By Mohsin Leghari
In April the state did not have the institutional capacity to buy wheat from its own farmers. Procurement centres stood empty. Banks hesitated. Aggregators were largely absent. Three months later the same state has found the resolve and the foreign exchange to buy wheat on the global market.
The message is unambiguous. Local grain was a burden at harvest. Foreign grain is a priority in July and August.
This is not a market failure. It is the predictable result of a transition disorder. Punjab chose the market route. The argument was defensible. The old system was fiscally unsustainable. Outstanding procurement liabilities had climbed to Rs 680 billion by June 2023, with annual interest payments alone reaching Rs 110 billion. Direct government buying had become unaffordable. But the financing architecture, aggregator capacity, and legal framework for warehouse receipts were still incomplete when the crop arrived. The Punjab Food Department withdrew from its traditional role faster than any replacement system could operate at scale. The result was a market that existed on paper before it existed in the field.
The cycle that produced this disorder was not sudden. In 2023-24, the caretaker government allowed 3.44 million tonnes of duty-free imports into a market already carrying record stocks. In 2024 and 2025, the Minimum Support Price was first ignored and then abolished under IMF conditionality. This happened years ahead of the phased timeline the Fund had allowed until FY2026. In October 2025 the government reversed course and restored the price, but the supporting machinery never materialised. In January 2026 the aggregator model collapsed when bank negotiations failed. By late May, with partial procurement continuing into June, total procurement fell far short of the three-million-tonne target. Three harvests, three different policy frameworks, and the exact same outcome: the state arrived only after the price had been set.
The farmer’s clock is biological. Storage is often little more than bags under a tarpaulin. Loans fall due. Labour must be paid. He sells when the crop is ready, not when institutions are ready. The middleman, sensing the state’s absence, bought at distress prices of Rs 2,800-3,200 per 40-kilogram bag. By late July the same grain was worth Rs 4,600. The spread that later appeared between farmgate and retail was captured entirely by those with liquidity and storage. These were the very qualities the small farmer could not afford.
Look at who wins and who loses in this cycle. The middleman wins twice: he bought cheap at harvest, and the state’s import decision now validates his margins. The foreign supplier and the shipping company win: they receive hard currency for a commodity Pakistan already possesses. The Pakistani farmer loses twice: he was underpaid for his crop, and now he must watch his country drain its foreign reserves to import what he was forced to sell.
The state had offered substantial concessions to make the aggregator model work. Seventy per cent of financing markup costs were covered, free storage was provided in Food Department warehouses, and around 400 experienced personnel were assigned to assist. Despite these concessions, negotiations between banks and companies failed to reach a workable agreement on lending terms. By May, the programme had collapsed. The failure was not fiscal; it was operational.
What this required was sequencing, not announcements. By December, acreage estimates and procurement targets should have been public. By January, financing and risk-sharing models should have been settled. By February, warehouse certification and aggregator registration should have been complete. By March the system must already be operational in early-harvest districts. The government’s private-sector model was not wrong in principle. It was fatal in execution.
Climate stress compounded the institutional failure. The 2025 floods were the worst in Punjab in four decades, destroying on-farm stocks and washing out transport links. The 2026 harvest lost further volume to late-season heat and spring storms. Rising temperatures and erratic rainfall are no longer background noise; they are actively cutting yields. Yet even these shocks might have been absorbed by a system that was ready in April. Instead, they fell on a system that was still being negotiated in May.
A functioning market does not mean the absence of the state. It means a state that performs different functions with greater discipline. The essential difference between having a system and having a system that works is timing. This requires the precise synchronisation of credit availability, risk-sharing mechanisms, and operational readiness.
The federal government must also play its part. Wheat is provincial in production but national in consequence. PASSCO must be refocused on its core mandate: maintaining strategic reserves, supplying deficit provinces such as Khyber Pakhtunkhwa and Balochistan, and managing inter-provincial shocks. When the centre manages macro-level reserves effectively, provinces are less likely to panic and impose improvised movement restrictions every time local prices tick upward.
The farmer is rational. He observes that the system designed to serve him was absent when he needed it most. He observes that when he was vulnerable, the state was unprepared. He responds by planting less, shifting to crops with lower capital requirements, or exiting altogether.
The next procurement cycle will begin in November. By then, the farmer’s decision about whether to grow wheat will already have been made. If the sequencing is not fixed before then, if the institutional machinery is not already operational by February, the system will again be somewhere else when the grain is ready.
