Agriculture Correcting the wheat market.

For the last few decades, Pakistan's agriculture sector has become the happiest hunting ground for crises. Going from one crisis to the next, the entire sector is operating in a firefighting mode and that too without any policy or regulatory effort on the part of the government, allowing the market to determine and extract its windfall.

The latest example is of fertiliser. In the last few years, all kinds of fertilisers have gone beyond the farmers' reach for one reason or another. Of three major fertilisers, potash was the first to fall out of farmers' favour when its price soared beyond a whopping Rs16,000 per bag two years ago. The squeezed supply deprived the soil of three primary micronutrients - nitrogen, phosphorus and potassium (NPK).

The next one was Di-ammonium Phosphate (DAP). Its prices tripled in a year (beyond Rs14,000 per bag), and the soil dried up, deprived of nitrogenous and phosphatic supplies, robbing plant health and compromising yield.

Market watchers have calculated a 37 per cent drop in its usage this year so far, compared with the last year.

Pakistan pays $2bn a year on average for the import of a crop that it can grow easily and has been doing so for thousands of years

This year, it was Urea's turn, which had become farmers' last hope. That hope is dwindling as Urea demand rises (due to a fall in NPK and DAP), production drops, prices climb, and smuggling continues.

As far as production is concerned, four months of data explain the origin of the present crisis. In August, the industry reported production of 540,847 tonnes which dropped to 530,961 tonnes in September and 468,026 tonnes in October as two plants shut off. In November, it went further down to 446,970 tonnes while demand rose because of the wheat crop.

Though the industry is processing December figures, the numbers may not be any better as the government has stopped gas supplies to two plants, with cumulative production of 77,000 tonnes per month. So, the squeeze will only tighten.

As dealers sense an increase in shortage during peak demand, the prices have already risen to Rs2,800-2,900 against the official price of Rs2,200 per bag. As the fall in production translates into actual shortages, prices may go up further - by Rs500, if the market analysts' fears come true.

Should that happen, the soil's calamity will complete its circle as it would run out of all primary raw materials: nitrogen, potash, phosphate, and natural gas.

The government response to...

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