The best ever Kharif season in terms of urea application has not transpired exactly into great farm economy, or so it seems, looking at the lackluster off-take of the nitrogenous fertilizer in the past two months. Save for August 2017, every month of this fiscal year has seen urea volumes drop significantly year-on-year. November 2017 was not different.
The cumulative Rabi season’s (to-date) urea off-take, slid by 13 percent year-on-year, failing to reach a million tons, in the historically high off-take months. The November 2017 dip in off-take was more striking at 21 percent year-on-year. It does not paint a rosy picture knowing that it comes on the back of two consecutive depressing off-take months.
The overall picture may not appear as grim, as the 11MCY17 off-take stands at a healthy 5.1 million tons – a healthy 12 percent increase over same period last year. The 11-month urea off-take is also comfortably clear of the 5-year average of 4.77 million tons, mainly at the back of a stellar second quarter, after the farmers’ package.
Some quarters have put the slowdown in demand to delay in Rabi crop sowing, mainly wheat. Should the farmers fetch better prices for sugarcane than they currently are, it might pave way for smoother clearance of the urea stock, and the off-take may take the annual toll to over 6 million tons for the first time since 2010? But in any other scenario, the surge in off-take may come late, if at all.
All of it is coinciding with a gradual rise in international urea prices, after a long period of lull. The international commodity price has moved briskly after staying around $200-220 per ton to now at $280 per ton and growing. The local prices have started to show signs of upward movement, evident from a 2.5 percent jump in urea rates, which are now at a 15-month high.
The stockpile has come down to just over half a million tons, and might ease off pressure on local manufacturers. The rising international prices offer more breathing space to local players, and they may now decide to regain some lost ground in the days of oversupply and rising international rates.
Things are much brighter on the phosphate front, as the 11MCY17 DAP off-take has already crossed the record high for any complete year. The DAP subsidy has surely done the trick, and there is increasing evidence of growing awareness of balances fertilization amongst the community. But one bad crop could change it all, as has been seen several times before. The axe has generally fallen on DAP application, when the farm economy faces hurdles.