Production:

Wheat is one of the main agricultural crops in Pakistan, with 80 percent of farmers growing it on an area of around nine million hectares (close to 40 percent of the country's total cultivated land) during the winter or "Rabi" season. This crop alone contributed about 10.3 percent of value added in agriculture and 2.2 percent of the country's gross domestic product (GDP) in 2014. MY2015/16 wheat production is forecast at 25.5 million metric tons, unchanged from last year's revised record production. The increase in production is due to timely planting, greater availability and use of irrigation water, improved quantity and quality of inputs and favorable weather conditions. MY 2014/15 production is adjusted upwards to 25.5 million metric tons, in accordance with latest government of Pakistan figures.

The Government of Pakistan has decided to buy 6.6 million metric tons of wheat from the next harvest. Public procurement agencies have been buying on average around six million tons for the past few years and this decision seems to be an intention on the part of the government to continue that trend. The Government increased the wheat support price for the MY 2015/16 crop by eight percent, fixing the price at Rs. 1,300 per 40 kilogram ($318 per metric ton). This was the first increase in two years and was aimed at boosting farm income and giving farmers an incentive to maintain planted area.

Wheat Area by Province MY2014/15

Province

Area

(Million Hectares)

Percentage of Total Area

Punjab

6.9

75

Sindh

1.1

12

KPK

0.8

9

Baluchistan

0.4

4

Total

9.2

100

Cumulative fertilizer nutrient offtake from October 2014 to February 2015 was 2.1 million tons, up 20 percent compared with corresponding previous period. Nitrogen offtake increased by 13 percent and phosphate offtake increased by 45 percent. Weather conditions during the current Rabi season were conducive for good crop production. Temperatures during December and January remained lower-than-average; however, major wheat growing areas did not receive significant rainfall until February. The lower precipitation was compensated with relatively better supplies of irrigation water provided by one of the world's largest networks of canals and sub-canals.

About two-thirds of the country's water for irrigation is sourced from snow and glacier melts, with the balance supplied by seasonal monsoon rains. Since the completion of the nation's irrigation system in the 1970s, demand for water has increased by more than 50 percent, while storage capacity has decreased by about one-third due to silting. During the last two years supplies of irrigation water have been relatively better, but over the long term, Pakistan is likely to face water related challenges. These water challenges, if not addressed, could become a key factor affecting wheat production. Dated farming methods, reduced water availability, dam silting, and an increasing population in the catchment areas of Chenab, Jhelum and Indus rivers have reduced the per capita water availability from 5,000 cubic meters in 1951 to less than 1,000 cubic liters in 2010. The situation is accentuated as 85 percent of Pakistan's wheat production is dependent upon irrigated water.

The effect of water shortages is traditionally more severe in the Sindh province than in the Punjab region. Many parts of Sindh's ground water are alkaline and not fit for irrigation, thereby necessitating a greater reliance on canal water. In the Punjab province, where extensive tube well irrigation is utilized to supplement the canal irrigation, the crop was generally considered to be in normal condition as of March 2015. The MY 2015/16 crop output forecast of the Ministry of National Food Security and Research is (MNFSR) is 26 MMT, largely based on an expected harvest of 19 MMT in Punjab. Heavier than normal late season in March and early April could affect yields as Pakistan readies for harvest.

Consumption:

Wheat is Pakistan's dietary staple. Pakistan has a variety of traditional flat breads, often prepared in a traditional clay oven called a tandoor. The tandoori style of cooking is common throughout rural and urban Pakistan. Wheat flour currently contributes 72 percent of Pakistan's daily caloric intake with per capita wheat consumption of around 124 kg per year, one of the highest in the world. MY 2014/15 consumption estimates are revised down to 24.1 million metric tons unchanged from 2013/14. MY 2015/16 consumption is forecast at 24.2 million metric tons. As incomes increase and a stronger middle class emerges, consumers are gradually shifting towards more dairy, meat, and other higher-value food products in their diet. Over the long term, this shift to a more balanced diet has the potential to limit the pace of growth in wheat consumption. During 2014, domestic wheat prices declined and price of wheat flour in December 2014 was six percent lower than in December 2013 mainly due to higher stocks and imports. Out of the total demand of 24.1 million metric tons, only 2.4 percent will be used in the feed industry, and the remaining 97.6 percent will be used for planting and human consumption.

Pakistan's wheat milling industry is privately owned. There are about 1,000 flour mills in Pakistan, which meet the consumption needs of about 40 percent of the population, with the balance met by on farm consumption. The disbursement of government-owned wheat to flour mills is managed in an effort to ensure that sufficient wheat is available throughout the year.

In urban areas and among affluent consumers, consumer preference is shifting from higher whole grain to lower extraction flour and traditional flat bread to western-style, loaf bread. Traditional home-ground flour is also losing favor to commercially milled flour. Specialized products like cereals suited to the changing life styles in the urban areas are also gaining demand.

