Urea production, sales increase

It comes in wake of higher farm activity, use of urea as DAP substitute

KARACHI:

Urea offtake rose 7% to 737,000 tons in June 2022 as compared to the corresponding month of previous year, as per latest numbers of the National Fertiliser Development Centre (NFDC).

Similarly, urea production increased 4% year-on-year to 531,000 tons in June 2022, taking the closing inventory to 256,000 tons, said AHCML Research fertiliser analyst Asad Ali.

It took urea offtake in the first half of 2022 to 3.247 million tons, compared to 2.899 million tons in the first half of 2021, up 12% year-on-year.

It came in the wake of higher agricultural activity, better farm economics and use of urea as a substitute of di-ammonium phosphate (DAP) given high prices, he said.

On a sequential basis, urea offtake went up 73% month-on-month in June due to seasonal factors.

Meanwhile, cotton crop suffered greatly due to high rates of fertiliser during the sowing season, said Sindh Chamber of Agriculture President Miran Mohammad Shah.

Input prices were high while output rates were low. Even big growers had to borrow from the middleman, Shah told The Express Tribune.

Urea prices went up 15% during the first half of 2022, said Topline Securities’ senior analyst Sunny Kumar while gas prices increased 24% during the period.

Urea sales were up 12% year-on-year in the first half of 2022, while DAP sales were down 3% year-on-year.

As per Finance Act 2022, fertiliser was exempted from the output tax, making input tax part of the cost, said JS Global fertiliser analyst Waqas Ghani Kukaswadia.

“Fertiliser manufacturers increased urea prices by Rs350 per bag during the outgoing month, taking retail price to approximately Rs2,200 per bag; prices may increase further.”

Prices of other fertiliser products were also expected to rise, he said.

Farmers were coping with a fertiliser crisis caused by soaring phosphate fertiliser prices that almost doubled in the last one year, said Waqas Ghani.

“Despite the price hike, I think there is no impact on fertiliser sales as it constitutes only 7-8% of expenses incurred on per acre of wheat at current prices. However, in case of DAP, price increase was quite significant,” said Ismail Iqbal Securities analyst Abdullah Umer Khan Lodhi.

Since January 2022, DAP prices have approximately increased by Rs4,000 per bag to record at Rs12,250/bag currently; DAP has modestly affected 5-7% due to these higher prices.

Resultantly, we have witnessed a decline in DAP sales. On year-on-year basis, Fauji Fertilizer Bin Qasim (FFBL) recorded an increase of 35% in urea offtakes followed by FFC, 14%, AGL, 2%, whereas EFERT and Fatima group depicted a decline of 6%, Ali said.

Published in The Express Tribune, July 28^th, 2022.

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