The Kharif season ended at a slightly higher note with urea application higher by 5 percent year-on-year. But before anybody jumps with joy, it needs to be reminded that it came off a very low base. The latest numbers released by the National Fertilizer Development Centre show urea sales in October 2020 jump by a massive 247 percent year-on-year.
The 10-month CY20 urea sales have grown by a more modest 3 percent year-on-year and the calendar year is again seemed to be heading towards another year of urea sales exceeding 6 million tons. This will be the second year in a row, after five consecutive years of flattish urea sales. The onus now lies on November and December sales which are usually the highest two off-take months.
The prices have remained stable throughout the year, having averaged Rs1716 per bag in 10MCY20, down a considerable 10 percent year-on-year. There is a lack of clarity on the GIDC front as urea prices could go up considerably somewhere down the road. The combined urea and DAP spending in CY20 to date has remained flat at Rs270 billion year-on-year, with DAP spending taking a higher 42 percent share. Urea application did not increase in proportion to the decline in urea prices, which goes on to show the farm economy has not really improved that drastically, and the spending pool has largely remained static.
The dream of balanced fertilizer application still remains distant as DAP application, although up 12 percent year-on-year, is still way off from the ideal nitrogen phosphate ratio. 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 saga playing havoc on prices once again, if more clarity does not arrive soon.
The DAP prices have suddenly gone up by 7 percent in a month – which is the biggest monthly jump in more than three years. There are plans of announcing DAP at subsidized rates, but the recent price hike could have a bearing on DAP off-take going forward. All in all, the fertilizer story has hardly been anything to write home about, and it seems the trend of the last five years of stagnant growth is going to stay a little longer.
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