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Pakistani industry sentiments hold MINFAL’s optimism as too high?
GAIN, July 11, 2004
MY 2004/05 Pakistan wheat production is forecast at 19 MMT as the March/April heat wave caused plants in the main production areas of Sindh and Punjab provinces to mature several weeks prematurely resulting with smaller, shriveled grains at harvest. In the Punjab Province, limited irrigation water supplies and deficient sub-soil moisture compounded the heat’s negative effect on plant maturity.

The Ministry of Food, Agriculture and Livestock (MINFAL) maintain a forecast of 19.7 MMT based on an anticipated more positive impact from the increased use of fertilizers and herbicides and expanded planted acreage this growing season. Industry sentiments hold MINFAL’s optimism as too high.

The Government of Pakistan (GOP), through the MINFAL and provincial food departments, procured about 3.2 MMT of wheat as of June 1, 2004. The GOP target wheat procurement is 5 MMT but it is finding commercial market competition extremely keen thus far this year.

In mid-May the Government of the Punjab Province (where 80 percent of Pakistan’s wheat is produced) banned inter-district and inter-provincial movement of wheat in effort to sway farmers to sell to provincial food departments. Despite this government action district food departments have been unable to accelerate procurement for logistical reasons. Early market involvement by the flour milling industry and trade has ensured many mills around the country will be amply stocked with wheat for a several months. However, most flour mills could not procure enough stocks to satisfy their full year requirements which translates to an active role of food departments in controlling local market prices the later part of this year absent imports.

Domestic wheat consumption continues to expand two-three-percent per annual driven by population growth, in the process creating ever keen competition between the food and feed sectors for available supplies. Domestic corn production, however, is finally starting to react to feed sector demand and corn prices are finally beginning to fall below that for wheat. As a result, reduced pressure on wheat supplies for food consumption thus prices should be witnessed in the nearer future.

Pakistan would need to import 500 TMT to 1.5 MMT of wheat to improve domestic supply availability thus hold market prices in check. For a second year in row carry-in wheat stocks did not meet government expectations. Open market prices for wheat and wheat-based products, as a consequence, have increased 30 percent over the last year. News that the Pakistan Cabinet authorized up to one million metric tons of wheat for purchase by the Government buying agency, Trading Corporation of Pakistan (TCP), temporarily arrested recent market gyrations but with market recognition of the current tight supply prices are expected to vacillate until the situation settles. The GOP, therefore, may have to actually import upwards of 1.0-1.5 MMT through its various buying arms in order to avoid problems with this politically sensitive commodity (wheat).

In MY 2003/04, rumors of farmer hoarding proved misleading after causing significant dishevel in the market. If the GOP wishes to avoid similar problems in MY 2004/05, it would need to import wheat with arrival starting in July/August in order to stabilize domestic supplies, prices and work towards rebuilding ending stocks, which would have a placating effect on the market next year. If the market stabilizes significantly, boarder restrictions with Afghanistan would likely be loosened resulting in greater movement of wheat to that country.
MGR Archive 14.6.2004
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