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Farmer spent the highest ever on fertilizers in FY19. The total urea and DAP combined application in FY19 was down by 2 percent year-on-year. The combined spending in FY19 was up by 20 percent, showing that the increase in fertilizer spending was all prices driven. Breaking it down to urea and DAP, urea off-take did manage to grow slightly by 1 percent year-on-year for FY19, whereas that for DAP went down by 11 percent year-on-year, which is the first instance of year-on-year decrease in at least last six years.

The overall urea off-take in FY19 at 5.97 million tons meant a 27 percent year-on-year increase in urea application cost – as the prices went dearer throughout the year, having increased 25 percent from previous year.

The increase in DAP prices is also on similar lines at 22 percent year-on-year, taking the spending on DAP to an all time high of Rs154 billion, up 11 percent year-on-year.

There is no denying that the farmers have been given extended relief on some main inputs, especially electricity for tube well use, which should provide some extra breathing space. But that has not really been supplemented by good crops this season and the axe may invariably fall on DAP spending as it goes deeper in the Kharif season.

Farmers have time and again demonstrated that urea remains fertilizer of choice. And farmers will not go beyond a certain threshold to buy more DAP – especially when prices of both commodities are on the rise. Assessment on the monetary loss of the wheat crops is yet to be precisely made. But what can be said with certainty is that farmers’ economy will not have improved from the havoc that the recent rains caused. This could lead to a Kharif season with dull off-take as the farmers walk the tight rope.
The prices in the international market have remained sticky for quite some time, remaining flattish year-on-year.

The increase at home has been mostly driven by pass on costs of feedstock gas and other taxes on the fertilizer raw material. The NP ratio at 2.73 is worse off from last year, and if prices keep increasing on the same pattern, it stands to worsen further.

The farmers’ economy will have to come out of the shell, and the crop numbers should really improve, for fertilizer application to be any better come the end of CY19.

Copyright Business Recorder, 2019