The Rabi crop season this year was by far the most expensive for farmers in terms of fertilizer application – as the fertilizer buying cost for Rabi 2022 over Rabi 2021 jumped by 25 percent year-on-year. Recall that previous three Rabi seasons had farmers had spent an identical amount on the two key fertilizers. Latest fertilizer numbers are out, as released by the National Fertilizer Development Centre (NFDC), and the off-take till May 2022 does not tell a harrowing tale.
The urea off-take remained firm, registering a 14 percent year-on-year growth for 5MCY22 at 2.5 million tons. This is also the highest ever urea off-take for any 5M period, with 17 percent year-on-year dip for May 2022. Urea prices have soared 17 percent year-on-year during 5MCY22 to Rs2,038 per bag. The government later issued an order in a bid to lower retail prices, irking the fertilizer manufacturers. With peak buying season for Kharif in full swing and likely increase in feedstock gas prices form next fiscal year, strong anticipatory buying for urea in June 2022 cannot be ruled out.
The urea to DAP application ratio at 5.7 xs for 5MCY22 is the worst in seven years – up from 3.7 xs for last six years. DAP prices have played a big role, as expected. Farmers tend to spend on urea on top priority, with DAP usually getting no more than one-third of the total spending. It is a pattern that has stood test of time in well over a decade. DAP off-take for 5MCY22 has gone down by 18 percent year-on-year at 0.44 million tons. DAP prices on the other hand, have skyrocketed like never before, averaging Rs9,434 per bag – up 90 percent year-on-year.
The total urea and DAP spending for 5MCY22 at Rs156 billion is easily the highest-ever and up a massive 47 percent year-on-year. On average, spending value has increased by 6 to 7 percent year-on-year in the past seven years, and CY22 so far is surely an outlier. While the bare minimum will continue to be applied, balanced fertilization will remain a distant dream, and the cost of production will surely take a hit – leading to another round of price increase of key crops, come harvest time.