Market Report, "Pakistan Agribusiness Report Q3 2016", published

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 available finance and vulnerability to extreme weather events. Nevertheless, the government has taken some positive steps to imp rove the availability of higher- quality seeds for rice, wheat and corn , which should raise yields in the medium term. We also note that there have been recent positive developments in the country's energy sector that , if sustained, could prove beneficial for cotton and rice producers in particular. Our expectation for rising prices out to 20 20 also gives some grounds for optimism regarding the key export commodities of rice and cotton.

Full Report Details at
- http://www.fastmr.com/prod/1152870_pakistan_agribusiness_report.aspx?afid=301

Key BMI Forecasts

Cotton consumption growth to 20 20 : -2.1 % to 10.4 mn 480lb bales. High base effects and a local supply shock in the early years of our forecast period will see a decrease in cotton demand.
Wheat production growth to 201 9 / 20 : 1.3 % to 26.3 mn tonnes. Production growth will be modest as farmers struggle with rising input costs, particularly fertiliser.
2016 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

Although Pakistan's cotton ginning and textile industry is relatively efficient, it has long been hampered by the country's unreliable and expensive power supply. Power blackouts and load shedding are routine, forcing industry to shut down operations or rely on expensive private energy generation. A Wilson Center report in 2015 found that the energy crisis could be responsible for losses to the Pakistani economy of as much as 4% of GDP and cited concerns over energy generation as a major disincentive to foreign investors. However, we are now more optimistic about the capacity of the energy sector to overcome these weaknesses on the back of the government's attempts to increase investment in gas and electricity infrastructure. Should these reforms be even partially successful, this could be transformative for a host of energy-intensive industries, not least the cotton processing and textile industries, with rice millers also expected to benefit.

Dry weather conditions in the winter months have reduced expectations for the 2016/17 wheat harvest. Agriculture ministry officials told Reuters that they fear production could fall as low as 23mn tonnes from a previous target of 26.5mn tonnes. We have revised down our forecast to 23.5mn tonnes and will continue to monitor developments as the harvest is completed.

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