Cotton Market, Rus-Pak Cargo, Flood Warning, IMF meet PTI + PPP, Pak-China Trade, Black Sea Grain Deal, Global Food Price Index

TOPLINE

• The cotton market in Pakistan faced price volatility due to government pressure to buy Phutti not less than Rs 8500/40 kg. This led to ginneries shutting down. Textile millers in Pakistan have refused to pay the cotton cess.
• 2 cargo containers from Russia loaded arrived at Torkham under the Transport International Route (TIR) agreement. Trade between the two nations has seen a 50% increase by May 2023, surpassing $760 million.
• Following an intense week of rain in Punjab, the NDMA has issued a warning about the potential for flooding in the Rivers Ravi, Chenab and Sutlej. This follows India's release of approximately 233,000 cusecs of water.
• With Brent crude falling from over $100 to $75 per barrel, Pakistan has an opportunity to safeguard its interests. It must decide whether to wait for potential price rallies or take proactive measures for financial stability.
• An IMF team held meetings with the PTI and PPP leadership to secure support for the $3 billion arrangement.
• Pakistan recently used China's currency, the yuan, to pay Russia for a significant oil purchase. Pakistan's bilateral trade volume with China has exceeded $20 billion, reaching $20.8 billion in FY22.
• Erdogan called on Russia to extend the Black Sea grain deal by 3 months after meeting Ukraine’s Zelenskiy.
• The Food and Agriculture Organization (FAO) reported that its food price index fell in June to its lowest level in over two years. The decline was due to lower prices of sugar, vegetable oils, cereals, and dairy products.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• Short-term Inflation: Based on the Sensitive Price Index, posts a year on year increase of 28.55%. [Dawn]
• May Imports: Rs 1.12 billion was the import value of wood and cork in May 2023, down 39.4% from Rs 1.85 billion in May 2022. Rs 1.11 billion was the import value of rubber tyres and tubes in May 2023, down 67.14% compared to Rs 3.9 Billion in May 2022. Rs 3.7 billion was the export value of tanned leather in May 2023, up 3.8% compared to Rs 3.6 billion in May 2022. Rs 1.01 billion was the export value of jute in May 2023, up 76% compared to Rs 575 million in May 2022, according to the Pakistan Bureau of Statistics. [ET] [ET] [ET] [ET]
• May Exports: Rs 2.75 billion was the export value of leather footwear in May 2023, up 50.01% compared to Rs 1.84 billion in May 2022, according to the PBS. Rs 1.11 billion was the export value of electric fans in May 2023, up 56.2% compared to Rs 713 million in May 2022, according to the Pakistan Bureau of Statistics. [ET] [ET]
• Weekly Cotton Review: The cotton market in Pakistan faced price volatility due to government pressure to buy Phutti at a specific intervention price. This caused a crisis, leading to ginneries shutting down. The PCGA called for a clear purchasing strategy, removal of illegal taxes, and resolution of electricity problems. [BR] [Dawn]
• Textile Millers in Pakistan Refuse to Pay Cotton Cess: Textile millers in Pakistan have refused to pay the cotton cess, resulting in a financial crisis for the Pakistan Central Cotton Committee (PCCC). Despite receiving substantial subsidies from the government, the millers have refused to contribute to the funds collected through the cotton cess. This has created a severe financial crunch for the PCCC during the last fiscal year. Previously, the release of subsidies was linked to the clearance of the cotton cess, but under the current government, this condition was removed, allowing even defaulting mills to continue receiving subsidies. This has led to subsidies meant for the export sector going to millers who are not actively exporting their products. [ET]
• Pakistan's Wheat Import Strategy: The federal government of Pakistan is considering importing wheat through government-to-government deals and allowing the private sector to import limited quantities to stabilize prices and combat hoarding. These measures aim to address the country's deficit, improve market sentiments, and reduce the price of flour, with imports estimated to lower the cost by Rs 350 to Rs 400 per 20kg bag. [The News]
• Traders in Balochistan Threaten Wheel Jam Strike: Traders in Balochistan have threatened to observe an indefinite wheel jam strike if the government does not address their grievances which include compensation for the damages caused to their trucks by terrorists, as well as the reconstruction of bridges and improvement of highways. They also called for the abolition of check posts and the end of extortion along national highways. Additionally, they urged the government to stop smuggling, particularly in the name of sugar and urea fertilizer permits to Afghanistan. [ET]
• First Truck from Russia Arrives in Pakistan: At least two cargo containers loaded with pulses and other goods arrived at Torkham late on Friday from Russia under the Transport International Route (TIR) agreement. Officials said that the consignment, the first of its type, was part of the TIR bilateral trade treaty signed with Russia in March this year during the Moscow visit of Minister for Communication Asad Mehmood. Trade between the two countries has already seen significant growth, with a nearly 50% increase by May 2023, surpassing $760 million. The successful arrival of goods signifies the positive trajectory in Pakistan-Russia trade. [Dawn] [ET] [BOL]
• KPK Minister Highlights Potential with Afghanistan: The Minister for Industries, Commerce, and Technical Education of Khyber-Pakhtunkhwa has emphasized the potential for increased bilateral trade between Pakistan and Afghanistan, based on their close proximity, cultural similarities, and cordial relationship, while also expressing Pakistan's wish for sustainable peace in Afghanistan. [ET]
• Egypt-Pakistan Dairy Collaboration: The Academy for Scientific Research and Technology (ASRT) in Egypt and the Dairy Science Park (DSP) in Peshawar, Pakistan, have partnered to establish the Dairy Science Park Cairo (DSPC). [BR]

