The federal government is evaluating wheat import proposal in order to stabilize flour prices in Sindh and KP. While official quota for import is yet to be announced, deficit estimate suggests it will be no more than two million tons – equivalent to 7.5 percent of annual domestic demand. Or roughly $400million at prevailing commodity prices in the international market.
Is this development news-worthy? Wheat prices in the domestic market as per Sep-19 CPI are trading at a 20 percent premium to international market. So, whether the shortage in domestic market is real or artificial, allowing import such that domestic prices may come at par with international price is only logical if the commodity were freely traded. Except, that it isn’t.
Does that mean the shortfall is artificial, as many in the media may conclude? Answer to that question is predicated on determining whether official estimates of wheat output at the time of harvest signalled a looming shortage or not.
Consider that annual wheat output for 2018-19 season was placed at 25.2 million tons by the Economic Survey, with average carryover stocks with PASSCO of 5 million tons per annum. Wheat availability for the domestic market, then, should at any rate have been in surplus against annual domestic consumption of 28.6 million tons (based on generous assumption of consumption defined at 130kg per capita) – even after discounting for the paltry twenty-five thousand tons exported (mostly to Afghanistan) during past 15 months.
Yet, the shortfall in wheat availability is further corroborated by the fact that prevailing market price of 40kg wheat bag is 13 percent higher than the government-set support rate, with farmer associations acknowledging that the growers received full price for their produce for the first time in several years. The story of ‘hoarding mills’ stocking up cheap wheat only to artificially jack up retail price of flour thus appears highly unlikely.
What exactly is going on then? Anecdotal evidence from central Punjab region raises serious questions over reliability of official estimates. Progressive growers who had achieved yield between 4.5 – 5 tons per hectare in yesteryears note that yield during last season was no more than 2.8 tons per hectare, almost same as the country average. While it is possible that the dispersion of yield rates between progressive and small- farmers shrank, the net effect should have been a substantive decline in total output, something that is missing from official numbers.
What explains the fall in an already abysmal yield? A sample of four large-sized growers from central and southern Punjab areas unanimously found ‘change in weather patterns’ responsible for the unexpected loss of crop productivity. Although wheat crop neither faced water shortage (unlike kharif 2018 crops) nor large scale destruction due to natural disaster such as floods, delayed rain and unexpectedly longer winters resulted in yield taking a nosedive, affecting output in a stealth but material manner.
While the country’s agricultural sector has not faced widespread destruction ala 2010-11 floods, weather patterns are becoming increasingly erratic. While this does not necessarily indicate that agricultural heartland may no longer be suitable for traditional crops, but it does signal that farmers can no longer count on existing crop calendars to achieve target productivity levels. And wheat’s experience is not one in isolation, but rather fits into a series of crops failing to achieve target productivity levels – cotton in ongoing kharif being the latest casualty.
Effects of climate change on crop productivity hence are no longer limited to finding heat- and drought- resistant varieties, as vagaries of weather are not restricted to extreme/freak events. When it comes to farming sector, even a single degree Celsius deviation in temperature from average during critical periods such as sowing and pre-harvest time can prove deeply impactful.
The second yet equally consequential failure lies at the altar of PASSCO, whose failure as a parastatal organization is only eclipsed by those of the big-three SOEs. Mill owners claim that PASSCO’s procurement target at 20 percent of annual domestic production is at best a misnomer, because its net effect is disappearance of the stock from domestic supply.
Recall that PASSCO itself readily acknowledges that wheat stocks aging under its inventory often runs up to three to four years at a time. Poor management thus results in crop going to waste due to spoilage in large quantities, all in the name of maintaining ‘strategic reserves’
But wheat does not require strategic management, considering reliance on the ‘import Frankenstein’ to meet deficit even in worst shortfall year of last decade will be less than one percent of total import bill for the last fiscal year, and cost half of what the country spent on importing cell phones, ‘officially’!
To sum up, import of $400million worth of wheat for a country with 220 million headcount is no story nor cause to raise alarm bells. Afterall, smaller economies with even lower population spend much higher sums to meet their requirements. The real story is the mismanagement, beginning from near-complete absence of forward thinking about impact of climate change on farming to ‘strategic mismanagement’ of stocks that results in deficit despite self-sufficiency.
Given Pakistan’s healthy population growth rate that shows no signs of slowing down and one of the highest per capita wheat consumption rates, the country may soon see a day when import-dependency for wheat is no longer an exceptional event due to a bad crop year.
The government may believe it deserves plaudits for foreseeing wheat shortage and timely allowing import. Sure, but only if it is measuring itself against a standard of mediocrity. An even better food security paradigm would be one where shortages do not arise from failure of official estimates, lack of investment in climate change research, and ill-planned market interventions in the name of strategic reserves. PTI government needs to decide whether its yardstick for success is resolution of self-created crisis. If yes, then kudos!