Posted by: uss017 | December 13, 2007

Wheat problem: an exposition

Introduction

These days there is a lot of talk about the so-called “wheat (ata) crises” in Pakistan. Those who oppose the government frequently proclaim with a lot of excitement that people are going hungry in Pakistan. Such claims are made to rubbish away the undeniable fact of the recent economic development of Pakistan. In a panel discussion a few days ago on GEO TV organized by Aamir Ghauri, an economist from Oxford University lashed out in a non-scholarly and unprofessional manner (paraphrasing): “the government talks about economic progress, but look at the wheat crises and the electricity crises!” Then the other day I happened to stumble across a fan of Imran Khan, and as soon as I began to list the economic achievements of Pakistan over the past 7-8 years, the chap suddenly screamed with emotion (paraphrase): “but people are dying in the streets of Pakistan because of a lack of ata and you talk about economic development?!”

So then, the ata polemic is currently very popular among all who hate President Musharraf.

This paper attempts to briefly respond to this polemic by explaining the nature of the problem internationally, the reason why it emerged, and by listing the measures taken by the government to deal with the problem.

From the outset let me explain that wheat in Pakistan is the cheapest in the world. Secondly, no one has died in Pakistan due to a shortage of wheat. People can always get chawwal (rice) if they cannot find wheat. There is no major “crises” as such. Unfortunately, certain politicians, reporters and Pakistani news channels have massively exaggerated the issue and created a lot of hype.

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International Wheat Problem

Pakistan produced RECORD wheat

In 2005-06, Pakistan produced 21,591,400 metric tons of wheat, more than all of Africa (20,304,585 metric tons) and nearly as much as all of South America (24,557,784 metric tons).

The Federal Bureau of Statistics valued MAJOR CROPS yields at Rs.504,868 million in 2005 thus registering over 55% growth since the year 2000. Source.

Wheat crop damaged in USA and Australia

The U.S. is the largest exporter of wheat, followed by Canada, Russia, Argentina and Australia.

Wheat prices soared to record highs on the Chicago Board of Trade and European markets on Wednesday as news of the damage to key exporter Australia’s crop heightened concern about shrinking global stocks.

The US Department of Agriculture has projected that world wheat stocks will drop to 114.8 million tonnes by the end of the 2007/08 marketing year, a 26-year low, following poor weather earlier this year in parts of Europe and the United States.

Australia’s crop concerns will definitely add pressure on global stocks already hit by dry conditions and strong demand,” an official at a South Korean flour miller said. Source.

Wheat shortage in the world and food inflation

Higher grain prices are triggering food inflation in several countries, including India and Pakistan. In Croatia, inflation accelerated at a record pace in December as food prices soared, according to the state statistics office. Source.

The People’s Bank of China has raised interest rates five times this year to curb inflation and damp speculation in stocks and real estate. Australia’s consumer prices increased more than expected in the second quarter as fuel, housing and food costs surged. Cattle prices in Australia, the world’s second-biggest beef exporter, have soared about 23 percent this year. Rising bread and flour prices have sparked protests across drought-stricken Morocco, where the wheat crop dropped by 76% this year. Public disturbances have also been reported in Yemen, Niger, and the Ivory Coast. In Italy pasta producers have taken great pains to justify the increase by pointing to the soaring cost of wheat, which has increased by 60% over the past year. Consumer groups organized protests in Rome, Milan and Palermo.

Wheat prices in Europe have been rising steadily over the past three months, driven up by growing demand particularly in developing markets such as China, coupled with a poor harvest in Australia that has led demand to far outstrip supply.

PAK Government’s stance and action

President Pervez Musharraf blamed hoarders and smugglers for the problem and said that wheat flour was being smuggled to Afghanistan, Central Asia and even Russia.

Pakistan faced shortage of wheat flour, prima facie due to hoarding by elements – which are minting money at the cost of the poor consumers.

Last week, the authorities deployed paramilitary troops at flour mills across the country to ensure steady wheat supplies to the people. The Utility Stores have been selling flour at the official rate of 18 rupees ($0.30) per kg but it is sold in market around 30 rupees per kilogram.
Source.

Shortage occurred due to three reasons:

1. Some wheat was smuggled out of country, as the world faces wheat shortage.

2. Hoarding up Mill owners and profiteers.

3. Panic created by the Media in general Public, due to which, public in general ran to buy extra three months quota. Naturally, excessive buying creates shortage and raises prices. I consider the panic created by the Media as much responsible!

See also a response to the “Electricity Problem

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© Musharraf Supporters 2008 All rights reserved

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Responses

  1. […] New projects for the next fiscal year include the Sukkur Barrage Rehabilitation and Improvement project (Rs 100 million), Akhori Dam PC I (Rs 200 million), construction of Jaban Hydroelectric Power Station and Jaban Hydroelectric Power Station (Rs 40 million). Source. See also: International Wheat Problem. […]

  2. Scarcity of water and arable land means that the the surge global food prices could be a long-term problem, a new study has warned. Meanwhile, efforts to increase wheat output may not be enough to offset soaring demand and bring the cereal down from all-time price highs, Abdolreza Abbassian, grains economist at the Food and Agriculture Organisation (FAO) said this week.
    Wheat, soyabean and corn prices have reisen to record levels and meat, poultry, eggs and dairy products prices have also risen sharply on demand in Asia. The report says that water and land scarcity, together with slow improvement in agronomics, would be key factors shaping food production. http://finfacts.ie/irishfinancenews/article_1012349.shtml

  3. […] the “wheat attack,” another popular polemic circulating around these days against the government is the so-called […]

  4. […] What surprised me was the way Dr. Malik spoke about Pakistan’s economic situation later on in the programme. Dr. Malik is supposed to be a teacher in economics, yet he proceeded to speak most unprofessionally and in a way which does not suit an economist. Based on his comments, it is hard to distinguish Dr. Malik from any average person walking on the streets of Pakistan having little or no clue about economics. To present a few examples, Dr. Malik went on to state that Pakistan’s debt, since 1999, had increased. But an economist is supposed to know that debt is seen in proportion to the economy. So while in 1999 65% of our GDP was used in debt servicing, today around 25% is used for debt servicing. Seen in this proper way, debts have decreased considerably. Dr. Malik also claimed that the U.S. aid played a major role in Pakistan’s economy. But such an assertion is laughable as Dr. Shah correctly pointed out (for a written response, see this paper). Dr. Malik, towards the end of the programme, also stated that Pakistan’s economy was in a bad state because “there is no wheat, wheat prices have increased, there is no electricity” (this is not a verbatim quote; I am only typing from memory) etc. Is this the way how an economist – particularly one teaching at Oxford (!) – is supposed to discuss economy? Dr. Salman Shah was himself taken by surprise by Dr. Malik’s street-talk “analysis” of Pakistan’s economy and proceeded to make important the corrections. [For a written response, see this and this]. […]

  5. […] International Wheat Problem […]


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