The expected stock of 4-5 million tonnes of wheat after the fresh crop will not benefit the country in terms of exports despite removal of ban as the international trade of Pakistani wheat has come to a complete halt.
Stiff competition in International markets
Though the country has already exported at least 1.71 million tonnes of wheat so far after the removal of three years’ ban over its exports, the stiff competition in international markets has meant that Pakistani products are finding it hard to compete with lower priced wheat. It is expected that there will be a surplus stock of almost 4 millions tonnes. According to sources, there are limited storage facilities for wheat, which will likely result in damaging huge stocks of the commodity. Interestingly, sources claimed that, the smuggling of wheat was also not possible as the commodity in the international market was available at highly reduced prices. However, they said, the price in the local market was unlikely to be dropped further as it has been two months to the crop season. According to the market mechanism, prices vary with distance from the origin of the wheat crop.
Domestic wheat price to remain stable
“Under the present situation, the domestic market price of wheat can only increase if unofficial trade is undertaken by smugglers but that seems unlikely given the current level of international wheat prices,” they said adding that until international prices of wheat are low, exporters would not be able to export wheat despite having surplus stock. To a question, sources said that the devastative countrywide flood last year had not damaged the wheat crop. It is worth mentioning here that Pakistan was aiming to export around 3 million tonnes of wheat by mid-July 2011, but could not meet the target due to stiff competition of Russian wheat in international markets. Pakistan still has room to export almost 1.2 million as at least 1.71 million tonnes of the commodity was exported out of the total 3 million tonnes, allowed by the government this year after imposing a three year ban on wheat exports.
Africa, Middle East major wheat importers
Country’s wheat was mostly aimed to be sold in the markets of Africa, Middle East, Bangladesh and other countries. But, like Pakistan, Russia had also come back to wheat export market, after a ban last summer due to drought.
Russia exported around eight million tonnes of grain in July-September, although its exportable surplus was expected to be significantly higher. Pakistan’s 2010/11 season wheat crop output was likely to cross 24 million tonnes while there was around 3 million tonnes of carryover from the previous crop making the total surplus stock to around 5 million tonnes as the country’s domestic consumption stands at around 22 million tonnes.