Why flour prices are soaring despite wheat hitting a 2.5-year low

Although the wheat prices in Punjab and Sindh have declined to a 2.5 year low, however the flour is still being sold at the high rate of PKR 130/kg in Karachi.

Wheat prices in Sindh and Punjab have come down to PKR 71/kg. However, consumers in Karachi are paying PKR 100 to 130/kg for different varieties of flour.

Anis Shahid, General Secretary Karachi Atta Chakki Association, said although prices of wheat declined but the retailers were reluctant to fully pass the benefit to consumers.

Prices fell as Punjab government had ample reserves and didn’t lift the commodity from farmers creating a supply glut. Punjab is the largest producer as well as consumer of wheat.

Country’s wheat production this year surged 11% to 31.4 million tons, according the US department of Agriculture.

Federal wheat procurement agency, Passco, set a target to procure 1.8 million tons at a support price of PKR 3900/40kg, Sindh Food Department will lift 1.0 million tons, while Balochistan targets to buy 50,000 tons.

Moreover, international wheat prices have also declined 11% from $280/ton in June to $250/ton on better crop yields.

Abdul Rauf Ibrahim, President Karachi Wholesale Grocers Association, urged the flour millers to further reduce the prices of flour.

He also called upon the authorities to ensure that prices of bakery items (breads and rusk etc.) declined in line with the wheat prices.

Analyst are of the view that wheat is an inflationary product, and its lower prices impact cost of several other edibles thus reducing the inflation.