Trade:

MY 2014/2015 wheat exports are estimated at 700,000 metric tons with Afghanistan being the main market. Pakistan's wheat flour exports to Afghanistan during MY 2014/2015 are estimated at 600,000 metric tons (wheat equivalent) with the remainder being exported to regional markets. MY 2015/16 wheat exports are forecasted at 1.0 million metric tons. Given the present trend, Pakistan's MY 2015/16 wheat flour exports to Afghanistan are forecast to be around 600,000 to 700,000 metric tons. Afghanistan has been the main wheat export market for Pakistan for many years mainly due to easy accessibility and traditional trade linkages between the two countries. While Pakistan has announced an export subsidy of $50 per ton for wheat purchased for export from government-held stocks, exports have been limited to Afghanistan and Sri Lanka. The subsidy is effective through June 30. As global wheat prices have declined, Pakistan's high sales price for publicly-held stocks has resulted in limited buyer interest. While that price differential is likely to persist, small additional quantities of Pakistani wheat are expected to make their way to regional markets like Sri Lanka, where Pakistan enjoys a lower tariff than other suppliers because of the provisions of the South Asian Agreement for Regional Cooperation, a trade agreement among South Asian countries.

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. The wheat was sourced from Black Sea ports at an average price of $275/ton (C&F Karachi). Pakistan is not likely to import additional wheat during the current marketing year and prospects of imports during MY 2015/16 are also low, mainly due to the expected bumper harvest and high government stocks. In a recent development, the GOP increased the regulatory duty on imports of wheat and wheat products from 20 to 25 percent. The increase is well below Pakistan's bound tariff rate (the maximum tariff rate Pakistan can establish) for wheat of 150 percent. The tariff on wheat imports was increased from zero to 20 percent during November 2014 resulting in a significant reduction in the volume of imported wheat. The tariff expires on June 30 and it is not clear if Pakistan will extend the tariff.

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

Total

739,287

Most of the imported wheat is used in the southern Karachi region which is farther away from wheat producing areas. Imported wheat is usually mixed with local wheat by the milling industry.

Stocks:

MY 2014/15 ending stocks are estimated at 3.7 million tons. Wheat is procured and maintained through provincial food departments and the federal agency known as the Pakistan Agricultural Storage and Services Corporation (PASSCO). In 2014, the GOP procured around 6.0 million tons of wheat from the local harvest. Over the past three years, the public sector wheat procurement has averaged around six million tons annually. The procurement target for the upcoming harvest has been set at 6.6 million metric tons which will likely boost public stock levels to 10 million tons shortly after the start of the marketing year. The GOP has come under pressure from international and domestic sectors to end its wheat procurement operations and let the markets and the private sector handle the efficient allocation of resources. The Government continues to support the policy citing national and food security concerns.

Policy:

Pakistan maintains a largely government controlled wheat marketing system and the GOP considers wheat as the key strategic commodity. The federal government sets a minimum guaranteed support price or procurement price and an issue price for wheat sold to flour mills. Through provincial food departments, the GOP procures wheat from farmers at the support price and then releases wheat to the flour mills at the government fixed issue price. The issue price is set at a rate that captures much of the cost of buying and storing the wheat, but there are implicit costs that are not fully captured. Wheat prices and the movement of wheat are controlled at the provincial and district levels. Grain stocks are procured and maintained by the provinces. The system aims to protect farmers from price fluctuations and to ensure a minimum return during cyclical post-harvest low prices.

Farmers in Pakistan retain about 60 percent of their wheat production for seed and village and household food consumption. For wheat that is marketed, the government is the main buyer of farmers' wheat, with actual volumes of government procurement often reaching 25 to 30 percent of total production, driven by both food security and market intervention objectives. The remaining 15 percent of the harvest is purchased by the private sector. While food security is an important concern in Pakistan, high volumes of state wheat procurement make it harder for to attract private sector trade and investment in the postharvest supply chain.

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

May 2013

May 2014

May 2015

Pakistan

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

8,640

8,640

8,830

9,100

0

9,100

Beginning Stocks

2,622

2,622

2,160

2,222

0

3,672

Production

24,000

24,000

25,000

25,500

0

25,500

MY Imports

388

400

750

750

0

100

TY Imports

388

400

750

750

0

100

TY Imp. from U.S.

28

28

0

0

0

0

Total Supply

27,010

27,022

27,910

28,472

0

29,272

MY Exports

750

700

700

700

0

1,000

TY Exports

750

700

700

700

0

1,000

Feed and Residual

600

600

1,200

1,000

0

1,000

FSI Consumption

23,500

23,500

23,900

23,100

0

23,200

Total Consumption

24,100

24,100

25,100

24,100

0

24,200

Ending Stocks

2,160

2,222

2,110

3,672

0

4,072

Total Distribution

27,010

27,022

27,910

28,472

0

29,272

Yield

2.777

2.777

2.831

2.802

2.802

1000 HA, 1000 MT, MT/HA