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Commodities up on local demand, smuggling

Updated December 02, 2013
- File Photo
- File Photo

Prices of wheat, pulses and beef went up in November on increased demand during the last three days leading to Ashura. Supplies also suffered due to truckers’ strike.

Sugar prices soared in November despite the fact that the country had enough stocks of the commodity and amid reports that the new crop was larger than expected. But an ease-off is expected this month when fresh cane crushing would pick up pace both in Sindh as well as in Punjab.

Commodity dealers say bulkier exports of 29,000 tonnes in October against only 8,200 tonnes in September and delay in cane crushing kept sugar supplies under pressure and pushed the prices up. Exports were in full steam till mid-November but shrank later on.

“We could have seen some ease off in prices by the end of November. But that didn’t happen because after firing their boilers, sugar millers in Sindh suspended production and controversy over support price and non-payment of overdues of cane growers also delayed cane crushing in Punjab,” says a Karachi’s Jodia Bazar-based commodity dealer.

Dealers say increased smuggling to Afghanistan via Waziristan was also responsible for high sugar prices in November. Most dealers, however, expect improvement in supplies this month. It’s a different issue though whether prices would also retreat amid costlier fuel and bank finances.

This year’s crop is expected to yield up to 70 million tonnes of sugarcane against the target of 65 million tonnes. Sugar production is being estimated at around 5.2-5.3 million tonnes. More than 400,000 tonnes of the sweetener is also in stocks. Some commodity traders say these factors can also start weighing on the pricing trend.

Prices of wheat flour further firmed up in November as wheat prices kept rising and the milling cost increased after upward revision of electricity prices. Higher landed cost of imported wheat and costlier transportation of the commodity also pushed up the prices. In October, Pakistan’s wheat imports rose to about 166,000 tonnes at an average landed cost of $3,590 per tonne, up from $3,530 per tonne in September when the country had imported 109,000 tonnes.

Total wheat output this year is being estimated around 25 million tonnes, slightly more than the country’s domestic demand. But commodity dealers say that importers lobby is busy speculating negatively about the next crop’s size, which also is responsible for wheat price hike. Wheat exports are no issue. Pakistan exported only 8,000 tonnes wheat in October and about 22,000 tonnes in four months of this fiscal year.

“Three things are generally being ignored,” a leading Karachi-based flour miller points out. First, smuggling of wheat and wheat flour to Afghanistan is increasing. Second, the food department is short-supplying subsidised wheat to the millers, forcing them to buy the commodity from the open market. And third, use of low-quality wheat, especially out of imported stocks of July and August, was very liberally used for feeding sacrificial animals this year.

“These factors are also keeping wheat supplies tight and prices up,” says the miller.

Prices of beef had slumped in October as households had stocked enough red meat of sacrificial animals after Eid-ul-Azha (which fell on October 17) but in November these prices returned to previous levels. Mutton prices remained almost unchanged.

Meat merchants fear that unabated smuggling of livestock to Iran and Afghanistan may push beef and mutton prices further up. One big reason for red meat price-hike during November was that the government had not banned meat exports during Eid-ul-Azha. The country exported about 3,900 tonnes of meat and meat products in October, data released by Pakistan Bureau of Statistics reveal.

Red meat’s demand also saw a big rise in November because it constitutes a basic ingredient of traditional Haleem that is cooked on large scale both at household level, as well by catering houses during Muharram.

Meanwhile, the arrival of winter has started affecting local supplies of some pulses that are grown in summer or autumn. Pulses became pricier in November also because of a two-week long strike of transporters who were demanding cut in the withholding tax rate. Muharram-led demand was also strong.

Earlier, prices of pulses had remained range-bound on adequate domestic supplies that had also reduced import volumes. In July-October this year total imports of pulses including that of Masoor and Mash stood around 145,000 tonnes, down 33 per cent from July-October last year.

Commodity dealers say that Mash pulse gained value in November because of higher import prices as a result of rupee depreciation and Moong gained due to dwindling stocks.

Pakistan produces Mash pulse equal to just one-third of its local needs and has to import the remaining two-third. Moong supplies became scant in winter as it is grown mostly in summer and autumn. After showing consistent gains from July to October, rice prices remained flat during November as output of non-Basmati varieties went up and in large parts of the country Basmati harvesting also commenced.

According to commodity dealers, prices could have even declined had there been no high export-led purchases and had the cost of transportation and storage not increased.

“Unlike in 2012, when Basmati prices around this time was rising rapidly due to supply constraints, this year’s prices are range-bound because of field reports of healthier harvest,” says a leading Karachi-based dealer.

He says that supply of Basmati rice from both Sindh and Punjab has picked up pace in the past few weeks, which is why prices are not shooting up, despite demand.