Rising wheat, sugar prices raise hopes of rural economy recovery

KARACHI: Wheat prices in Pakistan have surged to a 19-week high of Rs710 per 10kg, translating into Rs2,839 per 40kg, while some market sources quoted rates of around Rs3,000–3,050 per 40kg. This sharp recovery is expected to serve as a strong incentive for farmers ahead of the next sowing season, according to a research report released by Topline Securities on Wednesday.

The rebound is considered timely, given that farmer sentiment had weakened due to depressed returns in the previous crop cycle.

The agriculture sector slowed sharply in FY25, with growth dropping to just 0.6 percent compared with 6.4 percent in FY24. Adverse weather, water shortages, falling crop prices, and rising input costs have eroded farm profitability.

Production of major crops declined by 13.5 percent year-on-year, with wheat output down 8.9 percent. During the outgoing season, farmers suffered an average loss of Rs10,695 per acre compared with earnings of Rs13,572 per acre in the previous season, according to an FFC briefing presentation.

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The State Bank of Pakistan estimates that wheat production may fall by around 11 percent in FY25, as poor profitability discouraged sowing. However, the recent price uptrend is expected to encourage higher sowing in the upcoming Rabi season.

Farmers’ losses in key crops have been linked to the government’s decision to withdraw support prices under the IMF programme, coupled with higher costs of fertiliser, seeds, and electricity.

Sugar prices

Sugar prices have also risen sharply, climbing from Rs138–140 per kg in January 2025 to around Rs180 per kg last week, according to PBS data. This is well above the government’s fixed ex-mill price of Rs165 per kg.

The combined effect of higher wheat and sugar prices is expected to improve farmer incomes in the coming crop cycle. Better profitability could restore confidence, increase incomes, and provide a much-needed boost for the rural economy. Stronger rural earnings would not only stabilise agriculture’s contribution to GDP but also support domestic consumption.

This price recovery may also encourage greater production of key crops, helping to reduce reliance on imports and strengthen food security.

Impact on growth

Topline Securities noted that a lift in the rural economy would complement the country’s broader growth prospects. Over the past two years, farm economics have suffered due to both rising input costs and lower crop prices.

Wheat prices are still 43 percent below their previous peak of Rs1,256 per 10kg, PBS data shows. While the earlier record was fuelled by inflated support prices and cross-border smuggling, analysts believe the current recovery offers much-needed relief for farmers. At the same time, one of the largest input costs—urea—is expected to remain lower in the near term due to high inventory levels.

According to Topline, sectors such as construction, two-wheelers, hatchback and sedan passenger cars, and consumer goods including clothing could all benefit from stronger rural demand, helping to support overall economic growth.

In a recent analyst briefing, the management of Atlas Honda said sales in the two-wheeler segment are currently driven mainly by urban demand, as the rural economy remains under pressure. Analysts believe the latest improvement in crop prices could revive rural demand and further lift sales in these sectors, particularly motorcycles.