The wheat sector has remained in a state of crisis over the last two years. Following the recent harvesting season, complaints regarding price fluctuations and possible shortages have surfaced across the country.
Against this backdrop, Punjab Chief Minister Maryam Nawaz last week ordered strict action against traders who fail to declare their wheat stocks within a fortnight, underlining the government’s concern over the size of the 2025-26 crop and fears of rising flour prices in the coming months.
There have recently been reports of lower wheat production and speculative buying by traders anticipating shortages and higher prices in the days ahead. According to the Punjab Agriculture Department, average wheat yields this year remained around 33 maunds per acre, while Punjab’s overall production reportedly fell short by three to 10 per cent. However, some experts believe that the national crop may be more than 20 per cent below annual requirements. This is a matter of serious concern in view of volatile global grain markets caused by the Russia-Ukraine conflict and continuing instability in the Middle East.
To make matters worse, wheat stocks held by the Pakistan Agricultural Storage and Services Corporation Ltd (Passco) and provincial food departments are said to be insufficient to bridge the projected shortfall. Delayed procurement decisions, contradictory policies and uncertainty over stock regulations have further roiled the market. Economists argue that the crisis is not merely about hoarding but reflects rapid market fluctuations driven by anticipated scarcity, uncertainty regarding procurement policy and expectations of future shortages.
The roots of the problem can be traced to the government’s decision last year to abandon the support price mechanism and liberalise the wheat market. As a result, farmers received nearly Rs2,200 per maund for wheat — a price that severely disrupted the wheat economy. Consequently, the acreage under cultivation shrank drastically. Rising fertiliser prices further complicated the situation. Although the Punjab government later announced a procurement price of Rs3,500 per maund this year, the decision came rather late. Consequently, farmers at the beginning of the season reportedly received only Rs2,900 to Rs3,100 per maund.
According to Pakistan Kissan Ittehad, the minimum support price mechanism had been designed to protect farmers from hoarders and black marketeers, but it was abandoned without proper planning. Various studies show that the wheat economy has been facing a severe crisis due to rising input costs. DAP fertiliser prices increased from around Rs12,000 per 50kg bag last year to over Rs16,000 this season, while diesel, electricity, seeds and labour have all become more expensive. Despite these market realities, the government reduced the indicative wheat price from Rs3,900 per 40kg last year to Rs3,500 this year. This move discouraged wheat sowing. At the same time, wheat yields reportedly declined by nearly five maunds per acre because many growers reduced fertiliser usage amid uncertainty surrounding procurement and pricing policies. According to flour mill owners, inconsistent regulatory interventions and weak financing arrangements further aggravated the crisis. The government announced the procurement support price at a time when open-market prices had already risen sharply.
In many cases, farmers withheld their stocks in the hope of securing higher prices later in the season. Procurement through approved dealers’ groups relied heavily on bank financing, but financial institutions remained reluctant to lend because of prevailing market uncertainty. Meanwhile, private dealers had already swept through the market much earlier.
According to media reports, speculative investors unrelated to the wheat trade also entered the market solely for profit-driven stockpiling. On the other hand, fears of raids, transport restrictions and stock seizures discouraged flour mills from maintaining normal inventories.
Knowledgeable circles maintain that it was a mistake on the part of the government to set aggressive procurement targets, impose restrictive movement controls and intervene administratively at below-market prices. These measures reduced market liquidity by creating uncertainty among traders and private buyers. It is no secret that markets react not only to actual shortages but also to expectations of shortages. Once farmers and traders became convinced that the crop was smaller and procurement weaker than expected, prices inevitably started rising.
Independent economists suggest that freer wheat movement and transparent private-sector participation can go a long way towards improving the market situation. If flour mills are allowed to build inventories openly, wheat ultimately reaches consumers through increased flour production. However, when traders fear raids or arbitrary restrictions, they tend to hold stocks for longer periods, further tightening supply in the market.
The government’s concern is understandable because food inflation carries serious political implications. It must maintain strategic reserves to address possible market shortages. To achieve this objective, several reform measures are urgently required, including timely crop estimates through satellite and field data, flexible procurement prices linked to market conditions, transparent private-sector participation before harvest and the removal of unnecessary inter-provincial movement barriers. Equally important, the government should focus less on suppressing flour prices and more on reducing agricultural input costs in order to encourage higher production and ensure long-term food security.