PUNJAB started its procurement drive on April 15 for buying 4m tonnes of wheat and has entered the market with a ready cash of Rs130bn, which should keep the commodity price stable in harvesting season.

To curb malpractices and ensure transparency, it has inducted the district administration. Assistant commissioners would look after each tehsil and the additional deputy commissioners (revenue) have been put in charge of all districts in the province.

Owing to an expected bumper crop, the basic question being asked is: will the target of 4m tonnes be big enough to stabilise the price and satisfy the farmers? The provincial government, despite declaring the target, is keeping its position open — ‘we can always increase the target if the price crashes’, is the official response to its critics.

Punjab hopes to achieve its target of 19.50m tonnes even with its rain-fed (barani) areas losing 25pc yield to drought condition during sowing time and in the first 70 days of its life cycle.

The Punjab Food Department is starting the next procurement with a carry-over of around 2.6m tonnes

Given this crop size — which could throw anything between 6.5-7m tonnes of tradable surplus in the market — the current target of 4m tonnes seems to be on the lower side.

The Pakistan Agriculture Storage and Services Corporation (Passco) would be buying another 900,000 tonnes, making the total official target of 4.9m tonnes.

It would still leave an estimated 1.6-2.1m tonnes in the market, which may destabilise prices. Even if the private sector that normally purchases, albeit on its own terms conditions, and measured crucially pace, around 800,000 tonnes of wheat, there would still be 0.8-1.3m tonnes stuck in the market.

This is the emerging scenario that worries the farmers right now. The private sector’s role is determined by a host of variables: expected cop size, final position of the official stocks, official release price and policy for the next season and, finally, when the price is at its lowest ebb. The crop size is big enough to allow the millers and traders to wait for the most opportune moment, or in other words, let the market fall before moving in.

The Punjab Food Department is starting the next procurement with a carry-over of around 2.6m tonnes. Another addition of even 4m tonnes, will take the total to 6.6m tonnes — the second biggest stock ever.

The first one of 6.7m tonnes at the turn of the decade and the second would be very close to its record stocks. And if the procurement target goes up by another 500,000 tonnes, as the officials hint, the department will literally be burdened with over 7m tonnes of stocks.

Punjab government made gunny bags free last year and also gave additional 1kg wheat with every 40Kg — bringing effectively the release price down to Rs1,272/40kg against declared release price of Rs1,300/40kg.

The election year’s compulsions would also come into play: to keep farmers in good humour. That is what the farmers are relying upon — once the price starts falling, the government, fearing a political backlash, would increase its procurement targets and help keep the market stable.

Published in Dawn, Economic & Business, April 17th, 2017