Low price supports may be souring Pakistani farmers on wheat

By Shehryar Warraich  |  Updated March 23, 2014 at 3:15 PM
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LAHORE, Pakistan, March 23 (UPI Next) --

Farmers in Pakistan, a country with the potential to produce enough wheat for domestic consumption and export, seem to be losing interest in growing the grain because the government has failed to prop up prices high enough, growers’ representatives say.

A government decision this year raised the wheat support price to about $11.50 for about 90 pounds, a jump of 14 percent over the previous price of about $10, the Crop Site, a British website that tracks commodity developments, says. Still, total acreage planted this year slipped to 21 million acres, down from 21.4 million last year and 22 million in 2011.

The support level has been controversial in Pakistan.

Ibrahim Mughal, president of Agri Forum Pakistan, a national farmers' association based in Lahore, told UPI Next the government's wheat price is too low and Pakistan will join the wheat import club, which would be unacceptable for an agrarian country.

"Because of the low price, wheat production for the current fiscal year has already decreased and it will leave no other option except to import wheat," he said.

The government has set a production goal of 25 million tons for 2014. Index Mundi, a site that tracks production and commodity prices, says Pakistan produced 24 million tons of wheat last year. Wheat prices in January were 11 percent lower than they were in January 2013, when the price dropped from $312 to $277 a ton, Index Mundi says.

After earlier projections that production would likely come up nearly a half-million tons short of the goal, recent timely rains have National Food Security and Research officials predicting the target will be met.  

Mughal said per-capita wheat consumption in Pakistan is about 273 pounds of wheat a year, meaning almost 24.8 million tons of wheat must be produced annually for Pakistani domestic needs alone. Additionally, an estimated 500,000 to 700,000 tons of wheat is required for poultry feed and another 1.2 million tons is needed to seed the subsequent year's crop.

Farmers are not as interested in growing wheat as they were in past years because they consider the set price too low, Muhammad Mohsin, leader of the Kissan Itehad Council, a farmers' association, told UPI Next.

"The continuously increasing cost of seeds, pesticides, electricity and fertilizer has already disheartened us and we know that the government is unable to help us in reducing these prices. So we just need the wheat prices to be increased so that farmers can acquire some profit out of their hard work," he said.

Farmers contend the price set by the government is less than the cost of production, making it difficult to achieve the target output, not just this year, but also next year.

Farmer Tariq Bajwa, speaking with UPI Next by phone from the Wehari district of Punjab, said he was concerned that foreign exchange will be used to make the purchase if the government decides to import wheat.

"We have to buy expensive fertilizer, pesticide, seed and even expensive water to saturate crops," he said.

Punjab Agriculture Minister Farrukh Javed told UPI Next that as a farmer he agrees with the demands of the wheat growers, but as a minister he needs to take into account wheat prices that will attract buyers.

He said escalating production costs plus the goods and service tax -- similar to a value-added tax -- must be cut to help struggling wheat farmers.

"The government has already lowered electricity prices from 22 rupees [21 cents] to 10.35 rupees which will, of course, benefit them. In addition, negotiations are being made with fertilizer and pesticide companies to reduce prices, but it will be difficult to announce the time frame of this primary stage," he said.

Flour prices are also linked to the wheat supply. Flour mill owners are concerned that a shortage of wheat could cause price hikes and provoke a mass panic similar to one that occurred in 2007, during the last days Prime Minister Shaukat Aziz was in power.

Flour mill owners want to see an increase in the wheat support price set by the government or a decrease in the price of goods like fertilizer and pesticides as farmers demand.

Javed told UPI Next the government is trying to negotiate a drop in fertilizer and pesticide prices. In addition, the government is also considering a GST or VAT subsidy.

"The government should have a backup plan if shortages hit the market, because we will not have the ability to maintain flour prices," Asim Raza, chairman of the Pakistan Flour Mills Association, told UPI Next.

"Flour prices depend upon the wheat supply and demand. If flour mill owners get expensive products, buyers will have to buy costly flour," he said.

This is what has been done for the last five years, despite population growth, Ali Ahmed Aukak, former minister for agriculture in Punjab, said.

"The government needs to provide farmers with some incentives and also with the deduction inputs' prices subsidies so that they can feel encouraged to produce wheat not only to meet national demand, but also to export wheat for foreign exchange," he told UPI Next.



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