Corn prices across Punjab have continued the downward trend this week as well, losing another Rs. 200 per 40kg with new crop glutting the market and no new export avenues opening in the near future.
Corn prices across Kasur, Sahiwal, Gujranwala, Sheikhupura, Bahawalpur, Multan, Jhang and Faisalabad have fallen to as low as Rs. 1,800 per 40kg in some contracts while the average prices stand at Rs. 1,950 per 40kg in Bahawalpur and Multan and at Rs. 1,900 per 40kg in other major markets.
Traditionally Corn prices in local markets used to flow in tandem with Wheat but this season’s bumper crop has shifted the historical trends with Wheat prices averaging at Rs. 4,500 per 40kg while Corn has fallen to less than half of it.
The curb on the illegal smuggling to Afghanistan and Iran has also played a key role in lowering the prices of the commodity that is used as a raw material across the poultry and dairy feed industry.
Corn has been the one major crop success story in Pakistan in the last decade with production rising by nearly 50 percent in the last five years from 6.8 million tons during 2018-19 to more than 10.1 million tons during 2022-23 according to the Economic Survey of Pakistan.
It has been made possible with next-generation RandD efforts by international companies in developing high-yielding hybrid cultivars and little or no significant involvement by the government departments, yes, that is a feat in its own way. Anyhow, It has contributed significantly to ensuring Pakistan’s food security when it comes to the cheaper availability of chicken for the masses by providing feed to the poultry industry.
But now that success story is coming to bite back the farmers with lower-than-expected market prices in the face of heightened inflation. Corn is a particularly resource-intensive crop with hybrid seeds that cost the country and the farmer in dollars and require high fertilizer usage both of which have touched their historically high in recent times.
Taking a rough estimate as per our conversation with farmers, the Summer Corn crop can cost as much as Rs. 200,000 per acre depending upon the land rent and canal water availability during the summer season and if yields average around 70-80 maunds per acre (yields are lower for summer crop compared to spring crop), then it comes out as a clear loss for farmer with current prices.
Keeping that in mind, progressive farmers have been calling to explore new export opportunities for the last few months but the calls have been falling on deaf ears. It’s strange when the government hails the bumper production of crops, it often forgets to incentivize the farmers enabling these achievements in the first place.
Pakistan’s Corn exports have risen significantly in recent years as international prices rallied to their all-time high of nearly $8 per bushel in a post-pandemic commodity shock. As per the International Trade Center, Pakistan’s Corn exports rose from mere insignificant levels in 2018 to more than $264 million in 2022, though the aggregate exports of 0.79 million tons during last year make a small share of
The major share of these exports has been going to Southeast Asian countries like Vietnam, Malaysia and South Korea while bordering countries like China, Iran and Afghanistan represent little or nothing. The smuggling too had started to happen recently before the government curbed it completely under a recent administrative push to curtail black market practices.
An estimated 65 percent of Pakistan’s production goes to providing poultry feed while 15 percent goes to wet milling, a process that mainly gives starch and other by-products like corn oil, gluten, fibre, and several important chemicals and 10 percent or so is utilized in dairy feed preparation.
ITC Trade Map
Due to the above scenario, there has been some opposition from the poultry and dairy feed industry in the past years for corn exports as they rely heavily on this critical raw material for products.
Though the export numbers are not available for 2023, they must have shrunk given the fact that international corn prices have dropped to their 3-year low. Corn prices have been declining despite higher-than-expected production estimates from Ukraine and Russia and China’s dinged-up economy comes back reducing the demand. The rise of electric vehicles has also declined the corn demand for ethanol production in recent years.
International Corn Prices Fallen To 3-Year Low Source: Business Insider
Our problem is that there is no agile policymaking in place at the bureaucratic level in the government that can adjust to the rapidly evolving international economic and geopolitical developments so till the time we recognize an opportunity, it’s often not there anymore.
“If we compare the current domestic corn prices with 2021, it was available at only Rs. 700 per 40kg before jumping to more than Rs. 3,000 per 40kg last year which was an anomaly given the increased exports so we can say there has been a correction in corn price compared to previous years” stated Progressive Dairy Farmer and Researcher Asif Ali while talking to ProPakistani.
He added that farmers believed that Corn prices would remain affixed like wheat but wheat is a more essential commodity that can maintain its prices and gets dedicated support price from the government as well while Corn does not attract that level of attention.
Our government is known for wrongly estimating the production of key crops and making the right decisions at the wrong time and only mass consumers of milk and chicken will suffer if the exports are boosted without accurately assessing the data as has happened with Wheat and Sugar multiple times.
There is simply no mechanism governing the agricultural markets that can assess the demand and production accurately and can quickly adjust policy decisions accordingly. There is a heightened uncertainty in the international markets still rallying from the pandemic and Ukraine conflict while the El Nino weather system has drastically declined the production of some crops in some areas while boosting it in some other regions at the same time.
Ali agreed that if the corn is in excess of our domestic needs, it should be exported but it also must be regulated properly based on the accurate estimate of production data so the domestic prices can be maintained otherwise the dairy and poultry farmers would suffer.
Take the example of India which banned non-basmati rice exports in August when experienced a hike in domestic prices and significant damage to crops due to rains and floods in some areas, raised the customs duty on parboiled rice and imposed a floor price on basmati exports.
But as soon as reports came that the country had achieved the production targets, it cut the floor price and is reviewing the other restrictions as well. We can’t possibly expect the government to take such solid action at such a pace.
The job of the government should not be to choose between one or the other but it should be to devise policies that can benefit everyone. Both climate change and geopolitical environment are expected to remain volatile for years and that calls for two things.
First, a full fledge mechanism to document and govern the dysfunctional agricultural markets across the country that can provide accurate demand and inventory data for to government which can turn drive the decision-making so farmers or industry doesn’t have to lose for the other to win.
The second is to explore new export markets like Afghanistan and Iran or come up with some value-added way to exploit the excess corn production so this success story can continue bearing fruits.
Source: Pro Pakistani