Unfolding the Deepening Wheat Crisis

There is a severe wheat and flour crisis unraveling across the country.

A 20 kg bag of flour is being sold at Rs. 3,000 and a country of 230 million, on the verge of a potential default, is importing 2.6 million tons of wheat while the Minister of Food Security & Research Tariq Bashir Cheema has declined the existence of any wheat shortage in the country and blamed the provincial governments for mismanagement.

Let’s dive into how the world’s 7th biggest Wheat producer has come to the point where international media is publishing images of the lower middle class standing in long lines to get wheat flour.

Old Habits Hurt and its High Time We Shifted to Wheat Hybrids

Pakistan first time became a net wheat importer in 2013 after three consecutive years of exports when domestic production suffered a decrease amid delayed planting and reduced fertilizer usage due to price hikes.

The majority of our farming practices are still not optimized, farmers follow the local trends instead of government recommendations for time, wheat, and seed selection, stated Dr. Tariq Saeed, Head of Agronomy at GROWTECH Services talking to ProPakistani.

He explained that constantly using the same home-stored wheat for seed with no grading reduces the yield. While 50 to 60 percent of farmers have moved to mechanization in case of harvesting, which is a good thing, the fundamentals still need to be fixed.

Talking about the need for wheat hybrids, he stated that our domestic gene pool stored with public research institutions is more than enough. With proper R&D practices, we would not need hybrids in the case of wheat. On the subject of heat stress issues amid the looming climate change threat, he highlighted the work done on ‘speed-breeding’ at National Agriculture Research Council (NARC) Islamabad which can potentially bring the crop period down to 3 months with two crops that can ultimately double the yield.

Impact of Russia, Super Tax and Smuggling on Wheat Procurement

Pakistan Bureau of Statistics reported a 170 percent increase in fertilizer prices till July 2022 and that was before the government introduced a 10 percent super tax on dozens of big industries including fertilizers, which has put these essential inputs further out of farmers’ realm of access.

Given, Russia is the leading supplier of Ammonia (requisite for both urea and DAP production), LNG, and wheat, the Ukraine conflict has disrupted the supply chains. Floods also played their part both directly by damaging around $20 million of wheat in storage and indirectly affecting 8.3 million acres of cropland which brought a historically high level of inflation.

Climate catastrophes result in more damage when you haven’t built a large dam in the last four decades. All of these are long-standing incompetencies in policymaking that render our land productivity lowest compared to even some developing countries, but without the administrative failures to maintain the supply chain, this catastrophe would not have taken place.

Provincial governments often delay wheat procurement which, coupled with the different government prices in two major provinces, acts as an open invite to hoarders and smugglers as farmers will sell to somebody, if not the government then a hoarder. The government also lacks the storage capacity for around 16 MT of wheat, which leave local administrations to create temporary storage, which delays the procurement operation while also leaving grains vulnerable to weather patterns.

Surgically Remove Politics from the Wheat Game

There is an immediate need to streamline the decision-making regarding managing inventories and supplies at all administration levels through a single chain of command for all essential commodities. An example of it can be found in how all federal and provincial political governments and both civilian and military establishments successfully dealt with Covid-19 for two years under one roof of the National Command and Operation Centre (NCOC).

The discussions encompassing water, wheat, and other critical avenues should be strictly above politics. The government needs to invest in storage capacity building for surplus reserves. Pakistan Institute of Development Economics (PIDE) suggested the government entirely get out of the wheat market back in 2021, leaving the procurement, inventory management, and marketing to the private sector.

Privatize Wheat and Save Rs. 700 Billion

PIDE estimated that the privatization of the wheat value chain will cause an increase of Rs. 5 per kg, but the governmental interventions result in far more market volatility. The free market will automatically force imports the minute companies sense shortage, in order to gain profits. Additionally, it will conserve Rs. 48 billion annually and will also avoid Rs. 700 billion of debt that results when the government borrows from local banks for wheat procurement and storage operations.

The government needs to expand the scope of Ehsaas and BISP programs to include subsidized essential commodities like flour. IMF has also studied and supported targeted subsidies through social safety net programs.

Lastly, the provincial governments (especially Sindh and Punjab) have to pass better legislation against the prevention of hoarding and smuggling. Unless and until the hammer drops on the offenders, the legislations mean nothing so governments better enforce the laws they already have.

Is There a Way Forward?

Whether the government optimizes its own operations or entirely privatizes it, the root of the problem still stays. We still have to increase our productivity to feed 4.4 million more mouths, joining the growing population of 240 million every year. We need a consensus on building more dams instead of politicizing everything. We have to provide our farmers with better seeds and cheaper fertilizers. It is a sad state of affairs to see the ‘food basket of the world’ importing wheat without knowing from where the dollars are going to come.

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