Surplus wheat management

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IT IS highly positive to note that Pakistan has surplus stocks of wheat but the governments decision to enhance wheat support price from Rs 950 to Rs 1050 has put the government in trouble as it will be requiring about Rs 6.045 billion as subsidy to offload available one million tons surplus stock. The critical situation has hit the government as the price of local wheat in the international market had slashed from $345 per ton to $296 per ton thus making it virtually unviable to export it due to price differential with the international market. The wheat price slash has now become a difficult task following the high per day financing cost of wheat. According to experts, early disposal of the surplus wheat has become necessary as it would not only avoid deterioration of its quality but also save a huge amount on account of storage cost. The government has raised the wheat support price by 11 per cent without developing consensus in the Council of Common Interest as agriculture and its pricing are now provincial subjects. Subsequently, it has made the Pakistani wheat further non-competitive in the international market and its export unmanageable. During the year 2011, Pakistan had exported wheat worth $624.45 million mainly to Bangladesh, Dubai, Iran and Afghanistan. Pakistan had produced 24.3 million tons wheat last year against the in 2011 while the production target for 2012 is set at 25 million tons. India is expected to harvest a record 88.31 million tons of wheat in 2012 and is expected to export over 1.5 million tons surplus wheat. At a time when Iran is taking keen interest in having wheat from India in a huge quantity as other sellers divert grain cargoes away from the Middle East country because of sanctions-related payments problems, Pakistan needs to grab this opportunity and enter a barter system. Tehran is also expected to import sugar from Pakistan. Iran has offered to provide 80,000 barrels of crude oil to Pakistan on three-month deferred payment. Farmers fear that in the presence of the existing sufficient stock and the arrival of new crop, the wheat prices would smash in the market if the stocks are not exported. The price differential (Indian wheat is $265 while Pakistans is $300) has put the country in a deep trouble. Pakistan wheat prices are still higher than those in the international market, both Iran and Pakistan would benefit from the deal through lower transportation cost. At this critical stage, the Pakistani government needs to tap the opportunity and dispose of its surplus wheat stocks to Iran against the much needed oil as well as electricity.


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