Muhammad Irfan Kasana
Wheat lies at the heart of Pakistan’s food security framework, feeding millions of households daily and shaping inflation, rural incomes, and social stability. Any disruption in wheat prices whether at the farm gate or at the flour mill, has immediate economic and political consequences. As Pakistan transitions into a post-deregulation era after decades of state-led procurement, the challenge before policymakers and market participants is unprecedented: how to ensure fair and predictable returns for farmers, affordable flour for consumers, and fiscal sustainability for the government—simultaneously. In this evolving landscape, Pakistan Mercantile Exchange Ltd-PMEX Wheat Futures offer a transparent, regulated, and market-based mechanism to support price discovery, manage volatility, and strengthen confidence across the wheat value chain.
Deregulation and Its Market Impact
For many years, government procurement acted as the primary anchor for wheat prices, providing certainty to farmers and stability to consumers. However, fiscal pressures and structural reforms—partly driven by IMF commitments—led to the government’s gradual exit as the dominant buyer. The immediate market response was visible in the most recent production cycle, when annual wheat output declined from approximately 31.4 (2023-24) million tons to around 28.9 million tons. This decline reflected farmers’ rational response to weak post-harvest prices, rising input costs, and uncertainty over price support mechanisms.
The current wheat crop is already in the soil, yet farmer sentiment remains cautious. The central policy dilemma persists: how to keep wheat cultivation economically viable for farmers while ensuring affordable flour for the common man in a deregulated market environment.
Government Efforts and Strategic Reserves
Recognizing these challenges, both federal and provincial governments are actively working to recalibrate wheat policy. A key area of focus is the maintenance of strategic reserves, increasingly with participation from the private sector rather than exclusive reliance on public procurement.
This shift requires more than policy intent—it demands credible, standardized, and well-regulated storage infrastructure. Strategic reserves are effective only when storage quality, transparency, and accessibility are ensured. Private participation, supported by regulatory oversight, can reduce fiscal strain while improving operational efficiency. 
Global Wheat Dynamics and Domestic Implications
Pakistan’s wheat market does not operate in isolation. Global demand–supply dynamics, climate shocks, geopolitical developments, export controls, and currency fluctuations continue to influence international wheat prices. These global signals shape domestic market expectations, import parity prices, and inflation trends.
For a wheat-consuming country like Pakistan, where food inflation has immediate social implications, timely and credible price signals are essential. In the absence of transparent market indicators, uncertainty often translates into either farmer distress or consumer price shocks.
PMEX Wheat Futures: Transparency and Price Discovery
Against this backdrop, the Pakistan Mercantile Exchange (PMEX) has recently relaunched Wheat Futures Contracts, offering a regulated platform for transparent price discovery and risk management. Futures markets aggregate expectations of farmers, traders, millers, and other stakeholders, producing forward-looking prices that reflect anticipated supply and demand conditions.
The benefits are multi-dimensional:
- Transparent price discovery, accessible to all market participants
- Early warning signals of potential shortages or surpluses
- Risk management tools that reduce dependence on ad-hoc interventions
Equally important is the linkage between futures trading and standardized, accredited storage. Such storage allows farmers to avoid distress selling at harvest, access liquidity, and participate in organized markets. While current accredited storage capacity remains limited, PMEX, working with stakeholders, is optimistic that this can expand to around one million tons, significantly strengthening market depth and resilience.
A Smarter Price Stabilization Mechanism
One of the most compelling advantages of futures markets is their potential use as a cost-effective price stabilization tool. Instead of large-scale physical procurement, the government can intervene strategically through the exchange.
Indicatively, if the government defines a price band, for example:
- PKR 3,000 per 40 kg as a lower reference, and
- PKR 3,500 per 40 kg as an upper reference.
If market prices fall below PKR 3,000, the government—either directly or through approved aggregators—can enter the futures market as a bulk buyer (capped at 1-2 million tons of strategic reserves requirement), supporting prices and assuring farmers of a fair return at harvest.
Conversely, if prices rise beyond PKR 3,500, the government participates as a seller, helping moderate excessive price increases and protect consumers.
Because futures trading operates on a margin-based system, this approach requires significantly lower fiscal resources. Instead of deploying hundreds of billions of rupees in physical procurement, an estimated PKR 50–60 billion in margin exposure could achieve meaningful price stabilization—while preserving market discipline and transparency.
The Way Forward
Wheat deregulation is not a one-time policy decision; it is a structural transition. Its success depends on coordinated action across multiple fronts:
- Policy alignment between federal and provincial governments
- Expansion of standardized and accredited storage
- Active participation by farmers, millers, traders, and aggregators
- Intelligent use of regulated futures markets as policy instruments
Pakistan’s challenge today is to blend food security objectives with market efficiency. PMEX Wheat Futures—supported by credible storage infrastructure and prudent government participation—can offer a practical pathway to achieve this balance. With the right institutional support, Pakistan can build a wheat market that is transparent, resilient, fiscally sustainable, and fair to both farmers and consumers.
