Wheat: regression to the mean?

After two seasons of fleecing the poorest segments of rural economy to win urban consumers, it is back to square one. Reportedly, government of Pakistan has set a national reference price at Rs3,500 per 40kg for wheat procurement Rabi 2025–26, yet the conversation already feels strangely muted.

No protest from farmers;no panic from the Fund; nor any budgetary theatrics from Islamabad. It almost appears normal. But wheat season in Pakistan, as readers would recall for past many years, is rarely quiet or normal.

Converted through today’s exchange rate, Rs3,500 comes to roughly $310–315 per metric ton. Global HRW wheat is trading in the same band. Historically, Pakistan has carried a 10–20 percent premium over world prices once the storage shortages, liquidity gaps, freight costs, and information delays are accounted for. By that measure, today’s reference price is barely outrageous; in fact, accounting for the above differences, it is barely at parity. In fact, a credible argument could be made that it sits at the lower edge of equilibrium, particularly heading into an uncertain planting season.

But then comes the million-rupee question. Now that a floor has been declared, who will defend it? For two seasons now, public sector – both at the federal and provincial level – has set the example of leaving farmers out to dry at peak harvest time, leading to prices collapsing by more than a third – and in some cases, as much as fifty percent - in a fortnight. Not due to supply glut or falling demand. Simply due to the absence of a credible buyer of last resort.

This time around, PASSCO stands disbanded. Commodity operations debt is in quiet settlement, with nearly Rs400 billion settled over last 12 months, nearly 30 percent of peak outstanding. Provincial food departments are whispering fiscal restraint. In this setting, a price floor without procurement risks becoming a policy hallucination: visible only on paper, yet invisible at farmgate. The danger is not that Rs3,500 is too high:the danger is that it floats in thin air.

For over 60 years, the public sector absorbed roughly one-fourth to one-third of the marketable surplus within sixty days of harvest. That early intervention – despite its high fiscal cost - prevented panic selling, stabilized expectations, and allowed private trade to function. Without it, the entire value chain behaves differently. Farmers hold back while traders hedge, and mills buy cautiously. Banks close their doors. And the country ends up paying more anyway through emergency imports, not to mention the political cost of farmer unrest.

Commodity markets do not run on good intentions. They run on procurement trucks, storage space, working capital, and predictable timing. If GoP intends to defend the floor price, it must signal answer the who, when, and how and what of procurement schedule. If it refuses to buy, it must offer an alternative mechanism that has depth, liquidity, and credibility. Right now, there is none.

Regardless of its marketing, the electronic warehouse receipt regime remains experimental. Storage remains fragmented. And private sector capacity is nowhere near the scale previously maintained by PASSCO and the provinces.

Rs3,500 is not the problem. The silence around procurement is. Price floors are not moral support for farmers. They are market anchors. Announcing one without a plan to defend it is not reform. It is market disruption dressed as fiscal discipline.

The reference price is now on record. So is the sowing season. The only missing piece is the buyer. Until that question is answered, Rs3,500 will remain a number in search of a policy. And wheat will, once again, remind Pakistan that numbers do not stabilise markets, institutions do.