Fertiliser sales struggling to rebound

The massive surge in urea prices has started influencing the farmers purchasing patterns as the urea off-take for July 2011 slid by nine percent year-on-year. The trend set off at the beginning of the year, when urea prices started to increase following the prolonged gas curtailment across the country.
This is the fifth straight monthly decline in urea sales, which should be worrisome for those wanting to see the agricultural yields up. The farmers have long been lobbying for increased support prices, citing this very rise in the input prices, as the major reason for increased production cost.
The National Fertilizer Development Centre, the authority that compiles the fertiliser data, has shown discomfort over the supply situation for August as the inventory levels are low and the production is hindered by gas outages. In case of delays in import consignments, fertiliser shortage may cause another round of price increase that could be disastrous for the demand.
The DAP fertiliser off-take surprisingly witnessed a welcome surge for the period, registering the highest monthly off-take in the calendar year-to-date. This resurgence in DAP demand should not be confused with a revival of DAP demand as the concerns that have badly impacted the DAP off-take are still very much in place.
The DAP prices have been hovering beyond Rs4000/bag, and, in the absence of subsidy, it could spell a disaster on phosphate fertiliser demand and resultantly the crop yields. The DAP raw material prices in the international market have stayed firm and have been rising of late. Therefore, the local farmers heavy DAP buying for July could well be in anticipation of further hike in DAP price, than any other factor.
It has been observed that the farmers have been reluctant to spend more than a certain amount on DAP as the spending patterns of the last three years reveal a near identical amount spent on DAP off-take. Therefore, expensive urea would result in even lesser demand of the product.
Subsidy is not an option at the moment, but should the situation persist, one could do away with the feedstock subsidy to create space to finance the DAP sales.