Fertilizer application instills hopes

With doom all around industrial activity, much hope is pinned around agriculture sector to help keep the economy afloat in FY20. Laying a small but vital part in building a sense of optimism, is the Kharif fertilizer application data. With most things contracting in the economy, even a single digit year-on-year increase in fertilizer application for Kharif 2019 is heartening news.

Kharif urea application inched up by nearly 5 percent year-on-year to 3 million tons – only the second such instance of over 3 million tons of urea bought in any Kharif season. Last such instance was in 2017. But a good Kharif off-take Is not necessarily reflective of two consecutive god seasons – as 2017 urea off-take was not exceptionally high, and the Kharif off-take was slightly misleading, as anticipatory buying was on the rise back then.

This time around, urea off-take has increased despite a massive 20 percent year-on-year increase in average urea prices. The latest round of price increase came after the GIDC deal between the government and the fertilizer industry failed to materialize in controversial circumstances – and the industry was left with no option but to raise the price, in order to pass on the earlier held back impact of feedstock gas price increase in July 2019.

This is the highest Kharif over Kharif price increase since at least CY13, if not further back. This meant that the farmers ended up spending the highest ever on fertilizers in any Kharif season, with urea costing them to the tune of Rs113 billion. This is 25 percent higher year-on-year. The combined urea and DAP spending shot up to Rs184 billion – up by 22 percent year-on-year.

DAP off-take has increased by a healthy 8 percent year-on-year to 0.9 million tons. The prices for phosphate fertilizer also went up by 9.6 percent – taking the DAP application spending to Rs70 billion, comfortably the highest ever Kharif DAP spending.  A lot of fertilizer future will depend on the major crops’ outcome and the prices that the growers get. The higher fertile prices so far have not dented the buying power, which could also be a result of much reduced prices offered to the agriculture sector in lieu of electricity used for tubewell purposes.