AS the wheat procurement season draws to a close, the Punjab food department is trying to get its act together. It has announced a target of 4m tonnes and arranged around Rs130bn for purchasing wheat, while gunny bags are arriving at the centres.

Officially, the bag distribution would start from tomorrow, but the department thinks that since the crop is a bit late, the actual distribution might begin by April 25 and wheat procurement by May 1.

The department is especially concerned for two reasons; it is carrying over 1.9m tonnes and preparing to buy 4m tonnes, with a possibility, and arrangements, of 0.5m tonnes more, if the need be. Should that happen, the department would end up with a record 6.4m tonnes of stocks and it would come under severe financial and administrative stress. Incidently, both secretary and director of the department are new appointees.

The early clues of the crop are mixed ones. Grain is the most fertile areas, like Bahawalpur and Bhawalnangar, has reportedly been shriveled because of weather factor. In other areas like Gujranwala, Sargodha and Sahiwal, the reports of crop taking hit on the account of rains and hailstorms were already there. On the basis of these reports, the agriculture department has already revised its crop estimate from 19.7m tonnes to 19.4m tonnes. But farmers and millers are expecting some further dip in those figures as cold wave still persists, which had taken hold of the province ever since grain filling started in Punjab.

The Punjab agriculture department has revised its crop estimate from 19.7m tonnes to 19.4m

tonnes. But farmers and millers are expecting some further dip in output

Apart from the total quantum, an additional layer of pressure would come from the fact that it may be the major player in the market. The private sector, which had a bad year investment last year, is unlikely to play a major role this season but for the usual grain traders The millers may probably buy only for immediate grinding purposes because they would exactly know the position of official stocks and pressures on the government later on to clear its stocks. The government has recently reduced release price by Rs50 per maund to clear the existing stocks.

The farmers took a hit on almost all crops this year. They lost money on rice, cotton and potato. But they had a consolation that almost everyone lost money on these crops. But wheat would be a different case because of official purchase; some of them would make money because the government would buy it at higher price while others particularly small farmers lose money in the open market.

There are some reports of shriveled and bad quality grain, even from the most productive areas. This could be problematic for the government. It has struggled with exports this year with relatively better quality wheat. Even a subsidy of $100 per tonne could not make a commercial sense for exporters.

Its current procurement, carry-over stocks and unpaid bill would take the total food loan to the region of Rs250bn.

A factor that could hit the quality of wheat is that a major portion of the purchase this season may be placed in the open. Punjab has 2.3m tonnes indoor storage capacity and it would have 1.9m tonnes carry-over stocks. That means around 4m tonnes of wheat would be either be placed in the open and bear extreme weather conditions or a portion of it could be stored in private sector premises including the flour mills.

Published in Dawn, Economic & Business, April 20th , 2015

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