AGRI-INPUTS, WEATHER, WATER & POWER

• Low Floods Expected in River Ravi: The National Disaster Management Authority (NDMA) in Pakistan has issued a warning about the potential for "low floods" in the River Ravi. This follows India's release of approximately 233,000 cusecs of water from the Ujh Barrage. The NDMA expects around 65,000 cusecs of water to reach the Jassar region in Punjab within the next 20-24 hours, which could result in low flood levels in the floodplain areas. The local administration is closely monitoring the situation until July 20th, and the public is advised to stay informed and follow guidelines from the relevant authorities. Additionally, there is a possibility of heavy rains in Lahore, Sialkot, and Narowal, which could lead to flooding in the River Sutlej and its associated tributaries. Chenab, Sutlej and Ravi rivers receiving high water flows after incessant rain in northern India. Authorities prepare for evacuations as flood concerns continue to rise with expected floods in riverine areas. NDMA estimates 900,000 people to be affected by rains. [BR] [Dawn] [Samaa]
• Monsoon Rainfall in Karachi: Light to moderate rainfall occurred in various parts of Karachi on the second day of the monsoon season, with Gulshan-e-Hadeed receiving the highest recorded rainfall of 17mm. However, despite the rain, the city continued to experience intense heat and high humidity, with temperatures reaching 35.5 degrees Celsius and humidity levels reaching 76%. The Pakistan Meteorological Department (PMD) forecasts intermittent rain to continue on Sunday, with the possibility of partial cloud cover and light rain on Monday morning and evening. [ET]
• Heavy Rains Disrupt Anti-Dengue Efforts in Punjab: Recent heavy rains in Lahore and other parts of Punjab have disrupted anti-dengue activities in the province. Field staff in major cities, including Lahore, were unable to carry out operations due to the inclement weather, and government and private schools remained closed with rainwater accumulating in school premises and parks. [ET]
• Chahar Canal Breach Causes Devastation: A breach in the Chahar Canal in Munshi Wala led to water overflowing. Around 40 houses and a cemetery were affected, with 15 houses destroyed by the flood. [ET]
• Preserving Water in Pakistan's Soon Valley: The Soon Valley in Pakistan's Salt Range has become a hub for researchers and journalists investigating innovative solutions for rainwater preservation and wastewater treatment. The valley is known for its mining activities and features a wetland complex comprising lakes under the Ramsar Convention. With lower temperatures than the capital city, the valley is suitable for off-season crop cultivation. The Institute of Urbanism organized a visit for journalists to explore the modern strategies implemented by WWF-Pakistan to tackle water scarcity. [BR]
• Import Issues for Solar Equipment in Pakistan: Solar equipment importers in Pakistan are facing difficulties in getting their shipments cleared at domestic ports, specifically for imports from China. This contradiction in policies is hindering the growth of renewable energy. The capital-intensive nature of solar panel plants makes them unfeasible for smaller economies like Pakistan, necessitating the import of raw materials for solar equipment. [ET]
• Declining Oil Prices Benefit Pakistan: Pakistan is benefiting from declining oil prices as an oil-importing nation, which has positively impacted its import expenditure and foreign exchange reserves. With Brent crude falling from over $100 to $75 per barrel, Pakistan has an opportunity to safeguard its interests. It must decide whether to wait for potential price rallies or take proactive measures for financial stability. In May, Pakistan spent significantly less on crude oil and petroleum products compared to last year, with a decrease of approximately 25%. [ET]
• Taxes and Duties Drive Up Urea & DAP Costs: The fertilizer sector in Pakistan has raised prices of urea and di-ammonium phosphate (DAP) in response to taxes and duties imposed in the Finance Bill 2023. The federal excise duty (FED) of 5% has led to an increase of approximately Rs 125-150 per bag of urea and around Rs 470 per bag of DAP. The removal of tax exemption on DAP without allowing differential claims has further contributed to the price hike. Companies like Fauji Fertiliser Company (FFC), Fauji Fertiliser Bin Qasim Limited (FFBL), and Engro Fertilizers (EFERT) have increased prices to offset the impact of the taxes. [ET]
• Substantial Recovery in Sewage Industry: The Hydrant Cell of Karachi Water and Sewerage Board (KWSB) recovered over Rs 180 million in May 2023 from seven government hydrants in Karachi, revealing corruption in water tanker distribution and exceeding previous collection records. [ET]

