Market Report, "Pakistan Agribusiness Report Q3 2013", published

The economic outlook for Pakistan is beginning to look more promising as inflation, and crucially food inflation, abate. However, the agriculture sector is unlikely to follow manufacturing in registering 4.6% year-on-year growth any time soon. Indeed, we expect the value of Pakistan's agribusiness market to decline marginally in 2013 as rice exporters struggle to find markets and cotton production declines due to bad weather and disease. We expect the sector to return to sluggish growth in the remaining years of our forecast period, but the outcome of the May-June election may indicate whether the future is likely to see more of the same inefficient and inconsistent government intervention or an injection of much needed investment in essential infrastructure.

Key Forecasts

* Sugar consumption growth to 2017: 14.3% to 5.0mn tonnes. Demand, boosted by growth in population and incomes, will fall just short of supply throughout the forecast period.
* Rice production growth to 2016/17: 13.2% to 7.1mn tonnes. Production growth will be sluggish as demand for Pakistani exports stutters and domestic consumption remains low.
* 2013 real GDP growth: 4.0%. Up from 3.7% year-on-year (y-o-y) in 2012.
* Consumer price inflation: 8.1% average in 2013 (down from 11% y-o-y in 2012).
* BMI universe agribusiness market value: US$43.1bn in 2013 (down from US$43.2bn in 2012; forecast to grow annually by 0.9% on average to 2017).

Full Report Details at
- http://www.fastmr.com/prod/596876_pakistan_agribusiness_report_q3_2013.aspx?afid=301

Key Revisions to Forecasts

Wheat production for 2012/13 revised up to 24.5mn tonnes (compared with a previous forecast of 23.0mn tonnes). The extremely favourable weather conditions of the first quarter of 2013 were the main factor, although the government's last-minute increase in the procurement price may also have encouraged an increase in late sowing.

Industry Developments

The government has once again bowed to pressure from the sugar industry to increase export quotas, this time to 1.2mn tonnes. Pakistan is expected to produce 4.7mn tonnes of sugar this year, and domestic demand is expected to be 4.4mn tonnes with beginning stocks of 1.3mn tonnes. Meeting this new export target would thus leave stocks of sugar at a precariously low level of 400,000 tonnes, enough for only a few months of domestic usage. A poor harvest in 2013/14 could leave the country in the politically damaging position of having to import sugar to meet demand. Most controversially of all, the Economic Coordination Committee of the Cabinet (ECC) which announced the policy in March has approved a freight subsidy of PKR1.75/kg ($18/tonne). This is likely to lead to an increase in already precarious levels of government borrowing while also perhaps leading to censure from the WTO.

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