Wheat: not a shortage, a failure of imagination

The wheat market did not collapse because of a supply crunch. It collapsed because the state stopped talking and started panicking.

Prices, which had plunged to a 38-month low in mid-August, are now up over 55 percent in less than four weeks. But this is not demand pressure. It is not real scarcity. It is a self-inflicted wound triggered by policy silence, fear-driven restriction, and the total absence of forward visibility.

Punjab has reportedly imposed a de facto ban on interprovincial wheat movement. That, and that alone, is the spark behind the current price surge. Three provinces: Sindh, Balochistan, and KP depend on Punjab’s surplus to make it through the off-season. Block that movement and the entire market loses oxygen. Scarcity panic sets in. Traders hoard. Retailers pad margins. Flour prices shoot up.

Why did Punjab impose the ban? Either the government believes post-harvest flood damage has been severe, or it is reacting to exaggerated reports without verifying facts. In either case, if stock levels in public godowns are under threat, that information should not be protected like a state secret. End the secrecy. End the asymmetry.

Wheat is not a nuclear weapon. If large-scale stock damage has occurred, so be it. Publish the data. Let the federation, provinces, and central bank respond in time.

If the gap is real, allow commercial imports. That decision must go hand in hand with lifting the ban on domestic movement. Imports will cool prices, and quickly. That is good for urban consumers and inflation optics. It is terrible for growers, who are already reluctant to plant wheat this season. Imported cargo in October becomes a disincentive for sowing in November.

That is the trap. And the only way out is to get creative.

Announce the export policy for the 2026 harvest today. Say clearly that surplus wheat grown and harvested next spring will not be trapped behind a ban. Let the farmer make decisions based on visibility and opportunity, not rumor and fear.

Then, encourage forward contracts between buyers and growers. Let mills, traders, and exporters issue contracts now, locking in a price for delivery in May or June next year.

Benchmark that price to the Chicago wheat futures contract. Add freight. Convert to rupees using the six-month forward PKR/USD rate. At delivery, spot prices almost always land within 5 to 10 percent of forward prices. That is close enough to serve as a floor.

Back it up with financing. Commercial banks should be allowed to lend against these forward contracts. The contracts become collateral.

Upon harvest, buyers procure as agreed, store the wheat under electronic warehouse receipts, and execute delivery. If the buyer walks away due to a post-harvest crash in prices, the state does not need to procure. It only needs to backstop the farmer by paying the difference between the contracted and the spot price.

Not a subsidy. Not a market intervention. Just a targeted commitment to protect sowing decisions from collapsing in the face of fear and price suppression.

Markets do not work without visibility. Farmers cannot operate without trust. The price system cannot function if the rules keep changing mid-season. This is not a supply crisis. It is a design failure.

Intervention is not the problem. A lack of imagination is.