The Kharif season is all set to end on a flat note in terms of urea off-take, barring outlandish scenarios, the chances of which are slim. Data released by the National Fertilizer Development Centre (NFDC) shows urea sales in August 2020 at 0.57 million tons remained flat in month-on-month terms, and down 8 percent year-on-year.
The cumulative Kharif season urea off-take is slightly better than last year with one month remaining, but anticipatory buying in the preceding months indicate that September could well be a dull month for urea buying – which is likely to lead to no more than 0.3-0.35 million tons of urea off-take – closing the season with flat growth.
More confusion now surrounds the urea market, which could well lead to anticipatory buying by dealers with deeper pockets. Although the urea prices as reported by the Pakistan Bureau of Statistics in its latest weekly SPI report, do not see an alarming trend yet, having risen 2 percent month-on-month, there is all likelihood of the GIDC sage playing havoc on prices once again, if more clarity does not arrive soon.
That, the farm economy is not in the best of shape is not a surprise anymore, evident from flattish urea off-take in the Kharif season, despite 11 percent decline in average selling price. The DAP off-take has been much better and is expected to end 10-15 percent higher for the season – at the back of 6 percent year-on-year decline in average selling prices.
The farmer support package from the upcoming season is also highly anticipated to be geared towards DAP, which could keep the off-take up. But the cumulative spending on urea and DAP has not been anything to write home about – despite significant price reduction.
On the plus side, the threats of an earlier feared unprecedented locust attack have subsided, as the global locust tracker report by the UN Food and Agriculture Organization has noted that the “situation continues to improve”. There were concerns of a mega locust attack till a couple of months back, where experts feared a potential damage of 20-25 percent to the standing crops. That threat has largely been averted and should be a huge sigh of relief for the farmers, and the whole country in general.
Herein enters the elephant in the room, that is the GIDC. The issue never seems to die, as the government and the fertilizer players have reportedly failed to reach an amicable solution on the payment of GIDC dues, as instructed by the apex court. The fertilizer industry has claimed that the urea prices stand to go up by Rs400/bag, if the GIDC is collected in the next 24 months in equal installments. This was feared earlier, but here is hoping both parties would reach a solution before the Rabi season gets in full swing.