Punjab’s bet on not importing wheat drives grain market up

LAHORE: Punjab government’s continuously dragging feet on importing wheat has started to drive the grain market up, breaching Rs2,040/40kg level in various markets of the province.

In order to build strategic reserves and to maintain a cushion for meeting any eventuality, the federal government has asked the Punjab government to import one mill tons of wheat. However, Punjab Food Department has held the view of continuing with the strict monitoring of grain grinding by the flour mills and flow of private stocks available in the market with a view to fulfilling needs out of available about 4.0 million tons of official stocks.

In the meanwhile, the price of a 20kg wheat flour bag has crossed Rs1,120 mark in provincial metropolis following an upward trend in the wheat rates due to multiple factors. Wheat and flour prices have been on the rise for the last about a week, breaching the level of Rs2,040/40kg bag wheat bag and Rs1,120/20kg flour bag.

The grain market has been under pressure in the last week or so as due to multiple factors.

Haji Yousuf, President Lahore Atta Dealers Association, termed lackluster wheat imports by the government as one of the main factors in pushing prices of wheat up in the domestic market. The import of wheat was yet to pick up momentum, he observed.

“The import of wheat has been continuing at a slow pace by the federal government and Punjab still has not initiated the process even on papers,” Yousuf said adding, “Such signals are making grain traders jittery also due to low stocks with Passco and Sindh Food Department coupled with barely sufficient wheat in the warehouses of Punjab Food Department”. Main reason is said to be reluctance on the part of federal and provincial governments in importing required volumes of wheat. Punjab should show intention to import one million tons of wheat in order to show its determination to ensure supplies at comfortable levels.

Yousuf said one of the biggest factors in the bullish trend had been the possibility of wheat and flour outflow to Afghanistan in the coming days. “There is also pressure on the grain market due to the likelihood of opening wheat/flour trade to Afghanistan to maximum levels,” he said.

Khaliq Arshad, a veteran flour miller, said the upward trend in the global wheat market had been a sign of worry for a country like Pakistan. “There are various new happening affecting supplies in the world grain market,” he said. He added the Russian domestic wheat prices jumped to levels typically not seen this time of year. “Russia has been a major producer and export of wheat in the world,” the flour miller said.

He said the government should release wheat to flour mills from October as per liberal quota at Rs1,900/40kg. “Such arrangement will not only discourage trade of wheat by mills, but it will also be a viable option for the government given the fact that strict monitoring of grinding would also discourage lifting of excess wheat by flour millers from the food department,” Arshad said.

Majid Abdullah, a progressive flour mill owner, pointed out that private wheat importers are not importing any grain due to rising trend in the international market. “With wheat hovering around $355/ton, import of wheat is not feasible by the local private sector.” Hence, he added, about 0.5-1.0 million tons of wheat import by the private sector was not on the horizon at all.

He was of the view that a paradigm shift in wheat Issuance policy was the need of the hour. “Since Punjab Food department is having a reasonable stock of wheat, apart from the flour millers who have nearly 1.5 million tons privately, having this stock pile, stakeholders can play well in accordance with the norms of the free market economy.”

Abdullah said it was time to get rid of the menace named “Quota Based Issuance Policy” which usually acted as bait for ill-doings in the flour market.

He stressed to adopt a time tested “liberal releases” wheat issuance mechanism for 2021-22 season, which would be in the favour of consumers. “It will lead to availability of reasonably priced good quality wheat flour at the lowest possible prices as a result of a cut throat competition among working millers,” Abdullah said.