What do sugar and wheat have in common? The answer is a rising support price and low exports amid excess production. The numbers for the year ended FY15 reveal that exports for sugar declined by 8 percent compared to last year to $282 million, while wheat exports declined more than 93 percent year-on-year to almost nothing.

This column has written about the problems associated with the sugar industry (Read “The sugar failure,” published July 01, 2015) as well as the wheat industry (Read “Wheat (mis)management,” published on April 17, 2015). Government policies lie at the heart of both these matters, and those policies are ineffective and anachronistic.

The support prices on both sugarcane and wheat have been raised almost every year, making sugar and wheat totally uncompetitive in the international markets. Whatever exports do exist on either end are due to exorbitant export subsidies – wheat was given a $45 export subsidy in Sindh and $55 per ton in Punjab, while sugar received a near $100 per ton export subsidy from the ECC on 650,000 tons of sugar.

The export subsidy helped the sugar industry bag some returns for its excess production. In the case of wheat, however, the move doesn’t seem to have done much. In either case, the export subsidy was short-lived, being available for just a few months.

Whatever the case, depressed commodity prices continue to weigh down on exports – wheat in Pakistan is around Rs32.5 per kg while the world price is around Rs21. Similarly, the price of white sugar internationally is around Rs38 per kg, whereas in Pakistan it is at Rs63.

Pakistan has been sitting on surpluses of sugar and wheat for some time. According to USDA data, Pakistan’s wheat production in FY15 was 25.5 million tons, while consumption was 24.5 million. This brought the surplus up to 10 million. Meanwhile, sugar production over the year was around 5.2 million tons, while consumption was at 4.7 million. This brought the sugar stocks up to one million tons. It is disappointing that even after being fortunate to have witnessed a season of robust production in both these commodities, they are going to waste. The support prices need to be slashed significantly in order to bring our commodities back into the international market.