Wheat: woes of a bumper crop
Sunday, May 24, 2009
Editorial, Daily Times, Pakistan
Sunday, May 24, 2009
A TV discussion on Friday, featuring Punjab’s agriculture minister, centred on the bumper crop of wheat in the country and what the main producer, Punjab, was doing to reduce the economic damage that may come from over-production. The country normally needs 2.5 million tons to meet its national demand for wheat; it may have produced over 6 million tons this year, enough to feed three countries the size of Pakistan. The federal government says it is already paying a billion rupees a week to the private sector for storing the wheat it has bought off the farmers. Punjab, the main producer, is struggling with purchase.
The situation is so bafflingly unprecedented that it is unwise to level criticism. The area now called Pakistan had never produced more than 2.5 million tons of wheat. It has now three times that amount, a bonanza caused by a number of factors, the foremost among them being the price fixed by the government for the budget 2008-09. A high price of Rs 950 per 40 kg was fixed also to preclude a number of negative factors that had damaged the economy in 2007-08.
In the last days of the PMLQ government, absence of a protection price led to a steep fall in the market price of wheat, which had caused wheat and flour to be smuggled out of the country, till the entire region of Central Asia was eating our bread — while the PPP government had to face rioting citizens in its first year in power. Hoarders and smugglers prospered even as the county imported expensive wheat.
The PPP in its Budget 2008-09 was faced with a shrinking of the economy. Accepting up to 50 percent contraction in the industrial sector owing to global recession and lack of electricity at home, it decided to focus on agriculture with a quick recovery curve and benefiting 65 percent of the people of Pakistan living in the countryside. It took account of the high prices of agricultural inputs after a steady removal of farm subsidies and raised the protection price of wheat, meaning it was ready to buy it at that rate. It raised it above the going international price to prevent smuggling. It didn’t want to spend another $2.2 billion importing 4.3 million tons of expensive wheat while its own cheap wheat was being smuggled abroad. Then the weather lent a hand: during 2008, Punjab had its rare alternation of sun and rain suited to wheat crops.
When the giant crop was announced, Punjab took on the onus. Chief Minister Shehbaz Sharif announced he would buy every grain of wheat. However, he soon ran out of storage, ran out of capacity to handle the tractor trolleys in front of collection points, and, above all, ran out of money. Already under notice from the State Bank of Pakistan for a big overdraft, he went to the banks and borrowed Rs 150 billion to buy the mammoth crop as it rolled in.
Meanwhile, collection is marred by malpractices. Gunny sacks, or strangely named “bardana”, have disappeared and the middle man who has got his hands on them from the government stocks can pick up the crop at a premium and bring it to the collection spots, thus cutting the farmer out. The TV channels have shown the spectacle and brought the fiasco to the notice of the chief minister, who is ironically paying Rs 30 crore per month as subsidy for “cheap chapatti” in a province that has a wheat glut! And there is wheat famine in the battle zone in Swat!
The bumper crop cannot be sold abroad except after a huge subsidy to exporters. It cannot be stored because the country’s storage capacity is low. (It already has stock carry-over to get rid of from last year’s imported wheat!) Because the farmers were not paid for their sugarcane crop, this year we will be faced with a shortage and sugar will have to be imported. And yet the artificially huge acreage under wheat will have to be cut down to spare for other crops simply because we have enough wheat for two years even if we do nothing.
Punjab, the bread market, is in trouble because of too much bread. And Sindh is blocking movement of wheat into Sindh because it wants to sell its provincial stocks while the prices are still unaffected by the Punjab surplus. *
Source
Sunday, May 24, 2009
A TV discussion on Friday, featuring Punjab’s agriculture minister, centred on the bumper crop of wheat in the country and what the main producer, Punjab, was doing to reduce the economic damage that may come from over-production. The country normally needs 2.5 million tons to meet its national demand for wheat; it may have produced over 6 million tons this year, enough to feed three countries the size of Pakistan. The federal government says it is already paying a billion rupees a week to the private sector for storing the wheat it has bought off the farmers. Punjab, the main producer, is struggling with purchase.
The situation is so bafflingly unprecedented that it is unwise to level criticism. The area now called Pakistan had never produced more than 2.5 million tons of wheat. It has now three times that amount, a bonanza caused by a number of factors, the foremost among them being the price fixed by the government for the budget 2008-09. A high price of Rs 950 per 40 kg was fixed also to preclude a number of negative factors that had damaged the economy in 2007-08.
In the last days of the PMLQ government, absence of a protection price led to a steep fall in the market price of wheat, which had caused wheat and flour to be smuggled out of the country, till the entire region of Central Asia was eating our bread — while the PPP government had to face rioting citizens in its first year in power. Hoarders and smugglers prospered even as the county imported expensive wheat.
The PPP in its Budget 2008-09 was faced with a shrinking of the economy. Accepting up to 50 percent contraction in the industrial sector owing to global recession and lack of electricity at home, it decided to focus on agriculture with a quick recovery curve and benefiting 65 percent of the people of Pakistan living in the countryside. It took account of the high prices of agricultural inputs after a steady removal of farm subsidies and raised the protection price of wheat, meaning it was ready to buy it at that rate. It raised it above the going international price to prevent smuggling. It didn’t want to spend another $2.2 billion importing 4.3 million tons of expensive wheat while its own cheap wheat was being smuggled abroad. Then the weather lent a hand: during 2008, Punjab had its rare alternation of sun and rain suited to wheat crops.
When the giant crop was announced, Punjab took on the onus. Chief Minister Shehbaz Sharif announced he would buy every grain of wheat. However, he soon ran out of storage, ran out of capacity to handle the tractor trolleys in front of collection points, and, above all, ran out of money. Already under notice from the State Bank of Pakistan for a big overdraft, he went to the banks and borrowed Rs 150 billion to buy the mammoth crop as it rolled in.
Meanwhile, collection is marred by malpractices. Gunny sacks, or strangely named “bardana”, have disappeared and the middle man who has got his hands on them from the government stocks can pick up the crop at a premium and bring it to the collection spots, thus cutting the farmer out. The TV channels have shown the spectacle and brought the fiasco to the notice of the chief minister, who is ironically paying Rs 30 crore per month as subsidy for “cheap chapatti” in a province that has a wheat glut! And there is wheat famine in the battle zone in Swat!
The bumper crop cannot be sold abroad except after a huge subsidy to exporters. It cannot be stored because the country’s storage capacity is low. (It already has stock carry-over to get rid of from last year’s imported wheat!) Because the farmers were not paid for their sugarcane crop, this year we will be faced with a shortage and sugar will have to be imported. And yet the artificially huge acreage under wheat will have to be cut down to spare for other crops simply because we have enough wheat for two years even if we do nothing.
Punjab, the bread market, is in trouble because of too much bread. And Sindh is blocking movement of wheat into Sindh because it wants to sell its provincial stocks while the prices are still unaffected by the Punjab surplus. *
Source
Labels: Economy, Governance, Wheat Export
posted @ 10:20 AM,
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