Fertilizer spending remains high

Urea off-take for May 2019 stood at an all time high of 593 thousand tons, registering a 20 percent year-on-year growth. This comes at the back of steady beginning of the Kharif season. That said, the off-take for FY19 would still remain a shade under 6 million tons. On 5M basis, the off-take is higher by 6 percent year-on-year, as the prices seem to have steadied of late.

In year-on-year terms, urea prices have increased 27 percent year-on-year. But the prices have not increased a great deal, almost remaining at the level of January 2019 throughout the year thus far. International urea prices have also remained range bound, around $280 per ton, at almost identical levels of previous year.

In terms of total spending on urea application, the toll is Rs81 billion in 5MCY19, which is the highest in four years. The combined urea and DAP spending during the period has also ballooned to Rs117 billion – an all-time high.

DAP off-take, in the meanwhile has gone down by 2 percent year-on-year, despite a more than two times increase in May off-take numbers. DAP prices have not exactly skyrocketed, having actually come down during the calendar year, but the average increase from the same period last year is sizeable enough to take the total DAP spending to Rs34 billion – higher by 16 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.