Wheat Prices Plummet in Punjab Harvest
The decline in wheat prices has significant implications for the agricultural sector, with the government's policy failure and lack of alternative market-based procurement mechanisms contributing to the crisis. Empowering farmers through expanded access to financing and improved grain storage capacity may provide a more sustainable solution to the issue.
Punjab's wheat harvest has seen a significant decline in prices, with buyers scarce and prices plummeting to Rs2,200-2,300 per maund, far below production costs and the support price announced for 2023 and 2024. The federal government's withdrawal from procurement without a clear strategy has led to a policy failure, creating a vacuum in the market.
The government's abrupt exit from the market has resulted in a lack of alternative market-based procurement mechanisms, leaving flour mills and private stockists as the primary buyers. However, these buyers require a 25-30% price spread between the harvest window and off-season months to justify holding stocks, which is not possible due to the government's control over prices. The government's carryover stocks, procured at Rs3,900 per maund, now cost over Rs5,000 per maund, resulting in heavy losses.
The release of 1.2 million tonnes of wheat just before the new crop dampened demand, further exacerbating the situation. To address this issue, experts suggest empowering farmers by expanding their access to agricultural input financing and improving their grain storage capacity. This could be achieved by extending the loan tenor of the Kissan card from six to twelve months and increasing the credit ceiling from Rs150,000 to Rs300,000, thereby reducing distress sales and easing post-harvest supply pressure.
Punjab Finance Minister Harpal Singh Cheema has reaffirmed the state government's commitment to providing facilities to farmers, assuring that they won't face difficulties during the procurement season. The government is dedicated to purchasing every grain of wheat and making payments within 24 hours, providing some relief to the struggling farmers.