BARRING a recent hailstorm that must have caused limited damage, Punjab looks set to harvest a substantial, even bumper wheat crop this season.

To begin with, unlike the previous years’ trend, the crop gained the area under its cultivation. Against 16.50m acres target, the actual sowing was reported on 17m acres. However, the most crucial factor has been weather conditions. To begin with, December and January remained frost-free and helped better germination and tillering. For next six weeks, intermittent rains provided water to crop at the most crucial stage, compensating for the urea deficit during December.

The usage of Di-Ammonia Phosphate (DAP) increased by almost 8pc to further help improve the yield. Currently,with harvesting to start from this weak , the crop looks substantially healthy.

Though the officials of the Punjab agricultural bureaucracy are still reluctant to commit or comment on possibility of a bumper crop, they are hopeful about achieving their stipulated target of 19.50m tonnes; the margin of beating the target is still a matter of debate because of late hailstorm which has hit the crop in some part of the province.

Some farmers from six districts, where the hailstorm wreaked varying degrees of damage, say that they lost almost 50pc of the crop to bad weather. How much dent these individual losses could make to final tally is still being assessed. But the storm was limited, both in geography and severity. Thus, it might not impact the overall prospect of the crop in the province.

A better crop, huge carry-over, financial squeeze, international dip in prices, almost impossible exports and absence of investors in the market would all jointly become a significant problem for Punjab this harvesting season, which is now only weeks away

However, the better crop prospects also strike fear among the farmers. They see a distinct possibility of price crash, unless the provincial government intervenes effectively. The province would start fresh procurement drive with huge carry-over — somewhere between 1.7 to 1.8m tonnes, even if wheat harvesting is delayed by 2-3 weeks like last three years. This massive carry-over also means occupancy of over 80pc of its indoor stocking capacity and around Rs50bn of running finance. Both these factors would severely limit its capacity to stabilise the market on higher side and save farmers.

Better crop also generates its own business dynamics, both for millers and investors. With official stocks overflowing, the millers keep minimum stocks to save on inventory costs and to buy at the cheapest available rates. With the last season going exceptionally slow in wheat market and international prices dropping substantially, the investors have little incentive to take interest in the crop.

The last year’s official policies, both on wheat releases and pricing, kept the market unstable. This would only add to the burden of the provincial government.

The investors are already going slow on other crops. The huge drop in price of recently harvested mustard crop is an example; it is being traded at 60pc of last year’s price despite normally being in high demand at this time of the year.

The farmers blame cartelisation of buyers and their collective decision to purchase slowly, and let the price slide.

The Punjab government needs plan in advance because most of market factors, apart from a big crop, which may also turn negative if price slide, are negative.

As expected, if Punjab gets closer to 20m tonnes, it would throw a massive tradable surplus of over 7m tonnes. The Pakistan Agriculture Services and Storage Corporation (Passco) is also carrying over heavy stocks and is under no compulsion to procure

But the Punjab government might not be able to escape the responsibility, without a huge political and social cost. A better crop, huge carry-over, financial squeeze, international dip in prices, almost impossible exports and absence of investors in the market would all jointly become a significant problem for Punjab this harvesting season, which is now only weeks away.

Published in Dawn, Economic & Business, March 23rd , 2015

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