Urea application during 10MFY19 has been steady without being exceptional. That is not entirely bad news. The urea off-take during 10MFY19 has gone down by 1 percent year-on-year to 4.7 million tons. Needless to say, the ever elusive 6 million tons mark will remain elusive for another year.

The other important equation that of the farmers' economy is also being tested to the hilt. During 4MCY19, the urea off-take has increased by only 2 percent year-on-year, and it has cost 30 percent more year-on-year, as prices have also moved steadily north. The spending of Rs59 billion on urea in the 4M period is the highest since CY15, when the off-take was considerably higher by around 13 percent from 4MCY19.

The story is not much different on 10M bass either, as the spending of Rs165 billion in 10MFY19 is 25 percent higher than same period last year, despite lower off-take. It is also the highest since 10MCY15 – a period where urea off-take was closing in at 5 million tons.

On the other hand, the impact has been felt on DAP fertilizer; as the axe of higher spending on urea has invariably fallen on DAP off-take. The phosphate fertilizer off-take has gone down by a massive 37 percent year-on-year to only 274 thousand tons, the lowest 4M level since CY15. On FY basis, the off-take is lower by 18 percent year-on-year. The DAP prices meanwhile have continued to steadily go higher, and the spending on DAP in 4MCY19 has fallen to Rs19.5 billion- lowest since 4MCY15- and lower by 25 percent year-on-year.

Farmers have time and again demonstrated that urea remains fertilizer of choice. And farmers will not go beyond a certain threshold to buy more DAP – especially when prices of both commodities are on the rise. Assessment on the monetary loss of the wheat crops is yet to be precisely made. But what can be said with certainty is that farmers' economy will not have improved from the havoc that the recent rains caused. This could lead to a Kharif season with dull off-take as the farmers walk the tight rope. The government may have to come up with a special subsidy program beyond the current one, to help keep the fertilizer application afloat.

Copyright Business Recorder, 2019