The urea off-take continues to be lackluster, with January numbers showing a 5 percent year-on-year increase. The Rabi season is once again expected to yield stagnant growth in urea application – as two months away from the season end – the urea off take has virtually remained stagnant at 2.23 million tons. Recall that last year’s Rabi urea off-take was down 8 percent year-on-year – showing the area under cultivation has not increased.

The situation on the DAP front is far from encouraging too – as the Rabi season to date DAP off take is down by 7 percent year-on-year, barely crossing 1 million tons. The DAP off take for Rabi season peaked two years ago, when urea subsidy was highest and the international prices were low. Farmers have spent considerably greater amount, 17 percent to be precise for lesser volume of fertilizer in CY18 – and that is going to have a telling impact in the remaining Rabi season as well.

International urea prices have started to cool down – averaging $290 per ton – down from $335 per ton in November 2018. The prices at home have not come down yet, having crossed Rs1800 per bag in January 2019. There is still ambiguity on government’s announcement of reducing the GIDC on fertilizer feedstock gas in a bid to reduce urea prices – as the fertilizer manufacturers are not overly sold on the idea.

Going forward, little up tick is expected between Feb-Apr, as these are traditionally low off take months in terms of both urea and DAP. The next big demand does not come before June, unless of course, a consensus is reached on the mechanism to reduce urea prices – in which case, there could be buying in anticipation.

In overall terms, Pakistan’s urea to DAP ratio has improved significantly from previous years, both in terms of spending and application. But there is still a long way to go to reach the ideal application ratio of 2:1. Strictly talking about Rabi season only, the ratio has once again worsened from as low as 1.55 in CY16 to 2.13 today – at a four year high. With better rains this season and significantly cheaper electricity for tube well purposes, one expects the farmers’ economy to improve in the months to come. Whether or not, this translates into higher fertilizer application, remains to be seen.