Despite having fertile lands and bumper wheat crops, Pakistan had to import four million tons of wheat last year. South Asian country has undergone a historic shift from being an exporter of wheat to a major importer of wheat. Prime Minister Imran Khan warned if food crops production did not increase and the population explosion continued, the country might face famine and poverty in the years to come.
Pakistan is the fifth most populated country in the world, with a population of about 207 million. It is situated between Central Asia and the Persian Gulf, at the strategically important mouth of the Strait of Hormuz. It shares its borders with China, India, Afghanistan and Iran.
With an overall GDP of close to $305 billion, Pakistan is the seventh-largest market in the Middle East, African, and South Asian regions, as measured in Purchasing Power Parity (PPP). It has the second-largest economy in South Asia, after India. The economy has been growing slowly over the past two decades. However, the containment measures adopted in response to the COVID-19 pandemic led to a severe contraction in economic activity. As a result, GDP growth is estimated to have contracted by 1.5 percent in 2020. Pakistan’s economy is forecast to grow by 1.3 percent in 2021.
The agricultural sector is one of the largest contributors to the economy. While declining as a proportion of GDP, agriculture still contributes one-fifth of Pakistan's wealth and almost half the population depends directly or indirectly on agriculture for their livelihoods. With 79.6 million acres of arable land, there is a great potential for improving efficiencies and productivity of the agriculture sector.
The crop sector is an important sector of the economy which provides food to the rapidly growing population of the country. The major crops consist of six main crops: wheat, rice, sugarcane, maize, chickpea and cotton.
Wheat is Pakistan’s largest crop, in terms of area sown and is grown under different agro-ecological zones. It is main dietary staple. Wheat flour currently contributes 72 percent of Pakistan’s daily caloric intake with per capita wheat consumption of around 124 kilograms (kg) per year, one of the highest in the world.
In irrigated areas, wheat is planted after cotton, rice, and sugarcane, while in rainfed areas wheat is grown at the same time as maize and millet. The sowing of wheat takes place from October to December and harvests from March to May. Approximately 80 percent of farmers grow it on an area of around 9 million hectares (close to 40 percent of the country’s total cultivated land) during the winter.
Pakistan’s population growth rate is among the fastest in the world and domestic wheat production and yields have not increased correspondingly, due to the impact of climate change, lack of investment in research for developing high-yielding varieties, and minimal increases in the support price over the last three years. To address these challenges and increase wheat production, at the end of October 2020, the government announced several policy initiatives. These initiatives included increasing the minimum support price for the 2021 wheat crop by 23 percent from PKR 1300 to PKR 1600 per 40 Kg ($250/MT), support to wheat producers in the form of subsidies for fertilizers, and a renewed focus on wheat research.
USDA projects Pakistan’s 2021/22 season wheat production to 26 million metric tons (MMT), three percent higher than last year’s wheat production of 25.2 MMT. 2020/21 wheat consumption is estimated at 25.8 MMT while MY 2021/22 consumption is forecast at 26.3 MMT.
WHEAT MILLING INDUSTRY
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.
Wheat consumption patterns have been largely unchanged although in some affluent urban areas, consumer preferences are gradually shifting from higher whole grain to lower-extraction flour and traditional flatbread 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 lifestyles in the urban areas are also gaining interest among consumers.
Pakistan has bought wheat regularly in the global market in recent months to boost domestic supply and cool prices. Pakistan’s MY 2020/21 wheat imports are estimated at 3.4 MMT. MY 2021/22 wheat imports are forecast at 1.0 MMT. Almost all wheat imports during the current marketing year are being sourced from Russia and Ukraine. The government’s June 2020 decision to suspend the 60 percent duty on wheat imports is still in effect. Consequently, all wheat imports are currently entering duty-free.
Prime Minister Imran Khan warned if food crops production did not increase and the population explosion continued, the country might face famine and poverty in the years to come. Addressing the Kissan Card distribution ceremony on 24th September, he highlighted the importance of making Pakistan self-sufficient in food crops. The prime minister said despite having much fertile lands and bumper wheat crops, the country had to import four million tons of wheat last year.
In the past year, Pakistan has undergone a historic shift from being an exporter of wheat to a major importer of wheat. The main reason is that increases in wheat production are not keeping pace with population growth, mainly due to the adverse impact of climate change and a lack of investment in agricultural research.
It should be noted that during MY 2018/19, when Pakistan exported around 2 MMT of wheat, the beginning stocks were 4.7 MMT. At that time, managing such large stocks was a challenge. The government wheat procurement operation is financed by banks, which charge a markup against their investment. To reduce the cost of maintaining such large stocks, a policy decision was made during MY 2018/19 to reduce the stocks to around 2 MMT, thereby enabling Pakistan to export 2 MMT of wheat. At that time, the government was confident that the country’s future wheat production would meet its consumption requirements in the coming years. However, that did not happen, and subsequently lowered wheat supplies compelled the government to drop the 60 percent duty and initiate the importation of wheat.
An additional factor contributing to the current marketing year’s record imports is the government’s continued push to rebuild its strategic reserves in the wake of pandemic-related spikes in demand and to offset the threat of potential productions losses from locust attacks. Pakistan needs a coordinated approach and sustained policy to determine the size of its intended wheat stocks. If the present ad hoc approach is continued, the country is likely to face uncertain market conditions which will put stress on the supply and demand situation.
Pakistan is likely to remain a wheat importer unless sustainable policy interventions are undertaken to address the emerging challenges from climate change, the lack of investment in wheat research, and the lack of quality seed.
Pakistan’s MY 2020/21 and 2021/22 wheat exports are estimated to be around 300,000 MT. The exports represent the cross-border trade between Pakistan and Afghanistan. Afghanistan has traditionally been a huge market for Pakistan but due to depleting stocks and a rise in prices, Pakistan is gradually losing the Afghan wheat market to India, and the Central Asian Republics.
While wheat production struggles to rebound, rice and corn production continues to increase in the country. USDA forecasts MY 2021/22 rice production and exports at a record 8.3 MMT and 4.5 MMT, respectively, due to optimum production conditions and larger, more affordable supplies available for export. Rice is Pakistan’s third-largest crop, after wheat and cotton, in terms of area sown. Pakistan plays a major role worldwide as a rice exporter, and it annually exports approximately 2 million tons, which is 10 percent of the world's trade.
After wheat and rice, corn is the most important cereal in Pakistan. Corn production has almost doubled in the last decade. If the present growth trend in corn production continues, it is likely to overtake rice production in the coming years.