Pakistan: Wheat production decline of 2025 – is it an opportunity or a crisis?

Wheat production in Pakistan has declined significantly from FY2024 to FY2025 dragging down the agriculture sector’s growth. Although, it is statistically inappropriate to compare the current performance of a sector with its peak level, it has created a political uproar by presenting as a sign of long-term productivity decline.

During FY2025, total wheat output in Pakistan is estimated at 28.98 million tonnes (MT), 8.9 percent lower than the record-high harvest of 31.81MT during FY2024. About three-fourth of the decline was contributed by 6.8 percent loss in cultivated area, while per ha yield was 2.2 percent lower than the previous year’s peak. The production and yield during FY2025, although lower than previous year’s peak, were still higher respectively by 4.1 percent and 5.0 percent than the last five-years’ average—indeed a respectable growth.

It is worth noting that such so-called ‘crisis’ in wheat production is not new in the country. Over the FY2017 and FY2018, it declined by 6 percent; 7 percent between FY2011 and FY2012; and 9.8 percent during FY2000 and FY2001. Over these periods, wheat yield lowered by 4.1 percent, 4.2 percent, and 6.6 percent, respectively. Thus decline in wheat production is part of a cyclical phenomenon that happens after every 7-10 years’ interval.

The decline in area under wheat cultivation during FY2025 was in response to a sudden drop in wheat farm gate price from Rs4,000 per 40 kg in FY2023 to Rs3,000 in FY2024, which is closely linked with international trend where it plummeted from $360 to $267 per tonnes (PT) during the respective years. Similar slump in agricultural commodity prices and production decline were observed in FY2016, FY2010, and FY2000, with similar impact on agriculture growth.

It seems that long-term government policy goal is to keep the domestic wheat price in line with the international price allowing 20-30 percent deviation from each other (Figure 1). When international price went as high as $440 PT in 2022, government increased the support price from Rs2,200 to Rs3,900 just in one year. Further drop in wheat prices in FY2025 to Rs2,200 and resultantly reduction in its production was incidentally coincided with the shift in government policy towards deregulation. It is worth mentioning that earlier slumps in wheat production happened despite the presence of government in the market through procurement.

One reason of this shift from a half century market control was due to its exorbitant cost, and squeezing government’s financial space to fund these costs. The operation was sucking liquidity available with the banks to the tune of Rs540 billion just to purchase 6MT of wheat. In addition, around 90 billion would have been required for incidental and operation cost. Similar costs during previous years have resulted a circular debt of over Rs1.0 trillion.

Having said this, however, one must acknowledge that this policy shift was implemented haphazardly. The shift was not communicated with the private sector nor with farmers well advance in time, and no guarantee were provided that this will be government’s long-term policy. Thus farmers were unable to adjust cropping pattern nor the private sector could arrange enough liquidity, network for such huge operation, and the storage under new market realities. Adding to the agony of farmers was halfhearted deregulation as restriction continued on regional and local levels. These factors caused the prices to drop below the international price by 20-25 percent. The government could have offered market agents soft loans and public storage on easy terms to fill the gap created with the withdrawal of the government from the market. These measures could have led the prices closer to international level, creating an opportunity to open international trade with reduced smuggling.

How did the lower wheat production has affected the agriculture sector? The reduction in wheat area by 635,000ha was utilised by other high value crops. Sesamum alone picked up 339,000ha, rice was up by 252,000ha, while rapeseed and mustard expanded by 65,000ha. Low wheat price in FY2025 is expected to further strengthen these trends. The emerging new crops are high-value and exportable or importable products, thus will improve the trade balance as well as farmers’ income. The enhanced crop diversity is also good for the cropping systems sustainability. The shift in fact would be a great opportunity, but only if the marketing and value chain systems are established and farmers’ capacity is built in these emerging crops. The government should encourage rather than discourage these market induced substitutions.

This production loss in wheat may have reduced the income of 39 percent farmers (>1 ha farm size) having wheat surplus, but will not affect the income of remaining 61 percent who do not have any or little surplus to sell. In fact, it could have benefited majority of small farmers who had to buy wheat from the market. Diversion of crops area to high value crops has further reduced the number of farmers impacted by the lower wheat production. The decline in the growth of agricultural GDP is mainly due to slump in commodity prices.

An important aspect of the lower wheat price, which is usually overlooked, is an improved affordability of wheat for the landless wage earners in rural and urban areas. It is estimated that a monthly wage of unskilled labor could earn 308 kg of wheat during FY2023, which has increased to 696 kg in FY2025. This improved affordability is expected to reduce malnutrition among the poorest sector of the society.

In view of the above discussion, following are suggested:

1.            The emerging diversification opportunities out of wheat should be encouraged by strengthening the marketing and value chain systems and building capacity of farmers in emerging crops.

2.            Domestic wheat prices can be stabilized closer to international prices ifcontrolis liberated at all levels, and international trade is left on the private sector.

3.            To manage wide variation in international wheat prices, a “Food Stability Tax” (FST) may be imposed on consumers to subsidize producers when wheat price indexed with fertilizer price is 10% lower than the previous five-years average, and vice versa when 10% higher.

Dr Mubarik Ali — The writer is a Consultant (Food Security), Planning Commission of Pakistan.

Tags: Production, wheat, yield, output, area, price, Pakistan