Wheat prices have come down in the wholesale market on arrival of new crop in parts of Punjab and petering out smuggling to neighbouring Afghanistan, but rates of wheat flour stay stubbornly high.

Wholesalers in Jodia Bazar of Karachi say 100kg wheat is now available for Rs3500, down from Rs3700 in February as supply of wheat from Potohar region of Punjab has begun and as wheat hoarders in Sindh have started offloading their stocks in a big way. “The reason why wheat flour prices remain intact is that flour millers are still using costly wheat purchased earlier and most of them haven’t got full quota of officially-subsidized wheat from Sindh food department,” says a Karachi-based flour miller.

“Whereas in Punjab actual supply of new wheat grains have begun, in Sindh what we are getting right now is old wheat of low quality that hoarders are now offloading in the market. The milling ratio or the percentage of flour obtained out of this cheaper wheat, because of high moisture content, is so low that our cost of production is still the same,” explained an office bearer of the Sindh chapter of All Pakistan Flour Mills Association.

Latest estimates by SUPARCO, based on satellite imaging of wheat fields put this year’s output at 24.21 million tonnes up from initial earlier estimates of 23.84 million tonnes.

This upward revision in estimated supply has also caused a decline in wholesale wheat prices, dealers say.

“Besides, wheat smuggling to Afghanistan has declined both because Kazakhstan has flooded Afghan markets with its surplus wheat and also because our authorities have curbed illegal cross-border trade,” according to a Peshawar-based flour miller. Smuggling of wheat was earlier going on, despite shortage at home. Pakistan had imported 377,000 tonnes of wheat in seven months to January but in February, imports fell to a negligible 210 tonnes ahead of the new crop.

Prices of both Basmati and non-Basmati rice varieties increased during March. Rice dealers say whereas demand for Basmati was up on higher domestic use, coarse rice consumption was growing both in local and foreign markets.

“In fact, Basmati exports have declined by nine per cent (to 366,000 tonnes) between July and February FY14, but prices continue to firm up as food companies producing packaged rice brands have been making large purchases,” says a local dealer. Coarse rice exports, on the other hand, increased 4.6 per cent to around 1.82 million tonnes in July-February 2013-14.

Traders say, however, that unlike last year rice stocks are now quite large and prices shouldn’t normally rise despite some growth in exports. According to initial estimates, rice output this year has reached close to seven million tonnes, up from around six million tonnes last year.

As expected, sugar prices fell in March as supplies from mills increased and there was no immediate word on how soon the government would allow additional exports.

Wholesalers said sugar prices were hovering around Rs4600-4700 per 100kg, down from Rs4700-Rs4800 per 100kg a month earlier when millers were expecting rise of export quotas. In retail market, the price of the sweetener declined by one rupee per kg. This year, Pakistan’s sugar production has risen past five million tonnes, up from 4.8 million tonnes last year.

Prices of pulses showed a rising trend during March on scant supplies from fields. Wholesalers said prices were up due mainly to retail market dynamics adding that in wholesale markets, there was no big change compared to February. But retailers say wholesale prices are, in fact, rising as fresh supplies of pulses from Punjab have declined. Overall production of pulses this year is reportedly lower than in the last year for various reasons, including growers’ shifting priority to oilseed crop which is far more profit-yielding.

Poultry prices also went up in March. Poultry farmers link the price hike to increase in cost of production due to power breakdowns that are becoming more frequent after winter. They say that keeping controlled environment sheds’ temperature at a certain level in the absence of regular power supply requires big expenses on huge electricity generators. They insist that increase of poultry feed prices in the past has also started to push up their cost of production.

Prices of tea showed a declining trend towards the end of March, mainly reflecting the impact of six per cent gain in rupee value against the dollar which lowered import prices. Tea importers say further decline in prices would be seen in April, as imports booked in later part of March start arriving. Prices of loose cooking oil remained stable but one-kg plastic pouch became a bit cheaper, driven by about five per cent increase in local production, as reported by Pakistan Bureau of Statistics, and a stronger rupee.