According to the USDA’s latest June Pakistan country report, wheat production for the marketing year 2024/25 (May-April) is expected to reach a record 31.4 million metric tons (MMT), which is eleven percent higher than last year’s production of 28.2 MMT. The 2024/25 rice production forecast also sets a record at 10 MMT. Furthermore, due to sustained strong shipment levels, USDA has increased the 2023/24 rice export forecast from 5.9 to a record 6.3 million tons.

The grain industry in Pakistan is a cornerstone of the nation’s agriculture sector and overall economy. As a country where agriculture contributes significantly to GDP and employs a large portion of the population, the grain industry plays a critical role in ensuring food security and driving economic growth. 

Grains such as wheat, rice, and corn are staple foods for the Pakistani population. Ensuring a steady supply of these grains is essential for maintaining food security and nutritional standards across the country. Agriculture, including grain production, contributes around 19% to Pakistan’s GDP. The grain industry supports millions of livelihoods, from farmers to traders to millers, and is a key driver of rural development. According to the Pakistan Bureau of Statistics, agriculture employs about 42% of the labor force.

WHEAT HARVEST AND CONSUMPTION TRENDS IN PAKISTAN

In terms of both providing domestic food security and overall production area, wheat is Pakistan’s most important crop, accounting for about 70% of the daily caloric intake of the population. The nine million hectares of wheat area is about 40 percent of total field crop land. The cropping pattern in irrigated areas is wheat after cotton, rice, or sugarcane. In rainfed areas, wheat is grown at the same time as corn and millet. Wheat sowing occurs October/December. 

The government intervenes heavily in wheat production, marketing, and trade to ensure its position as one of Pakistan’s most important crops and to maintain wheat’s position as a strategic commodity critical to food security. The pillars of government intervention are a minimum guaranteed support price and a mandated selling price for flour mills. At the province level, the government buys wheat from farmers at the support price and then sells it to flour mills at the fixed government price. It is a costly policy, with the price that the government sells to the mills not covering all the associated procurement, handling, and storage costs. In any given year, the government purchases about 25 percent of production, 15 percent is marketed via private sector channels, and 60 percent of domestic production is for at-home use.

Based on the Pakistan government’s official data, wheat production for the marketing year 2024/25 (May-April) is expected to reach a record 31.4 million metric tons (MMT), eleven percent higher than last year’s production of 28.2 MMT. This year’s record production is based on significant increases in both area and yield and marks the second consecutive year of record wheat output. Good growing conditions throughout the season, sufficient irrigation water, and increased use of certified seed fueled the bumper crop. 

Beginning in August 2023, the government allowed the private sector to import wheat duty free, and the import prices were at a significant discount to prevailing domestic market prices. The private sector imported about 3.5 million tons. Russia was the largest supplier, followed by Ukraine, Romania, Bulgaria, and Latvia.

With the private sector providing lower priced imported wheat to the millers, the government sold only minimal stocks into the market. Consequently, the government held around five million tons of stocks at the onset of harvest and had limited storage capacity to purchase the new crop. Given record production and high stocks, the 2024/25 import forecast is reduced from 0.8 to 0.5 MMT.

Population growth and consumers’ preference for wheat-based products are driving the continued increase in consumption. Wheat consumption has remained steady at 124 kilograms per year, which is among the highest in the world. Wheat for feed and industrial use is not large, with the poultry industry consuming around five percent of the total demand.

During the last three years, annual price inflation in food commodities has hovered around 30 percent. The higher food prices have restricted consumers’ ability to include more protein in the diet. This has favored consumption of wheat-based products as milk and meat are unaffordable for many consumers. 

Domestic retail wheat flour prices during the last twelve months indicate that prices peaked in December/January, and then declined from March through May. Though this is consistent with the seasonal drop at harvest, the price decline this year was steeper due to the government’s decision not to procure wheat.

RECORD RICE PRODUCTION AND STRONG EXPORT PERFORMANCE

Rice is the second most important grain crop in Pakistan. The country is known for producing high-quality basmati rice, which is highly valued in international markets. The 2024/25 (November-December) rice production forecast is a record of 10 MMT due to good planting conditions and prospects for adequate irrigation water supplies throughout the growing season. The beginning and extent of summer rains will be critical in determining the final output of the current crop. The monsoon season will start in early July and continue until September.

