Report Published: "Pakistan Agribusiness Report Q2 2016"

We take a cautious view of the prospects for the Pakistani agribusiness sector. There are numerous challenges facing producers of all commodities covered by this report, chief among them a dire security situation, erratic power supply, lack of availability of finance and vulnerability to extreme weather events. The sugar industry is the sub-sector we view as least promising due to its high production costs and poor relations between growers and processors. Nevertheless, the government has taken some positive steps to improve the availability of higher quality seeds for rice, wheat and corn which should raise yields in the medium term. Our expectation for rising prices out to 20 20 also gives some grounds for optimism regarding the key export commodities of rice and cotton.

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Key BMI Forecasts

Cotton consumption growth to 20 20 : 4.4 % to 11.1 mn 480lb bales. Favourable trade agreements with the EU have seen an increase in demand from the textile industry, but higher prices will see growth rates moderate in the latter years of the forecast period.

Wheat production growth to 201 9 / 20 : 9 .6% to 28.5 mn tonnes. Production growth will be relatively modest as farmers struggle with rising input costs, particularly fertiliser.

201 6 real GDP growth: 4. 3 %. Up from 4.2% in 2015. Forecast to grow annually by 4.2% to 2020.

Consumer price inflation (ave) : 4.5% in 201 6 (unchanged from 4.5% in 2015).

Latest Updates & Structural Trends

The 2015/16 cotton crop is expected to see a decline of around 20.0% on the previous year's harvest. Low commodities prices are encouraging farmers to prioritise wheat crops and reduce fertiliser and pesticide use, while wet weather damaged the cotton crop prior to harvest.

Pakistan is to subsidise the export of 500,000 tonnes of sugar in 2015/16 in a bid to reduce the high stocks held by mills. The subsidy of USD124/tonne was approved by the government's Economic Coordination Committee in December as a necessary measure to facilitate exports, given that domestic prices remain well above those in the global marketplace. Mills that have failed to clear outstanding debts to farmers and begin processing the 2015/16 harvest will be ineligible for the subsidy. The aim of the policy is to stimulate the flow of cash from mill operators to cane growers in order to allow farmers to prepare adequately for the 2016/17 season.

The Pakistan Agribusiness Report features BMI Research's market assessment and independent forecasts for production, consumption and trade across core agricultural commodities.

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