Wheat exports: a decision well-timed

Talk about timing. At the beginning of this week, the first working day of 2011, US wheat futures climbed to a five-month high as floods in Australia raised concerns about the supply of the grain to the global market.
This surge in prices comes only a few weeks after the Economic Coordination Committee of Pakistan lifted the ban on wheat exports, up to 1 million tons.
In the wake of rising international wheat prices, the decision appears to be well-timed for Pakistan. Industry sources reveal that export deals with countries such as Bangladesh, Central Asian and Far Eastern economies have been locked, at prices hovering between $330-335 per ton, exclusive of transportation costs.
The price being bagged by the exporters is already fairly high, compared to the current international prices, which are touching close to $300 per ton. The extra revenue from the commodity seems to be quite welcoming as Pakistan stands on the receiving end of the rising wheat prices.
Locally, the imposition of a support price of Rs950 per 40 kg brings the domestic prices to around $280 per ton, which is fairly high. But the higher prices, at which export contracts are being locked, ensure gains for exporters as well.
There are fears that allowing the export of wheat might create a shortage at home. This, however, is checked by the ample availability of stocks with the government at the moment, and with a good expectation from the crop harvest in March.
"Currently, the government has around 8 million tons of wheat stocks, and since the land is believed to have been rendered more fertile after the floods, a good yield is expected, even though the acreage of wheat sowed may have reduced slightly," said a former government employee whos been following the industry.
A representative of wheat brokers also said that against an annual requirement of around 20-22 million tons, 25 million tons of wheat may be harvested this year, thanks to increased soil fertility.
Further, the higher domestic prices of wheat mean that the excess may not be smuggled or exported beyond the limit because this may not bring tremendous marginal gains for exporters and smugglers alike.
For a government struggling with high costs of wheat procurement and battling with a lack of storage space for wheat, this move seems to be a very sound one. One hopes for this step and the turn of international events to restore some order in the discipline-starved fiscal machinery of the country.