As Pakistan is about to harvest a bumper wheat crop, the farmers — producers of this record crop — are a fearful lot, scared of their production.

They know their momentous effort, aided by Mother Nature’s helpful weather, is coming on top of a generous import regime, which has already created a glut in the national market. Their produce would only make it more troublesome for them. They face a welter of conflicting situations on their produce’s production and marketing sides.

Look at the anatomy of their effort: they sowed wheat at 17.4 million acres this season against an official target of 16m acres — 1.4m acres more than the government had asked for. They also sowed 90 per cent of it within November — the most propitious time for maximum yield — using 60pc certified seeds and applying 52pc more of Di-Ammonia Phosphate (DAP) fertiliser this season compared to the last.

All these reasons make the Punjab planners and farmers believe they would be harvesting a record crop this April.

Imports of 2m tonnes of wheat on top of Punjab’s bumper harvest will create a surplus that may lead to a downhill tumble or full-blown crash

They were responding to provincial planning. The Punjab Government had set itself a mythical target of 25.6m tonnes at an average of 40 maunds per acre. It may not achieve this target, but it would certainly have a much larger crop because of the additional 1.4m acres. So far, it is looking at around 23m tonnes against last year’s 21m tonnes — an addition of 2m.

As far as the national picture is concerned, the country is hoping for 29.7m tonnes against a target of 32m tonnes, which would still be 1.7m tonnes more than last year’s 28m tonnes. This is a good effort by all means, both by farmers and planners.

However, there is a flip side. Fearing shortages last year, the government allowed generous imports of around 2m tonnes and staggered them up to March to maintain sustained supplies throughout the season. The country had imported 1m tonnes by the end of December and planned another 1m between January and March.

Reportedly, eight ships are docked at Karachi port as you read these lines, and more are on the way. The ships overlap harvesting time in Sindh and create a glut in the market. This scenario generates fear among farmers — imports add to the healthy production figures and create an excess in the market.

Because of these imports, Punjab is already carrying over 2.2m tonnes when harvesting is about to begin. This carryover means the entire Punjab Food Department’s indoor capacity is already eaten up, and it would store the next purchase under open skies, which is a much riskier option.

This situation is haunting those who produced a bumper crop but are now fearing the consequences

Punjab normally procures around 4m tonnes. With a carryover of 2.2m tonnes, it will need a maximum of 1.8m tonnes to meet its average purchase and see the next season through. However, the tradable surplus in the market would be much bigger — just less than 8m tonnes (30pc of its 23m plus tonnes).

As far as the national market is concerned, Pakistan Agriculture Storage and Services Corporation’s (Passco) hands are already full, and it may not be able to do much. The national tradable surplus would be just under 10m tonnes, which would be floating in the national market with millers and private parties as the only buyers.

With international prices in the Red Sea — where 90pc of Pakistani imports come from — already down to $200 per tonne (around Rs3,300 per maund against Rs4,000 in the country), Pakistan may not be able to export even to neighbouring Afghanistan.

This situation now haunts Pakistani farmers, who performed the feat of producing a bumper crop and are now readying to suffer the consequences.

Almost all wheat watchers in the market now fear a price slide in the country as the Punjab harvesting gains momentum and the market glut becomes unmanageable. They are, however, not sure how much it would slide: a downhill tumble or crash.

This is precisely why Punjab has been unable to formulate its wheat policy — setting mechanism and quantifying purchase for the season — let alone ready its field force, which it normally does by the end of March.

All those related to the wheat business (farmers, traders, millers and middlemen) suggest that the Punjab government should stay in the market, albeit slowing its purchase. “As long as it stays in the market, it would not crash. If the Punjab government rushes in and quickly completes its tiny target, a price crash is bound to follow quickly and ruin the market. It would be better advised to stagger purchase regardless of the size of it and keep playing its role,” says Majid Abdullah — a miller from Lahore.

The millers have experienced liberal releases (to every one according to their demand). This season will also go slow because of the initial glut in the market and the government meeting their demand later in the season. He predicts that the newly-inducted Punjab government will have to walk a tightrope this year.

Published in Dawn, The Business and Finance Weekly, March 25th, 2024