Pakistan’s wheat import tenders have been a regular occurrence for the last few years. After claiming to have harvested a record crop of 27.30 million tonnes last May, the government ordered the import of 3m tonnes — on the excuse of building of strategic stocks — in June. It came after imports of 3.6m tonnes the previous year.

Now, the fears are that the next season may not be any different, as most of the wheat watchers are worried about the crop for multiple reasons. Though it is too early to predict the crop size with a measure of certainty, they calculate the final figure at around 25m tonnes. Citing multiple problems that afflict the crop, they think that the crop is bound to suffer; how much only time will tell. The deficit would naturally be met through imports.

The persistent fertiliser crisis throughout the sowing, germination and development stage provides the context of their reasoning for the drop in yield. Phosphatic fertiliser (DAP), a most essential nutrient, saw its usage slide by a whopping 40 per cent (2.2m tonnes last season to 1.5m tonnes this season), as its price spiralled out of 90pc (small) farmers’ reach. It increased from Rs4,500 per bag to over Rs10,000 per bag within a matter of weeks. It doubled the requirement for credit for farmers, which was simply not available with the middlemen or formal sector. This drop is bound to impact the final tally.

The Indian side is experiencing almost identical problems and may go for imports while another problem is the brewing crisis between Russia and Ukraine — both potential suppliers of wheat — further complicating the situation

The next most important nutrient for vegetative growth is urea, which suffered an even bigger crisis. Its disputed supplies (production, demand and availability) caused an even bigger crop calamity. The industry claims to have produced 6.4m tonnes (half of which is required during the Rabi season) this year and says production and marketing failure during the peak period made its application uncertain.

The opening inventory this October was 116,000 tonnes against 473,000 tonnes last year as two plants went offline because of gas supply disruptions. This gap was further accentuated by the fact that around 250,000 tonnes of urea are always on wheels, reducing buffer stocks by the same margin and creating panic during crunch time. It started a price spiral, which went out of hand and led to massive domestic hoarding and smuggling — since the international price was over Rs10,000 per bag — to Afghanistan and Iran.

The National Fertiliser Development Center (NFDC) paints equally confusing facts when it says that a total of 3.35m tonnes urea would be available (116,000 tonnes opening balance, 3.11m tonnes local production and 100,000 tonnes import) during this Rabi season (Oct-April), but how much of it was actually available to farmers and applied to wheat, no one knows. Apart from the seasonal positive picture, the NFDC does concede a monthly deficit of 102,000 tonnes (November), 129,000 tonnes (December), 178,000 tonnes (January) and 168,000 tonnes during February.

Thirdly, a psychological shift among farmers added yet another layer to the urea problem. For farmers, who were unable to apply DAP, urea became fertiliser of the last resort; though this product substitution has no agronomical reasoning, that is how the urea issue worsened into a crisis when farmers went for panic purchases. If the media reports are to be believed, this process is still going on.

The feared drop becomes huge when measured against official targets of 28.90m tonnes for the season. This increase could only come either from expansion in the area or an increase in per acre yield (read better nutrients). With nutrients contribution or damages becoming a question mark, the acreage also does not leave room for any optimism either.

The country was able to increase acreage in 2020 (from 8.79m hectares in 2019 to 9.10m hectares) by jacking up support price by over 30 to 40pc; Punjab from Rs1,400 to Rs1,800 per 40kg and Sindh to Rs2,000. It added 2.4m tonnes to the national tally (from 24.90m tonnes to 27.30m tonnes) or 9.6pc. This year, the support price was increased by 8-10pc (Punjab to Rs1,950 and Sindh to Rs2,200 per 40kg) and wanted to increase production by 1.6 million tonnes.

Though Punjab has not officially announced its wheat acreage so far, farmers insist that it may not be even what the province (16.67m acres) had last year for two reasons. The cost is one and competing crops outperforming wheat commercially is the second. The farmers got only an 8pc increase in support price against provincial calculations of a 28pc increase in the cost of production. The fertiliser crisis, which might have increased this cost of production by another 20-25pc, started even before the sowing started and rigged the commercial viability of the wheat crop.

Privately, most of the officials do concede a drop in production as weather, which had created some optimism in early January, is turning inclement with continual wet spells that promise to continue even in February. Resultantly, they also admit the necessity of imports to meet the expected deficit and plan in time.

“The Indian side is also experiencing almost identical problems and may also go for imports,” warns Khalid Khokhar of Pakistan Kissan Ittehad. If Pakistan and India go to the world market together, international prices are bound to go up. Another problem is the brewing crisis between Russia and Ukraine — both potential suppliers of wheat — further complicating the process.

The ever increasing freight forwarding charges also require the government to plan ahead and efficiently. Wheat price in the domestic market is already climbing up and has touched Rs2,700 per 40kg against the official price of Rs1,950 per 40kg in Punjab. All these factors point in one direction: plan for imports at all stages (when, from where, which agency to import) and send clear signals to markets to keep them from overheating as has been the same for the last three years, Mr Khokhar suggests.

Published in Dawn, The Business and Finance Weekly, January 24th, 2022

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