Except for the flood damaged 2022/23 crop, rice production has steadily increased over the past decade. This increase is due to increases in both area and yield. Area has increased as rice has been more profitable vis-à-vis alternative crops. Meanwhile, adoption of hybrid seed varieties are driving yield increases.

Due to the sustained strong export pace through the first seven months of the marketing year, the 2023/24 rice export estimate is increased from 5.9 to record 6.3 MMT. The good harvest resulting in a large exportable surplus, competitive prices, India’s export ban, and increased buying from importing countries, especially Malaysia and Indonesia, boosted rice exports this marketing year.

Indonesia has been the single largest market during the current marketing year, while West Africa (Senegal, Mali, Ivory Coast, Gambia, Madagascar) and East Africa (Kenya, Rwanda, Tanzania), the Gulf region and EU remain consistent buyers. However, exports to China decreased significantly as compared to last marketing year. 

Pakistan exported around 4.5 MMT during the first seven months of the current marketing year. Basmati exports were slightly less than half million tons, while exports of non-basmati varieties were around four million tons. As of mid-June, offers for 5 percent broken white rice were around $640 per ton and parboiled rice around $680 per ton, up from $465 and $486, respectively, a year ago.

With the 2024/25 crop forecast at record level, next year’s export forecast is increased to 5.6 million tons. This marks a decline from the current year’s forecast as the unprecedented demand in global markets and favorable competitive conditions for Pakistani rice exports this year are unlikely to be sustained. Continued robust demand from Southeast Asia and West Africa is expected to underpin Pakistani rice exports through 2025. Local rice exporters are also focusing on rejuvenating shipments to China to counter any slowdown in the other regular markets.

CORN CROP FACES DECLINE AS FARMERS SHIFT TO OTHER CROPS

Corn is another significant grain crop, primarily used for fodder, poultry feed, and industrial purposes. Due to a significant decrease in area, corn output in 2024/2025 (July/June) is forecast to decrease 12 percent to 9.2 million tons. The decline in feed demand from the poultry sector caused corn prices to fall, discouraging farmers from planting corn in 2024. The decrease in the domestic corn prices prompted farmers to shift towards other crops, such as cotton, sugarcane, and rice. As a result, area is forecast to be the lowest in the past three years. 

Due to the poultry sector’s continued dismal performance, consumption in 2024/25 is forecast to drop to 6.5 million tons. Rising input costs and the ban on genetically engineered (GE) soybean imports adversely impacted the poultry sector, reducing the domestic feed demand.  Traditionally, poultry feed accounts for about 65 percent of corn use, while wet milling and dairy feed comprise about 15 and 10 percent, respectively. The remainder is corn milled for flour for human consumption. The main products of wet milling are industrial starches, liquid glucose and dextrose. There are approximately 180 feed mills producing poultry feed, with 10 million tons output capacity.

Pakistan’s Flour Milling Industry

The flour milling industry in Pakistan is a vital sector that plays a significant role in the country’s economy. With a substantial contribution to employment and a critical role in food security, the industry has grown and evolved over the years. The industry traces its roots back to the early 20th century. Initially, small-scale mills were set up to cater to local needs. However, the industry saw significant expansion post-independence in 1947, with the establishment of large-scale mills to meet the growing demand for flour in the country. The government played a crucial role in this expansion by providing subsidies and support to millers.

Today, Pakistan boasts a well-established flour milling industry with hundreds of mills spread across the country. According to industry reports, there are approximately 1,500 flour mills operating in Pakistan. The industry is primarily concentrated in Punjab, Sindh, and Khyber Pakhtunkhwa, which are the major wheat-producing regions. The mills produce a variety of products, including wheat flour, maida (refined flour), suji (semolina), and bran. The flour produced is used for making various traditional Pakistani bread, such as roti, naan, and paratha, as well as other bakery products.

Modernization has been a key focus for the industry in recent years. Many mills have adopted advanced milling technologies and automation to enhance efficiency and product quality. While modernization has been a focus, many mills still operate with outdated machinery and processes. The high cost of technological upgradation is a significant barrier for small millers.

The flour milling industry in Pakistan operates in a highly competitive market. Major players dominate the market, but there are also numerous small and medium-sized mills catering to local demands. The market dynamics are influenced by factors such as wheat supply, government policies, and consumer preferences. The government has a significant influence on the flour milling industry through various policies and regulations.