Agriculture Reference
In-Depth Information
the private marketing side, there are a large number of marketing agents, in-
cluding rural shopkeepers, petty traders (known in Pakistan as
beoparies
), pro-
curement agencies, and commission agents. Only a small proportion of the total
wheat produced goes directly to the processing units, that is, flour mills and other
processors. It is normal for wheat to change hands three to five times between
producers and the final consumers. Much of the marketing costs are incurred on
transportation and handling of wheat that is merely being transferred from one
party to another without much value added in the process.
However, the government is the single-largest player in the wheat market,
particularly during the first few months following the harvest. PFDs and
PASSCO jointly purchase 20-40 percent of the total production, equivalent to
50-60 percent of marketable surplus at the fixed support prices (Table 4.1). As
shown in the table, the government share fluctuates from year to year, with high-
est share reaching more than 40 percent of gross production in 1999/2000.
The public procurement is dictated largely by government procurement
targets, which averaged about 30 percent of total production from 1984/85 to
2004/05. The federal government assigns procurement targets to PFDs and
PASSCO. These targets have increased over time, averaging at 4.72 million tons
per year for the 1984/85 to 2002/03 crop years. The average procurement dur-
ing this period comes to 4.07 million tons, that is, 86 percent of the overall tar-
get. The annual procurements by PFDs have ranged from 1.88 million to 6.98
million tons, with average procurements of 2.98 million tons per year, consti-
tuting 18.54 percent of the annual production. PFDs have achieved 88 percent
of their procurement targets (Table 4.2). The quantities of wheat procured by
PASSCO have ranged from 0.65 million to 1.6 million tons. PASSCO has
achieved on average 83 percent of its procurement target. Notwithstanding the
variations in its annual procurements, in 13 out of 19 years it has achieved more
than 80 percent of its procurement targets. In only 2 years it has achieved a mere
51-52 percent of its target (Table 4.2). The quantities procured by PASSCO
have ranged from 4 to 12 percent of the annual production during this period.
Note that both PFD and PASSCO fell short of meeting their targets in most
years. Obviously, this shortfall has to do with the relationship between market
and procurement prices. To illustrate, we plot market price as a percentage of
procurement price in Figure 4.1, which also presents procurement as percent-
age of targets by both PFD and PASSCO. Clearly, market prices have been
higher than procurement prices in most years. How, then, did PFD and PASSCO
managed to procure? There can be two explanations. First, prices presented here
are annual averages, but procurement takes place immediately after the harvest,
when prices may be much lower than annual averages. The other avenue of in-
creasing procurement is by imposing movement restrictions, which have been
in place until recently. To summarize, the government has consistently occu-
pied a large share of the market, which is facilitated either by forced procure-
ment or by supporting the farmers through procurement when prices are low.
