Tackling Pakistan’s Agricultural Challenges: The Need for Improved Storage and Credit Systems
As the harvesting season for major crops like wheat, rice, and maize unfolds in Pakistan, market dynamics often lead to a sharp decline in prices. This pattern,
particularly evident in Punjab, has resulted in wheat prices plummeting by up to 40% in 2024, well below the government’s support price. The situation leaves farmers grappling
with financial losses, largely due to oversupply in the market and insufficient storage options.
Farmers, many of whom face financial pressures such as bank loan repayments and outstanding credits for agricultural inputs, are forced to sell their crops immediately after harvest, regardless of the market price. Additionally, a lack of proper storage facilities
exacerbates the issue. This results in the market being flooded with produce, leading to lower prices, though historically, prices tend to rise towards the end of the harvest season as supply decreases.
To address these challenges and build a more resilient agricultural market, several measures are needed. Improving farmers’ access to credit, enhancing storage facilities, and implementing price-stabilizing policies, such as the government’s wheat procurement program, are crucial steps. While agricultural credit disbursement has increased, particularly through institutions like Zarai Taraqiati Bank and microfinance banks, there is still a significant gap when it comes to providing affordable loans for
building storage capacity.
The implementation of the Warehouse Receipt System (WRS) could offer a promising solution. Under this system, farmers deposit their crops in approved warehouses and use the proof of ownership to secure loans, balancing supply and preventing market oversaturation. However, challenges like high policy rates, lack of quality standards, and an inadequate legal framework hinder the widespread adoption of WRS in Pakistan. A more tailored approach to financing, including smaller loans for farmers to build basic storage facilities, could help alleviate these issues, stabilizing the market and saving farmers from unnecessary financial setbacks.