August 28, 2010

Pakistan may shelve wheat-export plan on floods

Pakistan is likely to scrap plans to export two million tonnes of wheat after devastating floods washed away stored grain, threatening to further tighten global supplies hit by a severe drought across the Black Sea region.

The country has lost at least 725,000 tonnes of wheat in its worst flooding in 80 years, although traders said there are still enough stocks to meet demand until the next harvest, meaning imports are unlikely.

The floods have damaged up to 600,000 tonnes of privately-stored wheat, according to initial estimates, and another 125,000 tonnes of wheat in government stores had been washed away, a food and agriculture ministry official said on Thursday (Aug 26).

At present, the government was closely monitoring the situation and confirmed the likely cancellation of the export plans. Given the devastation, the government wants to ensure there are no shortages, especially in the flood-affected areas.

Pakistan, Asia's third largest wheat producer, said in April it would export two million tonnes of wheat after a bumper crop of 23.86 million tonnes in 2009/10, and a carryover of 4.2 million tonnes from the previous crop.

Earlier this month, benchmark Chicago Board of Trade wheat prices climbed to a two-year high as a drought ravaged crops in Russia and Ukraine, two of the world's largest exporters of the grain.

"But in that regard it is taking another two million tonnes out of the export market, which just increases the burden that the traditional exporters like the US, Australia and the EU are going to have to deal with," said analysts.

The USDA this month reduced its estimates for global wheat stockpile to 175 million tonnes at the end of 2010/11 marketing year, down from 187 million tonnes reported in July.

Wheat is a staple food in Pakistan with about 22 million tonnes consumed each year. Any shortages or steep price hikes would inflame public anger toward the government, which is facing mounting criticism over its handling of the catastrophe.

In 2007, Pakistan banned wheat exports because of shortages and high domestic prices.