Voluntary Report - public distribution

**Date:** 6/7/2004

**GAIN Report Number:** PK4011

PK4011

**Pakistan**

**Grain and Feed**

**Wheat Update**

**2004**

**Approved by:**

Michael Henney, Regional Director

US Consulate, D![](media/image1.wmf)ubai

**Prepared by:**

Asif Farrukh, Agri. Marketing Specialist

US Embassy, Islamabad, Pakistan

**Report Highlights:**

MY 2004/05 Pakistan wheat import forecast increases to 500,000 MT with
expectation the amount could climb as high as 1.5 Million Metric Ton
(MMT) to stabilize wheat prices reacting to a smaller, poorer quality
harvest, smaller procurement levels by government food departments and
rising wheat product prices.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Unscheduled Report

Islamabad \[PK\]

\[PK\]

**Production**

MY 2004/05 Pakistan wheat production is forecast at 19 MMT as the
March/April heat wave caused plants in the main production areas of
Sindh and Punjab provinces to mature several weeks prematurely resulting
with smaller, shriveled grains at harvest. In the Punjab Province,
limited irrigation water supplies and deficient sub-soil moisture
compounded the heat's negative effect on plant maturity.

The Ministry of Food, Agriculture and Livestock (MINFAL) maintain a
forecast of 19.7 MMT based on an anticipated more positive impact from
the increased use of fertilizers and herbicides and expanded planted
acreage this growing season. Industry sentiments hold MINFAL's optimism
as too high.

# Table: Wheat Production, Supply and Demand

+-------------------------+------+------+------+------+------+------+
| Pakistan                |      |      |      |      |      |      |
|                         |      |      |      |      |      |      |
| Wheat                   |      |      |      |      |      |      |
+-------------------------+------+------+------+------+------+------+
|                         | **20 | **R  | **20 | **Es | **20 | **Fo |
|                         | 02** | evis | 03** | tima | 04** | reca |
|                         |      | ed** |      | te** |      | st** |
+-------------------------+------+------+------+------+------+------+
|                         | **   | **   | **   | **   | **   | **   |
|                         | USDA | Post | USDA | Post | USDA | Post |
|                         | Offi | Esti | Offi | Esti | Offi | Esti |
|                         | cial | mate | cial | mate | cial | mate |
|                         | \    | \    | \    | \    | \    | \    |
|                         | [Old | [New | [Old | [New | [Old | [New |
|                         | \]** | \]** | \]** | \]** | \]** | \]** |
+-------------------------+------+------+------+------+------+------+
| **Market Year Begin**   |      | 05/  |      | 05/  |      | 5/   |
|                         |      | 2002 |      | 2003 |      | 2004 |
+-------------------------+------+------+------+------+------+------+
| **Area Harvested**      | 8057 | 8057 | 8094 | 8094 | 8200 | 8200 |
+-------------------------+------+------+------+------+------+------+
| **Beginning Stocks**    | 2591 | 2591 | 1438 | 1438 | 1630 | 1730 |
+-------------------------+------+------+------+------+------+------+
| **Production**          | 1    | 1    | 1    | 1    | 1    | 1    |
|                         | 8226 | 8226 | 9192 | 9192 | 9000 | 9000 |
+-------------------------+------+------+------+------+------+------+
| **TOTAL Mkt. Yr.        | 186  | 186  | 100  | 50   | 200  | 500  |
| Imports**               |      |      |      |      |      |      |
+-------------------------+------+------+------+------+------+------+
| **Jul-Jun Imports**     | 181  | 181  | 100  | 50   | 200  | 500  |
+-------------------------+------+------+------+------+------+------+
| **Jul-Jun Import U.S.** | 160  | 160  | 0    | 0    | 0    | 400  |
+-------------------------+------+------+------+------+------+------+
| **TOTAL SUPPLY**        | 2    | 2    | 2    | 2    | 2    | 2    |
|                         | 1003 | 1003 | 0730 | 0680 | 0830 | 1230 |
+-------------------------+------+------+------+------+------+------+
| **TOTAL Mkt. Yr.        | 1185 | 1185 | 200  | 50   | 50   | 100  |
| Exports**               |      |      |      |      |      |      |
+-------------------------+------+------+------+------+------+------+
| **Jul-Jun Exports**     | 1137 | 1137 | 100  | 50   | 50   | 100  |
+-------------------------+------+------+------+------+------+------+
| **Feed Dom.             | 400  | 400  | 400  | 400  | 400  | 375  |
| Consumption**           |      |      |      |      |      |      |
+-------------------------+------+------+------+------+------+------+
| **TOTAL Dom.            | 1    | 1    | 1    | 1    | 1    | 1    |
| Consumption**           | 8380 | 8380 | 8900 | 8900 | 9300 | 9300 |
+-------------------------+------+------+------+------+------+------+
| **Ending Stocks**       | 1438 | 1438 | 1630 | 1730 | 1480 | 1830 |
+-------------------------+------+------+------+------+------+------+
| **TOTAL DISTRIBUTION**  | 2    | 2    | 2    | 2    | 2    | 2    |
|                         | 1003 | 1003 | 0730 | 0680 | 0830 | 1230 |
+-------------------------+------+------+------+------+------+------+

# Wheat Procurement

The Government of Pakistan (GOP), through the MINFAL and provincial food
departments, procured about 3.2 MMT of wheat as of June 1, 2004. The GOP
target wheat procurement is 5 MMT but it is finding commercial market
competition extremely keen thus far this year.

In mid-May the Government of the Punjab Province (where 80 percent of
Pakistan's wheat is produced) banned inter-district and inter-provincial
movement of wheat in effort to sway farmers to sell to provincial food
departments. Despite this government action district food departments
have been unable to accelerate procurement for logistical reasons. Early
market involvement by the flour milling industry and trade has ensured
many mills around the country will be amply stocked with wheat for a
several months. However, most flour mills could not procure enough
stocks to satisfy their full year requirements which translates to an
active role of food departments in controlling local market prices the
later part of this year absent imports.

# Consumption

Domestic wheat consumption continues to expand two-three-percent per
annual driven by population growth, in the process creating ever keen
competition between the food and feed sectors for available supplies.
Domestic corn production, however, is finally starting to react to feed
sector demand and corn prices are finally beginning to fall below that
for wheat. As a result, reduced pressure on wheat supplies for food
consumption thus prices should be witnessed in the nearer future.

# Trade

Pakistan would need to import 500 TMT to 1.5 MMT of wheat to improve
domestic supply availability thus hold market prices in check. For a
second year in row carry-in wheat stocks did not meet government
expectations. Open market prices for wheat and wheat-based products, as
a consequence, have increased 30 percent over the last year. News that
the Pakistan Cabinet authorized up to one million metric tons of wheat
for purchase by the Government buying agency, Trading Corporation of
Pakistan (TCP), temporarily arrested recent market gyrations but with
market recognition of the current tight supply prices are expected to
vacillate until the situation settles. The GOP, therefore, may have to
actually import upwards of 1.0-1.5 MMT through its various buying arms
in order to avoid problems with this politically sensitive commodity
(wheat).

In MY 2003/04, rumors of farmer hoarding proved misleading after causing
significant dishevel in the market. If the GOP wishes to avoid similar
problems in MY 2004/05, it would need to import wheat with arrival
starting in July/August in order to stabilize domestic supplies, prices
and work towards rebuilding ending stocks, which would have a placating
effect on the market next year. If the market stabilizes significantly,
boarder restrictions with Afghanistan would likely be loosened resulting
in greater movement of wheat to that country.