Report Highlights:

The Government of Pakistan procured 5.0 million metric tons of wheat from the recently concluded harvest, well below the 6.2 million ton target. Larger than expected government-held stocks at the outset of the procurement campaign appeared to limit government purchases. As global wheat prices continue to fall, widening the gap between Pakistan's effective domestic price floor and foreign prices, the government increased the temporary import tariff on wheat from 25 to 40 percent. At this stage, barring a major policy change or rise in foreign prices, it appears that Pakistan is largely removed from the international wheat market. 2014/15 rice exports are off to a faster than expected start and exports are expected to reach 4.0 million metric tons, up 200,000 metric tons from the previous estimate.

Government of Pakistan Procures Five Million Tons of Wheat

The Government of Pakistan procured 5.0 million metric tons (MMT) of wheat from the recently concluded wheat harvest, significantly lower than the 6.2 MMT target that was announced prior to the onset of harvest, and approximately 1.0 MMT lower than a year ago. Total procurement is just 20 percent of the estimated total crop, less than the 25 percent share of the crop that the government has procured in recent years. Carryover stocks of government-held wheat were reportedly larger than expected and had prompted the government to announce a wheat export subsidy of $45 and $50 per MT from the provinces of Sindh and Punjab respectively. However, the subsidy was not large enough to encourage sales, and exports of wheat have been minimal. The subsidy has been extended through July 31, 2015, but is not expected to result in significant sales.

Weak exports coupled with large carryover stocks appear to have led to a less aggressive purchasing campaign. At an estimated 25 MMT, Pakistan's wheat crop is also lower than the optimistic early season forecasts that suggested the crop could be as high as 26.5 MMT. Lower production is a result of late rains and hail storms that reduced yields in some areas as the crop was in the final stages of ripening.

About 25 percent of Pakistani wheat growers produce a marketable surplus that amounts to an estimated 50 percent of the crop or 12-13 MMT. The government and private sector typically split the surplus with each purchasing about half of the marketed crop, although, as mentioned above, government procurement was just 20 percent of the crop this year. The balance of the crop remains on farm for local consumption. The government's role in the procurement of the harvest is generally sufficient to influence market prices, creating an effective price floor in the domestic wheat market.

The Government of Pakistan, through the provincial food departments and the federal Pakistan Agricultural Storage and Services Corporation (PASSCO), procures wheat from farmers at the support price and then releases wheat for sale to flour mills at the government's fixed issue price. The system aims to protect farmers from price fluctuations and ensure a minimum return to farmers and encourage wheat production. The Government of Pakistan increased the wheat support price for the MY2015/16 crop, fixing the price at Rs. 1,300 per 40 Kilogram ($319 per metric ton). The government spent approximately $1.6 billion for wheat procurement this year, much of it financed through loans that will be paid back when the wheat is sold to the private sector. Some wheat stocks are used to feed to communities that have been removed from their homes due to conflict and some is sold as flour at reduced rates to consumers via low-priced, government-run utility stores.

Regulatory Duty on the Import of Wheat Enhanced from 25 to 40 percent

On June 18, 2015, the Government of Pakistan increased the regulatory duty (a temporary import tariff, but it is not clear how long it will be in place) on the import of wheat from 20 to 40 percent. The increase is well below Pakistan's bound tariff rate (the maximum tariff rate Pakistan can establish) for wheat of 150 percent. The decision comes as the gap between Pakistan's domestic wheat prices and international prices continues to widen. The government increased the tariff from zero to 20 percent in November in effort to halt wheat imports. However, as global prices have fallen further below Pakistan's effective market price floor, an additional increase was needed to discourage imports. At this point, Pakistan is effectively cut off from the international wheat market as high procurement prices make exports uncompetitive and a high tariff prevents imports. Barring a significant reduction in the procurement and sales prices of domestic wheat or a cut in the import tariff, Pakistan is expected to be isolated from the international wheat market as long as global prices remain low or domestic stock levels fall.

Pakistan's MY 2014/2015 wheat imports are estimated at around 750,000 metric tons. Pakistan's wheat imports during the current marketing year are provided below in Table, this official data is subject to eventual revision. Wheat flour exports to Afghanistan are progressing at the normal pace. Pakistan is expected to export around 600,000 tons of flour (wheat equivalent) to Afghanistan during the current marketing year.

Pakistan Wheat Imports MY 2014/15 (May/April)

Month

Metric Tons

May

0

June

0

July

0

August

44,832

September

230,000

October

371,177

November

81,798

December

2,650

January

8,830

February

840

March

941

April

541

Total

741,609

Source: Pakistan Bureau of Statistics

Pakistan Wheat Exports MY 2014/15 (May/April)*

Month

Metric Tons

May

0

June

0

July

0

August

0

September

27

October

0

November

0

December

152

January

176

February

3,501

March

2,716

April

5,341

Total

11,913

*Excludes estimated flour exports to Afghanistan

Source: Pakistan Bureau of Statistics

Rice

Farmers are engaged in transplanting rice with better than average irrigation water supplies. The Meteorological Department has forecasted that the total amount of rainfall during the upcoming monsoon season (July-September) will remain slightly below normal and glacier melt rate will be slightly more than normal, which means that overall availability of water in the country for the Kharif (summer) crops should be satisfactory.

Based on preliminary official data that is subject to revision, Pakistan's MY 2014/15 rice exports are off to a faster than expected start, climbing to 2.5 MMT through the first six months of the marketing year. Exports are now expected to reach 4.0 MMT, assuming a pace of 250,000 MT per month. Export volumes tend to fade as harvest approaches, but stocks are adequate to push exports higher if demand materializes. Long grain rather than Basmati rice has accounted for the bulk of exports thus far.

Pakistan Rice Exports MY 2014/15 (Nov/October)

Month

Metric Tons

November

459,419

December

490,371

January

419,153

February

355,747

March

472,357

April

360,446

Total

2,557,493

Source: Pakistan Bureau of Statistics

Production, Supply and Demand Data Statistics:

Rice, Milled

2013/2014

2014/2015

2015/2016

Market Begin Year

Nov 2013

Nov 2014

Nov 2015

Pakistan

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

2,780

2,780

2,850

2,850

2,850

2,850

Beginning Stocks

500

500

1,431

1,400

1,761

1,500

Milled Production

6,700

6,700

6,900

6,900

6,900

6,900

Rough Production

10,051

10,051

10,351

10,351

10,351

10,351

Milling Rate (.9999)

6,666

6,666

6,666

6,666

6,666

6,666

MY Imports

31

0

30

0

20

0

TY Imports

22

0

30

0

20

0

TY Imp. from U.S.

13

0

0

0

0

0

Total Supply

7,231

7,200

8,361

8,300

8,681

8,400

MY Exports

3,200

3,200

3,800

4,000

3,800

3,800

TY Exports

3,300

3,200

3,900

4,000

3,800

3,800

Consumption and Residual

2,600

2,600

2,800

2,800

2,950

2,900

Ending Stocks

1,431

1,400

1,761

1,500

1,931

1,700

Total Distribution

7,231

7,200

8,361

8,300

8,681

8,400

Yield

3.641

3.615

3.533

3.631

3.631

3.631

1000 HA, 1000 MT, MT/HA