Decline in aggregate value-addition of major crops likely
CHI - The State Bank of Pakistan, in its third quarterly report, has indicated that the increased risk would lead to a decline in aggregate value-addition of major crops in current FY08 when compared to FY07.
It was hoped that a wheat harvest close to the annual target would offset much of the drag from the disappointing aggregate performance of the FY08 kharif harvest; SBP said and added some reports suggest that wheat production in FY08 may also turn out to be substantially below the target. If these concerns prove correct then a weak performance by major crops would drag the annual growth substantially below the annual target.
The disappointing harvests of key cash crops are particularly troubling for the country.
Mentioning the reasons of weak performance of wheat crop SBP said the absence of customary benchmark procurement price for wheat at sowing time in current FY08 along with rising prices o fertilizers as well as delayed sugar cane crushing and extended cotton picking caused a reduction in the area under wheat crop.
While anticipated decline in water availability at the time of sowing discouraged farmers to bring more area under wheat cultivation, SBP observed and said the wheat crop was partially damaged due to rains and hailstorms in early April 2008.
The report predicted that the agri food commodity prices would likely to remain strong as it is imperative that policies be framed to support farmers' ability to raise productivity substantially in the years ahead. Key areas requiring policy intervention remain the transmission of price gains (establishment of futures markets), risk mitigation (crop insurance, storage facilities), increasing investment in agri-sector infrastructure (water management, electricity, farm-to-market roads) and in value-addition chains, SBP suggested.
The agriculture credit disbursement continued apace with its positive trends as the total agri disbursements amounting to Rs 157.6 billion during Jul-Apr FY08 showing an increase of 34.9 percent year on year.
The water shortage seen in rabi FY08 which likely to continue in first phase of kharif FY09, while improved water availability is anticipated from better monsoon rains during the second phase of kharif FY09 (June -September), SBP said.
The SBP said the overall fertilizers off-take increased by 9.2 percent during July-March FY08 while the DAP off-take in July-March 08 decreased by 25 percent compared with 13.8 percent rise in the corresponding period of last FY07. This major decline in off-take of DAP during July-March08 was due to rise in international prices of this fertilizer which also translated into domestic prices, SBP concluded.