All-time high fertilizer spending

Close to a trillion rupees were spent by farmers on the application of two key fertilizers – urea and DAP in FY24. This is obviously assuming that the farmers are able to purchase the fertilizers at rates reported by the Pakistan Bureau of Statistics (PBS). As per the latest data released by the National Fertilizer Development Centre (NFDC), the combined urea and DAP off-take for FY24 at 8.2 million tons was 8 percent higher year-on-year – largely led by a revival (of sorts) in DAP application.

The nitrogenous urea fertilizer application was one of the highlights – growing only 2 percent year-on-year to 6.6 million tons, but well clear of the 10-year average of 6 million tons. FY24 urea off-take was also the second-highest fiscal year off-take reported, and it is now five straight years of urea off-take staying clear of 6 million tons – which is also a first.

DAP off-take at 1.6 million tons is 41 percent higher year-on-year. But while the urea off-take is the second highest in a fiscal year, DAP off-take is the mirror image – being the second lowest in at least 13 years. The lowest being last year, which explains the 41 percent jump from an exceptionally low base. DAP off-take in FY24 was still lower 17 percent from the 10-year average of 1.93 million tons. June 2024 off-take at 0.48 million tons, besides being lower 21 percent year-on-year is also the lowest June reading since at least 2012.

Urea prices soared a colossal 59 percent year-on-year during FY24 to Rs4,300 per bag – more than doubling from a year ago. Little surprise than that the total spending on urea in FY24 amounted to Rs560 billion – higher 61 percent year-on-year, almost entirely due to the price effect. DAP spending at Rs385 billion is also a massive 59 percent higher year-on-year – with the bigger contribution coming from a volumetric surge. DAP prices in 2024 have averaged Rs12,000 per bag and have been on a steady decline since touching the high of Rs13,800 in December 2023. That said, DAP FY24 spending is close to the cumulative urea and DAP spending just three years back in FY21. That is how much the prices have changed – with the volumes by and large staying range-bound.

The urea to DAP application or the NP ratio at 4.1x is the second-worst in at least 15 years. Pakistan is not necessarily known for the ideal and balanced fertilizer application mix – but even by its low standards, it is a dreadfully low number.