Another Wheat Crisis Looms For Pakistan
Triggered by wheat export curbs by Kazakhstan and the lowest world inventory in 26 years, wheat price hit a new record at $25 per bushel or about $900 per ton. This translates into Pakistan Rs. 55 per kilo for raw wheat in bulk excluding transportation, milling and bagging. It represents a 400% increase in less than a year. According to the U.S. Department of Agriculture's Foreign Agricultural Service, Kazakhstan is the sixth-largest exporter of wheat, behind the U.S., Canada, Russia, Argentina and the European Union. Kazakhstan is in the belt of wheat production that stretches from Ukraine through southern Russia. It already has exported nearly seven million tons of grain, of the available 10 million tons from the 2007-08 crop, Agriculture Minister Akhmetzhan Esimov said.
Price Doubled Since Dec, 2007
In my January 15, 2008 blog post Wheat Flour Shortage in Pakistan, I wrote as follows: " Former Prime Minister Shaukat Aziz announced in Sept, 2007 that the Pakistani government would import one million tons of wheat, stating that this action was necessary to “maintain a reasonable buffer stock for the future.” The export price for Pakistani wheat during the April-May export window was approximately $225-232 per ton. For December 2007 delivery, Pakistan is now looking at an estimated import price of $380-400 per ton, exclusive of transportation." Well, here we are in February 2008 and the price of wheat has more than doubled yet again since Dec, 2007. In fact, the inflation of wheat prices now exceeds all other commodities including oil, gold, metals etc.
Implications For Pakistan
Like most developing nations, the average person in Pakistan has very low discretionary spending,with the bulk of his or her income spent on food, clothing and shelter. The dramatic increases in commodity prices, particularly food, is very troubling for the vast majority of populations living in the developing countries such as Pakistan, India, China and the African nations. The exceptions, of course, are the nations with their own significant production of food and fuel and other natural resources. The nations producing and exporting food, fuel, and metals actually benefit from this trend of higher commodity prices.
The incoming government in Pakistan will face a very difficult challenge in containing tremendous inflationary pressures on basic commodities such as food and fuel. A failure in this effort can lead to significant instability and has the potential to threaten the future of democracy in Pakistan.