This season, wheat procurement in Punjab, which starts next week, is going to be a novel experience for many reasons. For the first time in procurement history, four different rates of the commodity will be operating in the field. Crop size is uncertain, at least so far, and would force every buyer into a frantic jostling to meet its target first — at the cost of others.

Last year’s historically highest rate will naturally incentivise farmers, who can afford, to delay the sale for potentially better rates later. This is going to be the context in which fresh wheat trade season opens in Punjab next week.

As far as rate confusion is concerned, the provincial government can only blame itself — and would pay the cost. Of late, after persisting with a rate of Rs1,950 per maund right till harvesting, it did increase it to Rs2,200; thus robbing itself of possible benefits of better rates leading to better acreage and better yield. So, the official procurement rate is Rs2,200 per maunds.

Punjab will be selling wheat at Rs1,600 and Rs1,950 per maund in one window and purchasing the same quantity at a rate of Rs2,200 in the next window

However, the government is still releasing official wheat (of last year’s procurement) at the rate of Rs1,950 per maund: it would be selling at Rs1,950 per maund and purchasing the quantity at the rate of Rs2,200 at the same time — thus keeping a window ajar for those who can manage sale-purchase, without commodity actually changing hands, to mint a windfall.

Things do not stop here. The Punjab government has introduced yet another, even lower, rate under the Ramazan package and is providing some 150,000 tonnes at the rate of Rs1,600 per maunds, and rigging the market further.

Practically speaking, Punjab would be selling wheat at Rs1,600 and Rs1,950 per maund in one window and purchasing the same quantity at a rate of Rs2,200 in the next window. Given the capacity of the provincial government to keep these different rate streams going in separate ways, their overlapping is a distinct possibility, even probability. A fourth rate of Rs2,400 per maund is operating in the open market as well.

The same rates are reflected in the staple market — incentivising convergence of different rate streams into the higher slab at the cost of the common man. Flour from the officially released wheat is selling at Rs55 per kilogramme — Rs550 per 10kg bag. Flour made of Ramazan package would be selling in the market at a rate of Rs45 per kilogram (Rs450 per 10Kg). The millers are selling 15kg packing, made of open market wheat at the rate of Rs70 to Rs73 per kilogramme — from Rs1,050 to Rs1,100 for different brands.

Under these market realities, an uncertain crop size is adding to volatility. Punjab started the season with high hopes, unilaterally adding one million tonnes to the federal target of 20.90m tonnes and pledging to yield 21.90m tonnes. Its hopes, however, were dampened when it lost almost 500,000 acres in area — 16.70m acres last year to 16.20 million acres this season.

Fertiliser was the next shock: its availability dipped at crucial times, price spiralled higher and higher throughout the season and its application suffered. Statistical realities tell the story. The phosphatic fertiliser (DAP), the most essential nutrient, saw its usage sliding by a whopping 40 per cent (2.2m tonnes last season to 1.5m tonnes this season), as its price spiralled out of 90pc (small) farmers’ fiscal reach — from Rs4,500 per bag to over Rs10,000 per bag within a matter of weeks.

Urea took its turn when its price ran to the north and supply to the south. Its price topped Rs2,500 per bag in the middle of the supply crisis. The National Fertiliser Development Centre measured the monthly deficit: 102,000 tonnes (November), 129,000 tonnes (December), 178,000 tonnes (January) and 168,000 tonnes during February.

During January 2022, nitrogen offtake decreased by 10.5pc as compared to the same period of last year. Phosphate and potash offtake, however, increased by 6.4pc and 16.4pc respectively.

In a nutshell, lost acreage, unfavourable weather conditions (high temperature), shortage and high prices of fertiliser, irrigation supplies shortage and rust disease prevalence because of conducive weather conditions left a question mark hanging over the crop size.

Amid fears, the first provincial crop survey rekindled hopes when it measured crop size of 2.50m tonnes (1.4 million tonnes less than the projected 21.9m tonnes) and also said that high temperatures during March have forced the crop to early maturity. Punjab, at one point (during February), was calculating the crop size to be a little less than 19m tonnes.

The survey came as a relief to the department but also created an emergency of quickly moving for procurement to deal with early maturity. The provincial Food Department immediately set a target of 3.5m tonnes and started dispatching gunny bags to South Punjab, where crop first hits the provincial market.

The market watchers, however, fear deeper confusion in trade during the next few weeks. They blame various wheat rates for causing confusion and corruption, leading to hoarding and the government resorting to administrative measures to get to its target.

Should that happen, as early clues point out — the food department has cast deputy commissioners in charge of the campaign in their respective districts — the millers would be waiting for their turn. If the millers are unable to purchase between 1.5m to 2m tonnes, the departmental stocks would have to supplement them.

However, if last year’s highest-ever rates become an incentive for hoarders and farmers to hold back wheat, everyone would be in trouble. Meanwhile, the common man, already reeling under high inflation and killer rates of the staple is holding his breath, waiting to see what next season would mean for it.

Published in Dawn, The Business and Finance Weekly, March 28th, 2022