AGRI UPDATES & PAKISTAN POLICY

• Financial Impact on Pakistan Railways: Pakistan Railways trains have experienced a decline in punctuality, resulting in financial losses. The punctuality rate of trains dropped from 59% to 42% during the financial year 2022-23, with delays amounting to 18,596 hours and additional fuel consumption. Maintenance schedules for Mail and Express trains were reduced by 17%, and the overall schedule maintenance for inter-city trains decreased from 97% to 85%. The over schedule maintenance of trains in 2022-23 was recorded at 79%. [BR]
• EU Urges Reforms for Pakistan's GSP+ Status: The EU Ambassador to Pakistan, Dr. Riina Kionka, has highlighted areas that need improvement in Pakistan for the renewal of its GSP+ status. These areas include freedom of expression, minority rights, women's rights, gender equality, and labor rights. The EU also emphasizes the importance of freedom of the media and religion. Concern was expressed over the crackdown on the PTI and its supporters, and the use of military courts and anti-terrorism courts is being closely monitored. [ET]
• IMF Engages Pakistani Parties: A team from the International Monetary Fund (IMF) held meetings with the leadership of Pakistan Tehreek-e-Insaf (PTI) and Pakistan Peoples Party (PPP) as part of an unusual move to secure support for the implementation of a $3 billion standby arrangement. The meetings took place ahead of an upcoming review by the IMF executive board and raised speculation about the release of funds for Pakistan, which was initially excluded from the schedule. [Dawn]
• Boosting Investment Climate for Growth: The Pakistani government has approved a new investment policy through the establishment of the Special Investment Facilitation Council, which aims to remove obstacles and facilitate foreign investment. The Pakistan Investment Policy (PIP) 2023, endorsed by the federal cabinet, is expected to attract around $20-25 billion in investments over the coming years. [Dawn]
• PML-N's Uninformed Dubai Meeting: JUI-F chief Maulana Fazlur Rehman expressed disappointment over the Pakistan Muslim League-Nawaz (PML-N) not informing other parties in the Pakistan Democratic Movement (PDM) about its meeting with the PPP in Dubai. [ET]
• Civil-Military Initiative for Agriculture - LIMS-COE: Pakistan's civil and military leaders have joined forces to tackle pressing issues in the agriculture sector. They have introduced the Land Information and Management System - Centre of Excellence (LIMS-COE) as a groundbreaking solution. LIMS-COE aims to address food insecurity, malnutrition, and high import costs, while promoting productivity, food security, and agricultural exports. [ET]
• China's Yuan & Pakistan's Financial Crisis: Pakistan recently used China's currency, the yuan, to pay Russia for a significant oil purchase, highlighting the country's increasing dependence on Beijing amid a balance of payment crisis and a shortage of dollars. Pakistan's bilateral trade volume with China has exceeded $20 billion, reaching $20.8 billion in FY22, according to Irfan Iqbal Sheikh, President of the FPCCI. China has become Pakistan's primary source of investments in energy and infrastructure. However, Pakistan is experiencing a trade imbalance as imports from China continue to rise while exports decline. Major Pakistani exports to China in 2021 included cotton, copper products, cereals, oil seeds, and fish-related products. [BR] [Dawn]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• Yuan Payments for Indian Oil Imports: Indian refiners are reportedly paying for some oil imports from Russia in Chinese Yuan, as Western sanctions against Russia have led to the search for alternatives to the dollar for settling payments. With India becoming the largest buyer of Russian oil, the shift to yuan payments reflects Moscow's restricted access to the dollar and euro financial networks. China has also adopted the yuan for most of its energy imports from Russia, as it has become China's top crude supplier. [BR]
• Sudan Edging Towards Devastating Civil War: The United Nations has issued a warning that conflict-ridden Sudan is on the verge of a "full-scale civil war," which could have severe destabilizing effects on the entire region. The alert came after an airstrike on a residential area in Omdurman, killing approximately two dozen civilians. The ongoing war between Sudan's rival generals has caused thousands of deaths and crimes against humanity which include sexual violence and ethnic cleansing in the Darfur region. The paramilitary Rapid Support Forces (RSF), fighting against the regular army, claimed responsibility for the air strikes, stating that 31 people were killed. [BR]
• Erdogan Calls for Black Sea Grain Deal Extension: Turkey's President Tayyip Erdogan has called on Russia to extend the Black Sea grain deal by at least 3 months and announced President Vladimir Putin's upcoming visit to Turkey in August. The announcement came after a meeting between President Erdogan and Ukrainian President Zelenskiy, where they discussed the arrangement allowing the safe export of grain from Ukrainian ports through the Black Sea despite the ongoing war. Additionally, Zelenskiy's visit to Turkey is part of his tour to garner support for Ukraine's NATO membership. [ET] [Reuters] [Geo] [HT]
• FAO Food Price Index Hits Two-Year Low in June: The UN Food and Agriculture Organization (FAO) reported that its food price index fell in June to its lowest level in over two years. The decline was due to lower prices of sugar, vegetable oils, cereals, and dairy products. The index reached 122.3 points, the lowest since April 2021 and 23.4% below the peak in March 2022 during the Russia-Ukraine conflict. The FAO also forecasted a slight increase in global cereal production, primarily driven by improved prospects for wheat production. The cereal price index, vegetable oil price index, and sugar price index all decreased, while the dairy price index slipped and the meat index remained unchanged. [BR] [ET]
• Game-Changing $12.19 Smartphone Aims to Revolutionize Market: The start of the week brings us news about a possibly revolutionary smartphone at the affordable price of $12.19. Billionaire tycoon Ambani aspires to capture market share like never before. With a quarter of a billion people without a smartphone in India, there is potential for a huge hole to be filled in terms of information and ease of business through technology, especially that which comes exponentially cheaper than your cheapest smartphone. [BR] [Reuters] [TechCrunch] [The Hindu]
• Oil Prices: Oil prices climbed about 3% to a nine-week high on Friday as supply concerns and technical buying outweighed fears that further interest rate hikes could slow economic growth and reduce demand for oil. Brent futures rose $1.95, or 2.6%, to settle at $78.47 a barrel, while US West Texas Intermediate crude (WTI) rose $2.06, or 2.9%, to settle at $73.86. [BR]

