May 26, 2010

Wheat price in Pakistan has started decreasing from PKR 885 (US$10.41) to PKR 865 (US$10.18) per 40 kilogrammes throughout the province and may continue to drop.

With the Punjab Food Department preparing to wind up procurement campaign in a week's time, the farmers fear that every passing day will press wheat prices further down.

According to wheat analysts, the market still has a tradable surplus of around 800,000 to one million tonne. The millers are not ready to purchase it at current lower price, because they know it will go further down. The investors, who had money or loans, have already purchased their share and are almost out of the market. Thus, no one is there to control the market glut and stabilise the price.

The food department has so far procured 3.6 million tonne wheat, and hit its financial limits. Its daily arrival is still around 40,000 tonne, and it will hit the target by the first week of June. Everyone in the market now knows that it has already invested whatever loans it got from the banks and will have to borrow more money for procurement, which is hard to come by.

According to Muhammad Mukhtar, a trader from Farooqabad, the department will maximum purchase another 200,000-300,000 tonnes if it gets additional money from banks. It will still leave around 500,000-700,000 tonnes in the market, causing a steep crash. Both these realities - market glut and department pulling out – are pressing the price down, and will continue doing so.