Untended orders: Urea shortage could lead to missed targets

Kharif crops feel the impact as sowing gets delayed.

KARACHI:

Growers are complaining that though they placed orders for urea weeks earlier, they have not yet received the commodity from the companies, even at higher prices, causing undue delay in the sowing period of Kharif season.

Nadeem Shah Matiari, a grower from Sindh, said that urea prices have increased and gone above the level of Rs1,600 per 50 kg bag in retail. “I myself placed an order of 600 urea bags on June 20, but each time I ask the company about the status of my order, they say that they will supply soon,” Matiari said.

Some growers are also worried over the sharp decline in cotton prices in the international market, as this would reduce their margins while their input costs, like urea prices, are bound to jump.

Cotton prices have fallen from the level of Rs12,000/maund to Rs6,700/maund, a decline of 45% from peak rates, making things difficult for cotton growers.

Commenting on the recent hike in Engro urea prices, Matiari said other producers would certainly increase the urea prices in coming days.

Government statements to increase gas prices up by 100 per cent have also created panic in the market and added to the woes of farmers, he said, further stating that such government moves were uncalled for in the current situation when most of the urea producers are facing gas shortages.  Invest Capital Market Ltd analyst Asad Siddiqui said that after the increase of Rs125 per 50 kg urea bag to reach Rs1,360 by Engro, it is expected that other urea manufacturers would also increase their rates owing to huge demand and less supply of the commodity in the markets. The net demand of urea is not less than 0.7 to 0.8 million tons, he said.

Engro Fertilizer, on Wednesday, increased the price of their urea by Rs145/bag (net increase Rs125 plus GST impact of Rs20). This move in effect has raised the price of urea to Rs1,360/bag at dealer’s level from Rs1,215/bag earlier.

This is the fourth time in the last seven months that the price of urea has increased (on three occasions it was done to curtail production losses while one was to incorporate increased taxation impact).

Sindh Abadkar Board President Abdul Majid Nizamani, who is also a farmer from Badin, Sindh informed that urea prices have surged to Rs1,750 in retail market and the prices are continuously increasing.

Furthermore, owing to acute shortage of commodity in market, growers believe that these prices would shoot up to Rs2,000 per 50 kg bag in the next 10 days.

“This acute shortage of urea has affected the sowing season of kharif from April 1, 2011 and will resultantly also affect the yield of major crops like rice and cotton this year,” Nizamani said.

Growers and fertiliser producers have asked the government to prefer domestic consumers and industries in gas allocation instead of CNG outlets. Pakistan is facing acute gas shortages resulting in gas load management and the fertiliser industry is one of the consumers’ facing severe shortages.

Urea constitutes over 60% of the total fertilisers use in agriculture and its rising prices has caused a big problem for growers who were confident that Pakistan would achieve record yield of major crops this year, Nizamani added.

Pakistan’s urea demand stands at approximately 6.2 million tons, whereas local production is approximately 5.2 million tons. To cover this shortfall, the government annually imports an average of $500 million worth of urea, in addition to bearing the subsidy for imported urea.

Published in The Express Tribune, July 18^th, 2011.