The calendar year 2020 has been tough on most counts. Fertilizer sector has thankfully been able to weather the storm, as farm activities by and large continued unhindered for most part, save for a few glitches when the locusts attacked. The November 2020 fertilizer data released by the National Fertilizer Development Centre (NFDC) shows 6 percent year-on-year cumulative increase in urea and DAP off-take, for 11-months of the calendar year.
Recall that the Kharif season ended at a slightly higher note with urea application higher by 5 percent year-on-year. But that came from a very low base. Little suggests that the full year urea application will be any different from the average 6 million tons off-take of the past three years. Urea prices have stayed under control for most part of 2020, averaging 10 percent lower year-on-year at Rs1713 per bag.
The phosphate fertilizer application on the other hand, has gone up by 7 percent year-on-year during 11-months of CY20 to 1.96 million tons. In all likelihood, the DAP full year off-take will surpass or match the all-time high of 2.38 million tons seen in 2017. That said, DAP prices have bene skyrocketing of late, primarily based on the massive surge witnessed in the Phosphoric acid global prices. Pakistan imports most of its DAP, and global raw material prices have a direct bearing on domestic prices, unlike that of urea.
DAP prices have averaged Rs3600 per bag in 2020, almost similar to 2019, but the surge in the second half of 2020 has been concerning. The prices have soared by 19 percent in the last six months, and the DAP spending during the year at Rs143 billion is 7 percent higher year-on-year. Urea spending on the other hand has dipped by 5 percent year-on-year, despite higher off-take, primarily on account of lower retail prices.
The total DAP and urea spending in 11 months of 2020 at Rs317 billion is identical to last year. The spending pie has remained static, which should be concerning if the current crop season does not result in improved yields. Ambiguity still surrounds the GIDC treatment by fertilizer manufacturers, and that could have a bearing on urea prices going forward.
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