The government of Pakistan procured 6.3 million tonnes of wheat from its recently concluded harvest, significantly lower than the 7.05-million-tonne target announced prior to the harvest but still the largest procurement in at least five years, according to a June 30 Global Agricultural Information Network report published by the Foreign Agricultural Service (FAS) of the U.S. Department of Agriculture (USDA).
In its report, the USDA indicated that producers who receive the procurement price of $310 per tonne are among the better compensated wheat growers in the world. And, with opening government stocks of 4.5 million tonnes on May 1, the government of Pakistan now has 10.8 million tonnes of wheat at the start of the local marketing year.
“The government of Pakistan shields producers from imports with a tariff of 60% on imports, still well below the World Trade Organization bound rate of 150%, which is the tariff ceiling for wheat imports,” the USDA said. “While the government only procures about a quarter of the crop (half stays on farm for consumption and half enters commercial channels directly) the high government procurement prices help to support the pricing of the wheat that is marketed commercially, as the government is also a primary supplier of wheat to the flour milling industry.”
The USDA said wheat accounts for about 75% of the calories that Pakistanis consume, but higher prices appear to be having some moderating effect on wheat consumption. The government of Pakistan spent approximately $1.9 billion for wheat procurement this year, the USDA noted, adding that much of the payments were financed through loans that will be paid back when the wheat is sold to the private sector.
“Some wheat stocks are used to feed communities that have been displaced from their homes due to conflict and some is sold as flour at reduced rates to consumers via low-priced, government-run utility stores,” the USDA noted in its report.
While Pakistan has established wheat export subsidies in recent years, the USDA said it is too early to predict whether the government will look to move some of its stocks onto the international market via subsidies.
“Pakistan’s most reliable market is Afghanistan, where wheat flour is typically exported via close relationships between traders on either side of the border,” the USDA said. “However, recent closings of a number of border crossings and the high price of wheat in Pakistan appear to be curbing the flow of flour into Afghanistan. Wheat equivalent exports to Afghanistan are estimated at 400,000 tonnes and total exports are estimated at 600,000 tonnes.”