The country is likely to achieve 26 million tons wheat production target during FY16 as cultivation area has exceeded the target and prices of fertilizer are remained soft.
However, State Bank of Pakistan (SBP) said that higher wheat production might pose some major policy challenges as wheat stocks in the country had already reached four-year high of 7.4 million tons and government would not be able to procure large quantities from growers without first depleting existing reserves.
Assuming a yield of 2,898 kg per hectare, the government has set FY16 wheat target at 26 million tons slightly higher than 25.5 million tons wheat produced in FY15. However, policy makers said the achievement of that target was contingent on adequate availability of inputs including urea, DAP, credit and water.
“Wheat outlook appears encouraging so far as area under cultivation has exceeded the target of 8.973 million hectors and overall wheat has been cultivated at 9.181 million hectors across the country. In addition, not only have prices of fertilizer (DAP and urea) remained soft, its off-take has also grown strongly,” SBP said in its recent report.
SPI data reveals that price of one bag of DAP declined by 13 percent during July-February FY16, while price of one bag of urea remained stable during the same period.
While, DAP off-take posted an increase of 26.4 percent YoY during Rabi season, whereas urea off-take recorded eight percent growth. Furthermore, weather conditions proved conducive due to rainfall in October ensured timely sowing of wheat in rain-fed cultivation areas and rains in second half of January provided much needed precipitation and brought down mercury levels, which bodes well for germination.
Moreover, water availability remained adequate and credit disbursement recorded significant increase. Agriculture credit disbursement registered an increase of 23.5 percent in Q2-FY16.
“While the likely promising wheat crop would partly offset losses from badly hit cotton crop, this would also pose some major policy challenges as wheat stocks in the country have already reached four-year high of 7.4 million tons, this severely weakens the government’s ability to procure large quantities from growers without first depleting existing reserves,” the report said.
The policy challenge becomes more complex as international wheat prices continue to remain lower than domestic prices, which makes export of wheat unfeasible despite the subsidy allowed by the government. Wheat exports remained almost nil during H1-FY16, it added.
Global wheat prices are likely to remain soft going forward due to abundant supply. Global wheat stocks are projected to increase by 24 million tons this year and reach a record level of 233 million tons. It may be mentioned here that wheat support price however was kept unchanged at last year’s level of Rs 1,300 per 40 kg.
Source: Business Recorder
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