During the last few months, Pakistan witnessed wheat and wheat flour crisis of the worst type in the recent years. The 2007 wheat crop was a bumper one - around 23 million tons and due to its limited storage capacity, the government decided to export 0.5-1 million tons of wheat.

The decision triggered an upsurge in prices of wheat/wheat flour. It was alleged that the exporters hoarded the wheat in large quantities and created an artificial shortage to push up the prices of these commodities. . The government had to put an immediate ban on the export of wheat.

While hoarding, profiteering and smuggling had no doubt been instrumental in the current wheat/wheat flour crisis, the role of the upsurge in global grain prices can also not be ignored in providing temptations to the local traders to smuggle their stocks across the borders in order to make a fast buck.

According to a recent report from the Food and Agriculture Organization of the United Nations, international wheat prices in January 2008 were higher by 83 per cent compared to the prices a year ago. Scarcity and considerably costlier grains - wheat, rice and corn, in particular - caused riots in poor nations such as Senegal and Mexico.

What had caused this upsurge in the international wheat prices? According to reports, key wheat-producing nations such as Australia and Ukraine had poor wheat crops last year. Global wheat stocks are at their lowest level in 30 years, while US wheat stocks at their lowest level in 60 years.

The rise in the global wheat prices is attributed to the growing demand for wheat from countries like China and India. Even Pakistan is importing more than one million tons of wheat from the world market to ensure availability of wheat flour to its people until the harvesting of the next crop in April/May.

The surge in the global wheat prices is reported to have resulted from growing demand from bio-fuel producers. Due to an unprecedented increase in the international oil prices and the threat to their oil security, the US and Europe are trying to turn corn into ethanol in a big way. This has obviously put tremendous pressure on the global grain prices.

Last but not the least, due to rise in living standards of the people in the developing world, the demand for meat has also gone up manifold. As a result, the use of wheat in poultry feed and cattle feed has increased considerably, in order to get more meat. This is, also, one of the factors pushing up wheat prices.

The rising trend in global food prices should not be taken as a purely temporary phenomenon. According to reports, Goldman Sachs is now focusing on agricultural prices rather than the international crude oil prices. The head of the commodities research at the US bank Jeff Currie has observed that the world could go into crisis mode in many commodities - agricultural commodities in particular - in the next 12--18 months. The World Food Program is reported to have observed that one- third of the world population is living in countries with food price controls or export ban.

What should be done to ensure that the country would not witness action replay of the wheat/wheat flour crisis following the harvesting of the 2008 wheat crop? In the first instance, the procurement/support price of wheat needs to be raised to an appropriate level. This will, help in persuading farmers to sell their wheat willingly at the procurement price and, second, higher price of wheat would discourage smuggling of wheat across the borders. Besides, the higher procurement price will encourage the farmers to grow more wheat next year and will enable them to buy pesticides and fertilisers etc. in the required quantities. .

It also needs to be ensured that the procurement target raised to seven million tons is fully achieved. To enable the government to do it, the private sector may be allowed to purchase wheat from the farmers only after government's procurement target has been achieved.

The utility stores may continue to sell wheat flour to the poorest of the poor at subsidised rates. To make their task easier, the number of the utility stores should be raised to at least 6,000 - one store in every union council, in the quickest possible time.