Since 2024, upon withdrawal of the official procurement of wheat at minimum support price (MSP), each year brought a different level of struggle and uncertainty for all the stake holders of the wheat value chain especially farmers.
In 2024, farmers faced the harsh market consequences and protested as the prices dropped due to surplus wheat in the market, squeezing the profit margins of the farmers and leaving many unable to cover their cost of production.
Once the farmers suffer losses in one crop, the impact automatically transits to next crop, limiting their ability to purchase inputs and to manage farm effectively.
As a result, in 2025 wheat cultivated area dropped by approximately 6.8 percent (around 9.1m hectares) and output fell by 8.9 percent (about 28.98m tons). This contraction attributed to lower market prices in 2024 (a phenomenon referred as cobweb effect in economics) and presence of imported wheat in the domestic market.
However, according to FAO, wheat planted area for the current season is estimated to be increased above the five-year average level due to better price expectations and good soil moisture at the time of sowing. The government has announced the timely indicative price of PKR3500 per 40kg under the Interim National Wheat Policy 2025–26, aiming to restore the farmers’ confidence and to maintain and build the strategic reserves of 6.2m tons for food security. The target for wheat production set this year by federal government is over 30m tons from all provinces, with Punjab expected to contribute 26m tons, Sindh 4.43m tons, KPK 1.71m tons and Balochistan 1.71m tons.
Now as the 2026 wheat harvest season is approaching, the market is at the verge of multiple policy decisions taken by the government that will significantly shape the stakeholders’ outcomes.
On 24th February, Economic Coordination Committee (ECC) of cabinet approved the minimum reserve price for selling 0.5 million tons of wheat stock held by Pakistan Agricultural Storage and Services Corporation (Passco) to private sector through competitive bidding. It will be done on First In First Out (FIFO) basis at the price PKR4,150 per 40kg for the local wheat and PKR3,800 per 40kg for imported wheat.
These aforementioned reforms are promising in principle but the real test is that how markets and stakeholders respond especially upon arrival of this year’s harvest. The ECC’s decision to release large stocks prior to harvest creates both opportunity and uncertainty.
At present, there are two price benchmarks in the market for the private sector to purchase wheat. One is the ECC-set price of PKR 4,150 per 40kg for government-held wheat stocks and other is the indicative price of PKR 3,500 per 40 kg for the upcoming harvest. Upon comparing these two prices it is obvious that price set by ECC is higher than indicative price. This creates a strategic dilemma for millers and traders: purchase wheat stocks now at a higher reserve price or wait for the new harvest, when market arrivals may push prices closer to or even below the indicative level.
The wheat harvest will be started in April and continued till May. If private sector will anticipate that fresh supply will arrive at the market in bulk and prices may soften or maintained at indicative price, then they are likely to delay the purchase. Also, purchasing from government now involves the storage cost associated with early purchase. Such wait-and-see approach may dampen the demand for government held stock. This behaviour is not termed a speculation; rather it is a classic economic behavior where buyers will time purchases to minimize costs and maximize margins.
For farmers, the implications are mixed. On one hand, a marketoriented approach has the potential for correcting the distortions caused by rigid price controls and government procurements at MSP since many years in past. On the other hand, farmers require clear and predictable price signals along with the timings, and potential access to buyers for avoidance of the price volatility. Such price volatility has happened last year; a lesson policy maker must heed.
For millers and traders, timings are everything. Purchasing at a higher ECC-set reserve price may appear unattractive in the short term, but waiting carries the risk of price spikes if supply disappoints.
For policymakers, the challenge lies in striking a delicate balance: ensuring fair returns to farmers while preventing excessive consumer price inflation and maintaining strategic reserves. The coming weeks will be decisive and will determine whether the wheat market stabilizes after two years of volatility or enters yet another cycle of uncertainty.
Copyright Business Recorder, 2026
The writer is a Lecturer at the Pakistan Institute of Development Economics (PIDE). She can be reached at: [email protected]
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