Maize Market: Farmers, Traders, and Price Games

Hi everyone! I hope you are all doing well. Welcome back to another blog. This article will discuss the topic in detail “Maize Market: Farmers, Traders, and Price Games”. In late May, the trading of maize witnessed a range of Rs. 4,050-4,500 per maund, closely aligning with historical trends for wheat prices. However, over the following two weeks, maize prices experienced a significant decline to Rs. 1,800-2,350 per maund, while wheat prices remained unchanged.

Although maize prices have since recovered to approximately Rs. 2,350-2,750 per maund, they still stand at nearly half the value of wheat prices, which is an unusual occurrence. Market sentiment suggests that maize is undergoing a similar trend as wheat did previously. Prominent market players allegedly drove down wheat prices intentionally, forcing farmers to sell their produce and excluding them from the market.

Variations in local markets across different provinces and the absence of a centralized trading framework can attribute to the significant difference in price ranges. Financial constraints and inadequate storage facilities left farmers with no choice but to sell their wheat, leaving them vulnerable. Farmers assert that this recurring practice happens every year.

In contrast, agriculture department officials, when questioned, acknowledge that consistent government intervention is the root cause of the farmers’ predicament. They admit that if the government had not interfered, prices would have stabilized long ago. Surprisingly, there is no governmental support price or any form of regulation in place, not even in the case of maize. This raises the question: what exactly is happening here?

As you may already be aware, poultry feed mills consume nearly 65 percent of the maize production, while wet-milling processors like Rafhan Maize Products Company procure an estimated 15 percent. Despite the expectation of a supply chain resembling that of sugarcane due to its corporate model, the reality is quite different.

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In Pakistan, there are over 350 registered and unregistered feed mills, playing a crucial role in the Rs. 1.5 trillion poultry industry, which is approximately three times larger than the sugar sector. These mills, similar to sugar mills, establish daily rates for maize.

Investors maintain contact with brokers on the ground, who then procure maize from farmers. These investors, in turn, impose various reasonable and unreasonable cuts per bag, resulting in farmers receiving Rs. 200-250 less than the rate announced by feed mills. Furthermore, this middleman influence is accused of manipulating prices in favor of their own interests, disregarding market forces.

The disrupted supply chain is primarily attributed to feed mills avoiding cash payments, similar to the practices observed in the sugar industry. Consequently, investors purchase maize on behalf of the mills and take their commission. In addition, there are hoarders present in grain markets and Facebook groups, who intentionally spread false market sentiment to entice farmers into selling their produce.

Mahar presented an argument, stating that certain individuals artificially inflated the price of maize grain to Rs. 5,000 in certain locations, with the intention of diverting farmers’ attention away from selling maize as silage. Subsequently, once the silage season had passed, the prices were significantly reduced on a daily basis.

However, an alternative perspective suggests that the sudden decrease in prices may be attributed to this year’s exceptional maize yield, surpassing 140 maunds per acre in certain areas. Traders, whom we interviewed, believe that the record-high maize productivity, combined with increased moisture levels due to the prevailing humid weather conditions, is the primary cause of the sudden drop in prices, rather than any deliberate manipulation of prices.

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Ali Hamed, from the Australian Center of International Agriculture Research (ACIAR), made a compelling argument for the implementation of a maize support price or the provision of inputs at controlled pricing by the government. He stressed the importance of protecting farmers in our market system, acknowledging the need for some form of regulation.

Hamed highlighted a significant change this year: farmers are becoming more aware of their own interests and are taking steps to store maize in the form of cobs, despite their limited resources.

Farmers suffer regardless of government intervention or market forces, which is the most striking observation. The government’s role as a regulator lacks efficiency and transparency, sometimes exacerbating the situation. In certain cases, the government proves to be even worse than the current system.

The government fails to establish a comprehensive framework that would prevent collusion among the numerous markets spread across hundreds of cities. Yet, it paradoxically asserts its authority in regulating prices within two million retail establishments. While countries worldwide boast about their free market policies. Our market system is profoundly flawed, rendering any attempts at manipulation futile.

However, farmers’ organizations contended that allowing maize exports was crucial, especially given the significant historical surge in international market prices. Despite the lack of accessible public data on maize exports. Nevertheless, farmers argue that this number is inconsequential, asserting that the current government policies prioritize traders over farmers.

Poultry producers oppose extensive maize exports due to the government’s unreliable information and subsequent imports. Although there is enough maize in the country, inaccurate government data worries poultry producers.

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