that there was a total blackout of formal information, like what was happening behind the scenes, and urged the government to disclose and discuss its plans with farmers for charting a viable course of action.

If the government has made up its mind, it should also completely abandon control over the import and export of commodities to enable farmers to fetch better prices for their produce and bridge the shortfall, if any, in local grain markets, he said and cautioned that "the end of the support price mechanism along with control over grain import and export will not work at all".

Shah was of the view that half information would create confusion and disrupt agricultural practices, which would be a bad omen for the economy. The agriculture sector, termed the backbone of national economy, contributes over 20% to the country's economic growth and has played a major role in turning around the gross domestic product (GDP) from contraction in FY23 to expansion in FY24.

The growing insecurity among farmers will force them to slash wheat plantations, though the country has a huge consumption of around 30 million tons per year. A decrease of one million tons will cost the government $1-1.5 billion to fill the gap via imports.

"We are trying to extract complete information directly from the government for developing our future strategy," the Sindh Abadgar Board president said.

Sindh Chamber of Agriculture General Secretary Zahid Hussain Bhurgari lamented that growers were completely unaware of the government's plans to end the fixing of support prices for essential crops.

"It is the time when farmers should start planting wheat in Sindh. However, no one has begun cultivation in anticipation of the announcement of support price by provincial governments for the new season," he said. "We are not going to sow seeds until we are assured of support price and procurement."

In the market, wheat price has gone down to Rs2,600-2,700 per 40 kg compared to the support price of Rs4,000 last year. The drop came after the Punjab government, which produces almost 70% of the grain and used to make heavy procurement in the past, adopted the policy of zero purchases last year, Bhurgari pointed out.

Under the growing dark clouds over the agriculture sector, Securities and Exchange Commission of Pakistan (SECP) Chairman Akif Saeed came up with some soothing words.

He said when the government had decided to discontinue support prices, farmers should be made aware and trained in finding fair prices for commodities at the futures market, called the Pakistan Mercantile Exchange (PMEX).

"With the halt to support prices, the market mechanism should be made robust to ensure better prices for growers. Otherwise, somebody will take benefit of the vulnerable situation of farmers."

He revealed that the SECP was working with federal and provincial governments as well as the Asian Development Bank (ADB) to evolve a better market mechanism, construct warehouses, establish a food grading and pricing mechanism to help farmers sell commodities at PMEX.

The writer is a staff correspondent