KARACHI, Nov 20: The government’s decision to remove 25 per cent duty on wheat import coupled with an earlier decision to increase wheat support price to Rs350 for 40 kg from Rs300 should prove to be a double-edged sword for the speculators and hoarders in wheat trade.

Market watchers are confident that these decisions would encourage the farmers to go quickly and in a big way for wheat sowing on more than eight million hectares in all the four provinces. A promise of Rs350 for a maund should give a yield of more than 20 million tons harvest next spring. A duty-free import of wheat should bring into action many traders to explore wheat supply sources.

“Retail price of wheat should come down to settle at Rs9 a kg in next four weeks,” a Jodia Bazaar trader said confidently.

The Economic Coordination Committee on Thursday decided to bring rate of duty to zero from 25 per cent on wheat import. A day earlier on Wednesday, the federal cabinet decided to increase wheat support price. There are indications that government may bring down fertilizer prices in near future to help farmers in cutting down their production cost.

Market reports suggest that private traders and millers have stocked ample quantity of wheat in mills and ginneries. Falling bank rates helped these speculators to borrow at cheap rates from banks and purchase wheat from the farmers directly at Rs220 to Rs260 for 40 kg during March-May.

A simple arithmetic convinced them of windfall gains. A six months bank loan on four to 4.5 per cent rate plus storage cost for six months is all the reason to push up wheat price in the open market to Rs10 and Rs10.50 a kg.

“Even a rupee gain on a kg of wheat will bring anywhere up to Rs500 million to Rs700 million for about three dozen known brokers, traders and millers in wheat trade in Sindh,” a trader in Jodia Bazaar told Dawn. And mind it all this profit comes to these speculators and hoarders within six to eight months on small investment. “Connections matter and not the money,” he explained, adding that brokers maintain good relationship with the bank managers and district establishment.

But with the announcement of duty-free wheat import, the speculators and hoarders have no option but to bring their wheat stock in the market.

Wheat prices are reported to be high in the world market. Sindh government officials quote $180 a ton. Traders say wheat prices are close to $200 a ton. But a member of the Indian delegation during his visit to Pakistan in August offered wheat sale to Pakistan at less than Rs6 a kg.

Traders in Jodia Bazaar say that supply of Indian wheat from West Indian port of Kandala should not be more than Rs7 at landing cost at the Port Qasim. Traders have started exploring wheat prices in East Punjab from where overland transportation could be even more cheaper.

These being the prospects for wheat supply, market watchers are confident that wheat prices in Karachi market should stabilize somewhere at Rs9 to Rs9.50 a kg in next one month.

Country harvested more than 19 million tons of wheat in the last season. The target was 19.75 million tons, but government has been giving figures of 19.25 million tons. Of this total harvest the government could procure hardly four million tons. A farmer normally retains one-third of produce, which means that about six million tons wheat is with the farmers. It means that traders and millers purchased seven to eight million tons of wheat.

By the middle of November, the government had a little more than three million tons of wheat. There are reasons to believe that at least four million tons of wheat is with the traders and millers and another million ton in the rural areas.

Now that there are prospects of duty-free import of wheat and that too from neighbouring India at a faster pace and less cost, the speculators have little choice than to bring out their hidden wheat from stocks in the open market in next few weeks.