Punjab may soon start releasing wheat from its official stocks and the decision may come within a week or so. The early releases by Sindh and Punjab point to new realities for the season: either the crop size was not as good as being touted by the officials, or hoarding has taken better of it.

The two provinces are responding to rising wheat prices. In the last one week, almost Rs50 per maund have been added to the prevailing price in bigger cities.ri The Ramzan package, which kept the price almost Rs150 per 40kg bag below the market price, has just ended, correspondingly adding to the market price. The opposition parties (PTI and PAT) are up in arms, looking for issues.And Punjab is in the process of deciding to go for an early intervention to stabilise the price.

Of three projected release prices of Rs1,300, Rs1,330 and Rs1,350 per 40kg, it would probably go for the middle one. With 3.7m tonnes in its coffers, it would have to meet demand for the next eight months, which normally it does for six months, or little more than that. Its margin is thus squeezed by a month or more.

If the crop size was as big as the officials had estimated and the hoarders have done the trick, the chances of their further hoarding and keeping the pressure on the price cannot be ruled out. They know that the government has very limited capacity to maneuver. Thus, if they hoard even two to three weeks of releases, they would be in a position to create further pressure on the market.

Sindh dealt with the situation more wisely; it started early releases for the most sensitive part (Karachi) and also started receiving imports. Up till now, more than 650,000 tonnes of orders have been placed and rates quoted in the international market, at least for Karachi arrival, are much cheaper (around Rs1,050 per 40kg) than potential release prices in the rest of the country. These arrivals, due between September and November, should take some pressure off even Punjab, which otherwise has to cater to markets right up to Karachi and Kabul.

Punjab has marginally enough wheat to see it through the rest of the season, but it has huge dry pockets even within its own borders and its procurement exclude dry areas. Its district coordination officers (DCOs) — who were asked not to help the Food Department but themselves meet the procurement targets — have placed very strict roadblocks to check the movement of wheat.

The upper parts of the province, twin cities (Ralwalpindi and Islamabad) and the entire Pothohar (mainly rain-fed) regions, were left without stocks. Now the province would have to take this extra pressure, along with the demand of Khyber Pakhtoonkhawa and Afghanistan. This may worsen the situation. Exports to Afghanistan have touched a million tonne mark in the last few years. Relatively cheaper Kazak wheat this season might bring that figure down a bit. How much? No one knows for sure.

That is the situation in which Punjab and the federation would find themselves for the next eight months. The only margin of maneuvering they might have is additional import, even if they have to carry it to the next season. It is feared Pakistan Agriculture Services and Storage Corporation would not complete its procurement targets despite the so-called big crop.

Published in Dawn, Economic & Business, Aug 11th, 2014