PAKISTAN - REMAINDERS

• Five killed in Jhelum gas cylinder blast. [BR] [Dawn] [Geo] [The News] [The Nation]
• The ‘game’ of human trafficking on social networks: In the absence of strict checks, agents freely advertise services to "attract customers" via TikTok, YouTube and Facebook.” - Abdul Moiz Malik [Dawn]
• Opinion: Changing grain market dynamics - “In case the trend of selling at farm gate picks up further momentum, which is a natural outcome of the developments taking place in our rural areas, the grain markets are under threat of losing their significance. The launch of some effective information and communication technology-based solution/app that can link farmers and buyers directly, eliminating most, if not all intermediaries, would definitely become the straw that breaks the camel's back.” - Khalid Wattoo & Rahema Hasan [Dawn]

Opinion: Is CPEC a ‘debt trap’ for Pakistan? - “The Belt & Road Initiative (BRI) has been described by former US assistant defence secretary Chas Freeman as “potentially the most transformative engineering effort in human history” because, once completed, it could cover more than half of the world's population and generate a GDP of over $21 trillion. The project includes no military component, but American analysts fear it could potentially upend global geopolitics as well as geo-economics and challenge the US-led world order. These apprehensions sparked vociferous debates in Western media in which analysts sought to portray BRI as a “debt-trap” that, according to them, ensnares developing nations in unsustainable debts through “predatory lending” and allows China undue influence over their policies.” - By Naveed Hussain [ET]