Massive smuggling to Afghanistan: wheat exports come to a standstill
July 01, 2011: Wheat exports which are totally in the hands of private sector have come to a standstill due to a steep fall in international prices and questionable increase in the domestic market. According to leading wheat exporters, artificial increase in prices in the domestic market is due to the massive smuggling of wheat to Afghanistan with the connivance of government officials and security agencies.
Wheat exports by private sector, having touched approximately 1.8 million tons, is almost certain to slow down or stop altogether, resulting in colossal loss of foreign exchange, if remedial measures are not taken by the government immediately. Black sea prices which are considered bench mark for international trading have touched $250 FOB per metric ton as against last price which Pakistan fetched was $305 per metric ton, FOB Karachi. Further sales do not seem viable, wheat exporters said.
In view of current pricing, it is difficult for exporters to enter into new contracts. They would be loosing money in export commitments that they have already made and which they have yet to fulfil. Wheat Traders Association of Pakistan (WTAP) has invited the attention of the government to watch the situation carefully in view of reports that ample wheat stocks exist both in Sindh and Punjab. This stock is under potential threat of rains and floods. In view of available stocks the current increase in wheat price seems unwarranted, they said.
Provincial governments of Sindh and Punjab must follow an active wheat management policy and plan out to protect open stocks against weather calamities and floods. WTAP suggested that extra wheat stocks may be put in the export pipeline with export incentives to save storage and management cost. Wheat exports would remain suspended till such time international market improves substantially.
The association further said there appears to be no co-ordination among two major wheat producing provinces, ie Sindh and Punjab. Sindh in order to halt exports from Punjab is engaged in confiscating the cargo purchased for exports which is resulting in losses suffered by exporters due to unprecedented rise in local prices and sudden fall in international prices.
A leading wheat exporter told Business Recorder that Sindh and Punjab were following their own political agenda resulting in losses suffered by common man and exporters of wheat. Punjab was currently holding 1.0 metric ton of 2009 wheat crop and there was every likelihood that in case it was not disposed off early, entire wheat would be damaged resulting in loss of almost $300 million, the present market value in international trade.
Government of Punjab, he said would be better served if they sell their stocks immediately at a cheaper price say Rs 850 per maund to the exporters so that government of Punjab and people of Pakistan could earn foreign exchange worth $300 million by exporting this wheat stock of 2009 crop.
Similarly, Government of Sindh, he said should restrain their food department from entering into corrupt practices and allow legitimate exporters with valid documents to carry wheat to their ware-house for export, failing which the business community in future may never involve itself in the export of food grains and would again be left with “corrupt government food departments” to export wheat and other food grains resulting in further disaster for the country.