PESHAWAR – Pakistan’s Covid-19 outbreak is morphing into a food security crisis as massive wheat shortages emerge due to failing supply chains, poor government planning, unseasonal rains and, not least, pestilence.
Wheat millers claim the virus-hit nation is on course for a 3.5 million ton shortfall of the targeted 27 million tons needed for this year. If accurate, the shortage could result in severe food shortages during the upcoming winter season.
Pakistan’s economy has been devastated by the Covid-19 pandemic. As of July 28, the country had recorded over 275,000 cases and at least 5,865 deaths from the disease. Lockdowns and displacement, meanwhile, have disrupted food supply chains.
Around 80% of Pakistan’s farmers grow wheat on nearly nine million hectares, representing close to 40% of total cultivated land. Wheat is the nation’s main crop, contributing over 2% of gross domestic product (GDP).
Farmers retain about 60% of their wheat production for seed and food consumption, while the government buys 25% to 30% of the harvest. The private sector purchases the rest. One-third of total production is generally retained by wheat growers for cultivation and household food consumption.
Prime Minister Imran Khan’s government says it plans to meet the shortfall through imports and early stock releases, but millers doubt they will be able to convince importers or find sellers at the government’s approved below-market price rates.
Pakistan’s domestic requirement of wheat is over 2 million tons per month, or 25.5 million tons annually for the 212 million-plus population. The government had targeted to procure 8.25 million tons from growers for strategic reserves, while 700,000 tons were provisionally earmarked for export to Afghanistan.
At the end of June, Pakistan’s Economic Coordination Committee (ECC) of Khan’s cabinet approved the import of 2.5 million tons of wheat to meet the shortfall and bring prices down in domestic markets. The shipments never materialized, however, as the private sector shied away from government proposed rates.
“The government fixed 1,450 rupees (US$8.6) per 40 KG bag of wheat while import cost of the same quantity comes to 1,750 rupees ($10.4),” said Asim Raza, chairman of the All Pakistan Flour Mills Association (APFMA).
“The importers find this rate uncompetitive for import unless the government offers a subsidy to make up for the price differential in local and imported wheat,” Raza said.
The Ministry of National Food Security and Research announced this month various incentives to bridge the price difference between local and imported wheat, including relief in some regulatory and customs duties, sales tax and withholding tax.
Omer Hamid Khan, secretary of the ministry, claimed that the measures would encourage wheat importers and that orders had already been placed to import 270,000 tons of wheat, which will reportedly be shipped via four vessels over the next two months.
Hafeez Pasha, a former finance minister and renowned economist, has estimated that the end-consumers would pay an extra 180 billion rupees ($1.1 billion) due to the shortages. He said that the government would need to import at least two billion tons of wheat to meet domestic requirements.
It was the first time in 21 years that Pakistan would need to import wheat, Pasha said. That’s raising questions about whether the country has the capacity to handle such a large volume of imports and if it will be able to efficiently distribute the grain in a timely manner to avoid a possible famine.
Staple food shortages have already pushed prices up by some 30% this year in Punjab, Pakistan’s food basket region. Millers there have cut back on the wheat flour production due to skyrocketing prices for the grain on open markets.
The government’s fixed 1,450 rupees ($8.6) price per 40-kilogram bag is well below the open market price of 2,200 rupees ($13). In a bid to deflate prices, the federal government has released 400,000 tons of wheat from its reserve stocks to help local flour millers to keep their wheels turning.
Normally, the food department releases wheat from the government reserved stock from September onward, during the onset of the cold season. The early stockpile release foretells a crisis in December and early next year when the demand for wheat products usually rises.
Reports indicate that forward public stocks are already largely depleted. Minister for Food Security Syed Fakhar Imam recently informed parliament about a mysterious “disappearance” of wheat from government stocks.
“We have procured record six million ton wheat, but it is a mystery as to where it has gone,” Fakhar said while winding up a recent debate on the agriculture sector.
“We have only 450,000 tons of wheat in the carry forward stock against the previous year’s stock of around 4 million tons, which means that with the addition of a new crop the country’s total production will be 24.5 million tons,” APFMA’s Raza said. “This shows a shortfall of over 3.5 million tons needs to be met by imports.”
Like others, he has expressed doubts about the government’s ability to arrange berth space and vessels to import 3.5 million tons of wheat in such a short period of time.
Apart from supply chain mismanagement, mother nature is also wreaking havoc on supplies. The United Nation’s Food and Agriculture Organisation (FAO), in a report released in May, warned Pakistan faced a serious food crisis due to locust attacks on crops.
The report noted a new “migration pattern” of desert locust in Southwest Asia and predicted potential dire effects on Pakistan’s wide agro-economy without stronger government control measures to fight back the insect invasion.
“In Pakistan, 38% of the area (60% in Balochistan, 25% in Sindh and 15% in Punjab) are breeding grounds for the desert locust, whereas the entire country is under the threat of invasion if the desert locust is not contained in the breeding regions,” the report said.