LAHORE: As the Punjab prepares for one of its toughest wheat procurement campaigns in two weeks’ time, it has all the arrangements in place: finances, gunny bags and, as expressed by the chief minister the other day, ‘political will’, to meet the target. Market realities, however, threaten to scuttle it.

The Punjab, as stated by Chief Minister Shahbaz Sharif, would purchase 3.5 million ton wheat this year, spending around Rs120 billion. At one point during the meeting held to finally thrash out the procurement target, the CM reportedly hinted at pushing the target up to 4.5 million ton.

He was later convinced to scale it back to 3.5 million ton as recommended by the provincial food department. The department was still told to be prepared for four million tons, if the need be.

But, if the wheat watchers are to be believed, market sentiment may not allow the food department to hit even 3.5 million ton target, leave alone going beyond it.

Both market analysts and officials agree that the biggest question dogging this procurement drive would be whether the farmers take their crop to the official procurement centers or to open market where they would be making over Rs200 more per each 40kg.

The official procurement price is Rs1,200 per 40kg whereas current open market rate is Rs1,400, even for the wheat with high moisture content of above 16pc. There is a possibility that once the crop starts drying up and moisture content goes down (a milling preference) the rate would climb up further and away from the official reach.

Food department officials hope that once harvesting gathers some momentum and creates market glut, the rates will drop for two reasons. First, the private sector would procure slowly, hoping for and leading to a price crash.

Secondly, the farmers, with no holding capacity, would throw the commodity in the market, leading to price reduction, if not a crash. Whether the rate drops below the official procurement line of Rs1,200 per 40kg or not would determine the fate of the official procurement target.

Even more crucial is the fact that if the rate drops below the official line, for how long it stays there? The officials are pinning hopes on the fact that continued rains, with two spells still to come, will delay the crop by one to two weeks in different parts of the province, leading to sudden and massive arrival of crop in relatively short span of time, making price reduction a distinct probability.

That duration, however short, will provide the food department a chance to go for maximum procurement during the period.

The officials also hope that they are entering the market with over Rs120 billion ready cash. The private sector will not be able to match that kind of financial clout and would only be waiting for the price crash before jumping in the market.

All that official optimism depends on two basic factors: lack of farmers’ holding capacity forcing them to throw the commodity in the market and the price going down. While accepting the validity of both these factors and crucial role they can play, the private sector thinks that the officials are overstating the importance of these drivers of the market.

The farmers might not have the capacity to hold the crop for months, but they still could, ably aided by the middle man, hold it for two to three weeks.

Delayed by weather conditions by two weeks and farmers holding it for another fortnight or a month could quickly change market sentiment and create a panic situation for the officialdom because the food security for next year would entirely depend on 3.5m tons of official purchase.

On the other hand, would the government, led by politically over-sensitive Shahbaz Sharif, be able to take the flak for price crash? Once price starts crashing, the CM may take some panic measures to save rural constituency and spoil departmental plan. All these factors, coupled with crop size, would determine the fate of the drive, they think.

Meanwhile, the department is busy preparing for a farmer-friendly, and if the need be, an open (from all, including middlemen) procurement policy to meet the target, which is crucial to see a relatively securer next year.