In a space of just a month, farmers showed extremely contrasting behaviour towards fertilizer off-take. The NFDC has released the fertilizer statistics for the month ending June 2012, which shows a record high level of urea off-take - just a month after urea off-take had witnessed an eight-year low.
The urea off-take in June was recorded at a staggering 1.029 million tons, a number which is an all time record for a single months urea off-take in the history of the country. To give more perspective, Junes urea off-take is nearly one-sixth of the average yearly urea demand and double the five-year June average urea off-take.
Recall that urea prices had started to decline after having peaked in January 2012. Farmers refused to queue up to buy urea during the first quarter, which forced local producers to rethink their strategy and take a hit on their margins by reducing urea prices. To add to the local producers woes, the presence of imported urea in abundance at cheap rates also made it tough for local players to maintain high prices.
The prices were considerably reduced in June, and were seen at as low as Rs 1,678 per bag - a level last seen in September 2011. With more planned urea imports of nearly 0.6 million tons in the pipeline for the ongoing season, urea prices face further downside risk owing to enough supply.
News reports suggest that the government has been recommended to slash imported urea prices by a further Rs150 per bag to Rs 1,450 per bag. Should that happen, local players will again be left with no choice but to reduce the locally-produced ureas price to be at par with imported urea. However, this time around, urea manufacturers will have the cushion to reduce prices without taking a dent on their profit margins, as feedstock gas prices have been revised downwards to previous years levels, effective from July, 2012.
On the production side, the fertilizer industry continues to protest against the extended gas curtailment, which has severely hampered production and as a result has inflated the import bill and the subsidy on imports. It is rather well documented now that the fertilizer sector needs gas the most. But little can be expected of this government in an election year to take a step which sounds rational on economic grounds.
Comments
Comments are closed for this article.