Wheat Markets and Price Stabilisation in Pakistan: An Analysis of Policy Options

Abstract

This article provides a quantitative analysis of the effects of Pakistan government domestic wheat procurement, sales, and trade policies on wheat supply, demand, prices, and overall inflation. Analysis of price multipliers indicates that increases in wheat procurement prices (one means of promoting domestic procurement) have relatively small effects on the overall consumer price index. Partial equilibrium analysis of wheat markets suggests that fluctuations in production, rather than market manipulation, are plausible explanations for price increases in recent years. Comparisons of domestic and international prices suggest that promoting private sector imports is one alternative for increasing supply and stabilising market prices, particularly in years of production shortfalls. Overall, this paper concludes that market forces play a dominant role in price determination in Pakistan, and that policies that promote the private sector wheat trade can both increase price stability and reduce fiscal costs.

Wheat Yield Forecasting for Punjab Province from Vegetation Index Time Series and Historic Crop Statistics

“…Accurate wheat production forecasts allow government planners, policy experts and decision makers to better determine whether and how much grain to import or export, while maintaining adequate reserves for national food security and to set support prices at appropriate levels. The effect of inaccurate forecasts was exemplified in 2005 when a large surplus of wheat was expected in Pakistan, allowing private traders to purchase wheat significantly below the support price and triggering the government to sell wheat grain on the international markets, while the final production was much lower than expected, caused by damage from rains and strong winds [5,6].…”

Going Against the Grain of Optimism: Flour Fortification in Pakistan

“…Licensed private sector mills are then allocated quotas of subsidised grain from government stocks. The quotas are determined by mill size and this accounts for overinvestment in or over-reporting of milling capacity (Dorosh and Salam 2008). Prikhodko and Zrilyi (2013) estimate that the issue price of wheat to flour mills includes a subsidy element of around 15 per cent.…”

“…5 The Women's Work and Nutrition survey undertaken for LANSA in collaboration with the Collective for Social Science Research and the Leverhulme Center for Integrative Research on Agriculture and included modules related to the consumption end of wheat flour. 6 These aggregate harvest shares are based on Dorosh and Salam (2008), who in turn, base their estimates on a survey of farmers in Punjab and Sindh in the late 1990s. 7 Key informant interview, sector expert, Islamabad.…”

Trading-Off Volatility and Distortions? Food Policy During Price Spikes

“…The first example is that of rice markets and prices in China with rice the most important staple food crop for China's poor; the second example is that of wheat markets and prices in Pakistan, where wheat is the most important staple food crop. (Dorosh and Salam, 2008;Briones Alonso and Swinnen, 2014). Yet at the same time, the government has allowed structural price changes to be transmitted to its domestic producers and consumers.…”