12% YoY decrease in earnings on cotton

Wheat, sugarcane and Basmati rice to see increase by 26%, 21% and 189% respectively

KARACHI:

The agriculture sector is experiencing a shift in crop yields and income following the recent floods and support price adjustments. Wheat, sugarcane, and basmati rice are expected to see a rise in income per acre, but cotton crops have suffered damage.

According to Engro Fertilisers Limited’s (EFERT) corporate briefing session for the fourth quarter of calendar year 2022, wheat income per acre is expected to increase by 26% year-on-year (YoY). In addition, the sugarcane income per acre is expected to increase by approximately 21% YoY and basmati rice income per acre is expected to increase by 189% YoY, as per the Optimus Research report.

The management, however, predicts that they will see a decrease in earning per acre of approximately 12% YoY on cotton. Analysts attribute this to the increase in support prices from Rs2,200 to Rs3,000 in Punjab and from Rs2,200 to Rs4,000 in Sindh.

Speaking to the Express Tribune, JS Global Agriculture Sector Analyst, Waqas Ghani Kukaswadia said, “The five major crops – wheat, cotton, sugarcane, rice and maize- account for about 90% of fertiliser consumption. Wheat has a 50% share followed by cotton with a share of 25%. Sugarcane has the third highest share but nutrient per hectare is the highest on this crop.”

With the Sindh Food Department having issued a notification to fix the wheat support price at Rs4,000 per 40 kilograms for the 2023 season, “Farm economics is expected to improve for wheat going forward due to better grain prices,” said Ghani.

Similarly, due to firm sugar prices in the local market, cane is also expected to fetch better prices for growers. For rice, due to better demand-supply dynamics, farm income is expected to improve as well. The sowing area for rice crop might also improve in the next cycle as some of the area was affected due to the flash floods during 2022.

“While contribution of the cotton crop is barely 2% in the Gross Domestic product (GDP) of the country, any damage to cotton leads to absence of local cotton for the textile sector,” explained Ghani.

“The sector not only contributes a bulky 8% to the GDP, the labour-intensive sector also constitutes over 60% of the country’s exports,” he added.

Cotton productivity was also impacted in the outgoing season due to adverse climate and floods especially in Sindh.

“Due to poor quality seeds, along with the highest ever cost of production, it is anticipated that earnings per acre for cotton will not see an increase,” said Muhammad Ali Iqbal, President of Concave AGRI.

“Moreover, due to the decrease in textile growth numbers, the textile industry will not be in a position to pay the farmers and ginning units on time, leading to low revenue generation by cotton growers. Additionally, due to the high return on rice varieties such as IRRI-6, IRRI-9 and Kainat, cotton growers will bet on rice in areas like Rajanpur, DG Khan and Sindh,” predicted Iqbal.

While talking to The Express Tribune, Co-Founder of Agriculture Republic, Aamir Hayat Bhandara said, “I don’t understand how farmers’ incomes will increase as input cost has hiked already. DAP is available at Rs10,500, diesel prices have more than doubled while one bag of urea is available for Rs3,200 to Rs3500 in the black market. Likewise, electricity, labour and the cost of pesticides have also gone up.”

“Now with the International Monetary Fund (IMF) deal coming, who knows what chaos is to hit the agricultural economy,” said Bhandara.

Published in The Express Tribune, February 11^th, 2023.

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