Unlike their counterparts in banking and oil and gas exploration sectors, agriculture-related companies do not enjoy a commanding position in the Pakistan Stock Exchange (PSX).

Agriculture-related companies are part of fertiliser, food, textile and sugar sectors. Market capitalisation of the fertiliser sector is Rs554.3 billion, representing 7.27 per cent of the aggregate market capitalisation of all listed companies that amounts to Rs7.64 trillion.

Fourteen listed companies are directly or indirectly related to the food segment. Most of them make juices, milk, ketchup, jam and jellies. They rely on agriculture that generates basic raw materials. Major companies include Mitchell’s Fruit Farms, Shezan International, National Foods, Nestle Pakistan, Unilever Foods, Rafhan Maize and Fauji Foods. There is gruelling competition among producers to acquire cheaper orchards from farmers. Many companies offer assistance to farmers to grow better-quality fruits.

Most of agri companies are engaged in fruit, citrus, milk and meat production, which are essentially the healthiest ingredients of a balanced diet

Most of these companies are engaged in fruit, citrus, milk and meat production, which are essentially the healthiest ingredients of a balanced diet. Although most companies cultivate their own orchards, the wastage is still colossal. “Citrus, which can be easily converted into a healthy diet, rolls down the river and ends up as wastage,” said an entrepreneur who set up a food processing plant along the Jhelum River but closed it down soon due to losses beyond his control.

According to a recent article in Herald, Pakistan is the world’s 10th largest producer of citrus. But we are not as good at exporting — or even consuming — our produce as we are at growing it. Farmers believe the government has done no research on the subject. Also, the government hesitates to share with farmers whatever little research it has done, they say.

They also claim that agricultural subsidies — a norm in similar economies — are minimal in Pakistan. A big landowner claims that the Indian government generously supports its farmers through subsidised electricity for tube wells. Similarly, citrus trees in Japan produce fruit until they are 70 years old, thanks to research. But such trees dry up in only 20-25 years in Pakistan, he says.

Milk and meat processing companies also complain about the poor availability of the main raw material. The quality of milk and meat is often compromised, thanks to the fierce market competition.

The big four fertiliser producers are Dawood Hercules Corporation, Engro Fertilisers, Fauji Fertiliser, Fauji Bin Qasim and Fatima Fertiliser.

Fourteen listed companies are directly or indirectly related to the food segment

Analysts projected that the tight supply of urea in 2019 would keep the pricing power with major players. They believed that urea prices would remain elevated given the lower probability of subsidised gas availability, reduced urea imports and the government’s intention of selling imported urea at market prices.

Directors of Engro Fertilisers stated in their forward-looking statement in the latest annual report that 2018 was the year of record profitability for the company.

The Engro directors expected that local urea demand for 2019 would remain stable at current levels due to the price inelasticity of urea. Its production for 2019 was expected to be 5.6m tonnes. International diammonium phosphate (DAP) prices were expected to remain at the level of last year.

In the two dozen sugar and allied companies listed on the PSX, prominent ones are JDW Sugar, Al-Abbas Sugar, Al-Noor Sugar, Baba Farid Sugar, Faran Sugar, Mirpurkhas Sugar, Mehran Sugar; Premier Sugar, Shahtaj Sugar, Shahmurad and Shakarganj Ltd. Production and profitability of sugar mills depend on the quantity, pricing and quality of sugar cane.

Listed companies in the textile sector are divided in three groups: spinning, weaving and composite (which includes both spinning and weaving). Textile mills in the composite segment remain under the shareholders’ glare as such entities usually post higher sales and profitability that translate into dividends. Prominent among composite textile mills are Nishat Mills, Nishat (Chunian) Ltd, Bhanero Textile Mills, Masood Textile Mills, Sapphire Fibres, Blessed Textile, Faisal Spinning and Gul Ahmed Textile Mills.

Published in Dawn, The Business and Finance Weekly, April 22nd, 2019