WASHINGTON, Oct 28: Expectations of a good crop across the globe and reports that Pakistan will curb wheat imports next year have caused the price of the grain to fall in the international market. “This is good news for people back home,” said Dr Salman Shah, the prime minister’s economic adviser, during a visit to Washington.
He said that domestic prices were half the international prices, so most growers in Pakistan were not bringing wheat into the market, thinking that they can sell it at a better price across the border.
“But if prices go down in the international markets, the growers will no more have the incentive to hold wheat,” Dr Shah said. “This will have a positive impact on the domestic market as well.”
Dr Shah said one way to encourage the growers to release wheat was to increase price. “But this would have hurt the ordinary people, so we ignored this option.”
Recently the price of a bag of 100kg of wheat rose by another Rs50 in Punjab. On Saturday, a 100-kg bag was sold at Rs1,550.
The latest rise in wheat price followed the provincial government’s decision to curtail the wheat quota for flour mills. In the international market, however, the price of wheat is falling steadily. In Chicago, wheat fell price the maximum amount permitted by the Chicago Board of Trade --- 30 cents per bushel --- on speculation Pakistan will curb imports after forecasting a record domestic crop for a second straight year.
Farmers in Pakistan, the world’s sixth-largest wheat consumer, will harvest 24 million tons of the grain in the marketing year that started on July 1, up 3 per cent from last year’s record of 23.3 million tons.
Wheat prices in international markets had surged to a record high last month as global demand outpaced supply, eroding inventories.
“Pakistanis were buyers this year, so the talk that they’ll be self-sufficient will take the edge off the bulls,” said Louise Gartner, owner of Spectrum Commodities in Beavercreek, Ohio.
Pakistan had earlier said it plans to import as much as 1 million tons of the grain this year to curb rising food costs caused by a shortage of wheat. Consumer prices rose 8.37 per cent last month, higher than the government’s annual average forecast of 6.5 per cent.
In the international market, wheat price has been rising since mid-summer when it became apparent that harvest results would be disappointing.
After a month-long run up, futures contract prices topped out at over $9.50 per bushel in late September. Producers around the Northern Hemisphere are responding by expanding the area planted to winter wheat, with generally favourable soil conditions, by an estimated 3 per cent.
Consequently, wheat price has fallen about $1.25 per bushel from the high and has firmly established a down trend. The July 08 futures contract price is about $1.50 lower than the December 07 contract indicating more price weakness ahead. Winter growing conditions, the health of the wheat crop when it comes out of dormancy next spring, and weather during the reproductive period may weigh heavily on price.
Normal weather conditions with expanded acreage will replenish global supplies, causing buyers to hold off purchasing, as they anticipate a lower price. This will temporarily reduce demand.
Sellers will try to lock in price by selling ahead, increasing supply. The result will be a much lower wheat price by harvest time in the United States.
