KARACHI - State Bank of Pakistan (SBP) has said that despite lower water availability and decline in fertilizer off-take, the agriculture growth would reasonably be good during FY09. In its third quarterly report for current FY2008-09, SBP said the robust growth in major crops, despite less water and fertilizer availability, is principally a reflection of anticipated higher prices and good luck in terms of favourable weather. Similarly, growth in production of some pulses, oilseeds and horticulture crops indicates a better performance by minor crops during FY09, while growth in livestock benefited from higher supply of fodder, following the extended monsoon and winter rains as well as absence of any major incident of diseases during FY09. SBP said that all these developments suggest that agriculture growth would be reasonably good during FY09. But, it could have been even better if sufficient inputs - irrigation water, fertilizers and certified seeds - would have been used. Less than required irrigation water, concerns over high prices and timely availability of fertilizers, as well as plantation of substandard seeds restricted possible gains, central bank report said. Furthermore, the gains from high production in key crops in FY09 could not be fully transmitted to farmers as prices realised by the farmers were below their expectations, SBP said adding that a drop in international rice prices and weaker exports, farmers did not get prices as high as anticipated earlier. SBP report pointed out that the farmers ability to increase investment in quality inputs might be reflected partially by slower than anticipated growth in agri-credit. The trends so far suggest that the annual target of Rs250b would not be achieved, for the first time since FY05. This would be due to both demand and supply factors. However, SBP noted that for the next season, credit disbursement is expected to improve. For example, relatively stable fertilizer prices would help restore demand for agri-credit for inputs. Similarly, ease in monetary policy and SBP measures to address liquidity shortages in the banking system would help improve supply of agri-credit in the months ahead. A substantial increase in fertilizer off-take and agri-credit disbursement recorded during March 2009 would support prospects for continued improvement in agri-growth. Discussing the performance of major crops, SBP said the growth in major crops saw recovery during FY09, owing to record production of wheat, rice and maize, despite decline in fertilizer off-take. Central bank said that a substantial growth in gram and a moderate increase in cotton output (despite decline in area) more than offset the drag by relatively disappointing sugarcane crop. The decline in sugarcane harvest was not a surprise, as area under this crop fell during FY09 as the farmers could not realise the anticipated prices besides disputes between farmers and sugar mills over payments. Growers substituted this area with wheat and rice crops owing to attractive prices for these crops. Despite adversities such as lower fertilizer off-take, higher energy prices, decline in irrigation water availability, FY09 wheat harvest provisionally estimated to have reached record high of 23.302m tons, slightly higher than 23,295m tons achieved in FY07. This increase seems more impressive given losses at maturing stage due to rains and hailstorms in upper Punjab, report noted. An improvement in wheat output is largely attributed to timely announcement of support price for wheat at Rs950/40kg with commitment of 6.5m tons procurement, with effective campaign to grow more wheat. Moreover, SBP said the provincial governments aggressive procurement operations help stabilise wheat prices in open market. In response of a bumper wheat crop and to supplement the governments efforts, SBP has also abolished the margin requirement on wheat financing.