June 19, 2001	atimes.com

India/Pakistan Pakistan cuts into Indian wheat markets By Syed Saleem Shahzad KARACHI - Pakistan's economy has taken a new turn with the country for the first time entering the wheat export market with the shipment of 35,000 tons to Iraq. This places Pakistan as a potential competitor to India in Gulf and Middle Eastern markets, which Islamabad has targeted. Pakistan, which until last year had to import wheat from Australia and the United States, has built up a surplus stockpile of 2 million tons following a bumper crop in 2000. The country aims to increase its export net despite drought conditions this season and losses due to farm mismanagement. The recent loading of the first consignment of 35,000 tons marked the beginning of a shipment of 100,000 tons of wheat to Iraq, for which full arrangements have been made to ensure quality and on-time delivery by the end of this month. In terms of a contract with the Iraqi grain board, full delivery must take place within 90 days from the date of the opening of letter of credit. The second shipment will reach Baghdad by the first week of July and the third and the final one is scheduled to land by the end of July. Pakistan sealed the deal for hard red winter wheat to Iraq under the "oil for food" program of the United Nations at the rate of 214 Euros per ton - or about US$196 per tonne. About three months ago, Pakistan's Economic Coordination Council (ECC) of the federal cabinet set a target for wheat exports of 800,000 tons. In addition to Iraq, Afghanistan and Iran were identified as potential buyers. There had been some conflict over the Iraq deal as Baghdad had wanted to pay only $125 per ton, against the minimum international price of about $150 a ton. By contrast, under a recent agreement signed between the government of Afghanistan and Pakistan, Afghanistan will import 250,000 tons of wheat by December 2001 at the subsidized rate of $138 per ton. Pakistan's wheat export targets might have to revised as a result of this season's drought which could see overall production slide by 15 to 20 percent against last year's total of 21 million tons. The country's consumption requirement is approximately 21.3 million tons. Nevertheless, the government is determined to continue with exports. The ECC has recently approved deregulation of wheat exports by allowing local producers to export wheat without having to obtain to a No Objection Certificate (NOC) or others permission from any government agency. International reports say that the recent dry weather in the wheat growing areas of Canada, Australia and China, resulting in a lower estimate for world production, will help Pakistan. The United States Department of Agriculture May crop report puts wheat output in the 2001-02 season at 572 million tons, down from 580 million last year and 586 million two years ago. International analysts believe there will be a likely cut in China's wheat production, as well as declines of about 1 million tons in Canada's output and possibly 1.5 million tons in Australia's production. However, Pakistan will not alone in the region in attempting to capitalize on this opportunity. India has raised the ceiling for wheat export by state-run firms for 2000-01 from 2 million tons to 5 million tons. However, its chances of attaining this target by the end of June are bleak due to the inferior quality of the wheat. India offers wheat on export markets at around $140 million a ton, which is competitive, but the quality is often poor. Indeed, Iraq chose Pakistani wheat of that from India due the the latter's inferior quality. Similarly, Iran has also slashed its imports of Indian wheat due to presence of a disease called "Kernal Bunt". Sources say Pakistani and Iranian authorities are negotiating to resolve price matters. If Pakistan agrees to drop to $125 per ton, Iran says it will import 300,000 tons. Pakistani authorities are now weighing up the advantages of selling the wheat at this subsidized price as a loss leader to establish its wheat credentials by entering the Iranian market for the first time. Pakistani authorities realize that to remain a player on world markets, they will have to maintain a sufficient stockpile to ensure they are around for the long term. Increased wheat production is therefore essential. According to experts, this can be achieved through better farm management. At present, Pakistan is the seventh-largest wheat producer, accounting for 2.73 percent of the world's wheat production from an area of 3.57 percent of the world's growing area. Wheat accounts for 37.1 percent of the country's total crop area, 65 percent of land used for food grain and 70 percent of the production, mainly grown under irrigated conditions. The plains, with their favorable topography, rich soil and good agriculture facilities have a much a greater acreage planted to wheat. The contribution of wheat in the value-added in agriculture stands at 12.5 percent and its share in the GDP is 3.1 percent. Still, Pakistan's wheat production per hectare is lower than the world's average. In addition, a second target is the participation of the private sector in wheat exports. The government is contemplating involvement of the private sector in procurement, storage and export. The federal cabinet has already removed bureaucratic barricades such as NOCs. ((c)2001 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)

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