Karachi, May 4: Traders are expressing sharp conflicting views on resumption of wheat exports much before the final estimates of the crop and completion of procurement operations by the two provincial governments — Punjab and Sindh — and the Passco.
Karachi-based traders are all for quick wheat export and increase in quantity to one million tons in anticipation of a bumper crop. But a few traders in Lahore and market analysts insist on final assessment of the crop, build-up of adequate government stocks of a minimum of about 5 million tons plus before embarking upon export.
There is also confusion as to how much quantity of wheat is to be exported. The Federal Food and Agriculture Minister Mohammad Hayat Bosan announced at a press conference on Thursday the export of half a million tons of wheat without clarifying whether this decision is continuation of late December 2006 announcement or it is in addition to that.
There is also confusion whether the export is from the current crop or from the carryover stocks with Punjab and Sindh governments and Passco.
Last year in November, the Economic Coordination Committee (ECC) of the cabinet lifted 15 per cent export duty on wheat to give a go ahead signal for disposing of the carryover stock from the previous crop. Later, in last week of December 2006 the ECC announced export of half a million tons of wheat through private sector. At that time the government maintained stocks of 4.3 million tons.
A monitoring committee of secretaries of food, commerce and revenue division and an official of State Bank of Pakistan was formed to oversee the export of wheat. In mid-January 2007, media reported the procedure set by this monitoring committee.
According to this procedure the private parties were allowed to export wheat purchased from the stocks of Punjab and Sindh governments and from Passco. Private parties were advised to purchase 400,000 tons from Passco and Punjab stocks and 50,000 tons from Sindh.
The private sector was allowed to export 50,000 tons of wheat from their own stocks. The government made it clear that no subsidy will be offered to the exporters as reports suggested that export price was less than the price of wheat from government stocks.
While the wheat procurement is going on in Sindh and Punjab, media reported commencement of wheat export and according to Raees Ashraf Tar Mohammad, a leader of the Jodia bazaar based Pakistan Grocery Importers Association, about 230,000 tons of wheat has been shipped by now. “Sixty per cent of exported wheat went to India and small quantities to Indonesia, Sri Lanka and African countries,” he said.
The Customs stopped shipment of about 35,000 tons of wheat last week on the plea that the 50,000 tons of wheat export quota fixed for private sector has been exceeded. “There was no such export quota or condition to procure wheat from Passco or Punjab stock for export,” Raees said on Friday. This impression was created by big wheat exporters of Karachi. But timely government intervention at high level has resumed the shipment and private sector has with them letters of credit for export of 0.7m tons.
He pleaded that the government should increase export ceiling from half a million tons to one million tons of wheat as exporters are getting good price of an average of $225 a ton. “This price is bound to crash in June when wheat will be harvested in Russia and Australia,” he said while predicting that international export price will come to $130 to $140 a ton.
“If at all the wheat supplies show signs of shortages in June, we can import wheat at $130 to $140 a ton,” he pleaded. He said a margin of about $70 to 80 a ton on import and export of wheat is attractive to go for wheat trading.
Sufi Bilal, a senior flour millers leader believes that the best time for wheat export is October and November when average export price of $280 a ton can be obtained. With this price, the exporters can meet the local price plus the bank and transportation charges and the cost of storage.
The State Bank of Pakistan in its annual report for 2005-06 warned of hoarders, profiteers and speculators taking advantage of a bumper wheat crop if the government failed to build-up an adequate buffer stock. Released last December when the government decided to resume exports, the State Bank’s advice was to hold back wheat export till size of the crop is estimated and adequate stocks are developed.
Perhaps a widening trade imbalance this fiscal, expected to be about $14 billion, is forcing the government to go for earning a few million dollars from wheat export.