Floods reduce usage of fertilisers

KARACHI:

Due to the recent floods, the use of fertilisers has witnessed a drastic decrease in recent weeks, putting a damper on any hope for growth in the near future.

“After wide scale damage to the standing Kharif crop, the ongoing flash floods have also raised concerns regarding the sowing cycle of Rabi season which begins from mid-September to October. In this season, wheat is the main crop,” said JS Research fertiliser analyst, Muhammad Waqas Ghani.

“There will be implications for fertiliser offtake in case of disruptions to the wheat sowing cycle in some of the most affected areas, i.e. Sind and lower Punjab –DG Khan and Rajanpur,” he added.

“The fertiliser sector is expected to take a hit due to the recent floods affecting cotton, rice, sugarcane and maize crops in the provinces of Sindh and Balochistan,” said Topline Securities senior research analyst, Sunny Kumar.

“We also believe that the ongoing floods will have an impact on the sowing of wheat which starts mainly from early October,” he added.

“We estimate that 2.4 million acres of cultivated land has been impacted in Sindh and 1.3 million acres in lower Punjab,” said Ghani. Of the total estimated cultivated land of 22.5 million acres, these 3.7 million acres could result in at least 17% of the area being unavailable for cultivation, he explained.

“With around two bags of urea and one bag of DAP required for each acre of sowing, we’d like to highlight that fertiliser offtake faces a downside risk of 370,000 tons urea – approximately 6% of annual and about 21% of fourth quarter offtake– and 185,000 tons DAP from wheat sowing in these areas,” reiterated Ghani.

“The impact on maize will be over and above these,” he warned.

“In comparison, during the floods of 2010, urea and DAP sales were down by 12% year on year and 15% year on year respectively,” said Kumar. As per the National Fertiliser Development Centre (NFDC), around 30% of urea and DAP sales were diverted towards Sindh and Balochistan, he added.

“The affected crops including cotton, sugarcane, rice and maize account for around 40% of fertiliser consumption. Wheat accounts for 50% of fertiliser consumption,” Kumar noted.

“With the ongoing situation, we expect urea sales to decline by 5-7% on an annualised basis,” said Abdullah Umer Khan Lodhi, Fertiliser Analyst for Ismail Iqbal Securities. In the calendar year of 2022, six million tons sales are expected versus the sale figures of 6.3 million tons in 2021, he added.

“This situation may contrast from the field application of urea as most of the parts in Sindh and lower Punjab are still affected by floods. However, due to the anticipated increase in gas prices as proposed by OGRA recently, fertiliser dealers will continue to build inventories which will eventually arrest the fall in urea application,” he noted.

“For DAP, we expect ongoing demand destruction to continue with 15-20% decline in annual offtake in FY 2022. The expected sale this year is 1.5 million tons versus 1.8 million tons in FY 2021, due to affordability issues,” Kumar stated.

“To put all this into a nutshell, fertiliser offtake will be affected in the next 1-2 months due to mobility issues rather than decreased application rate,” he explained.

“Furthermore, the farmers’ agricultural infrastructure including tube-wells, tractors and other equipment will be damaged and result in a reduction in the farmer’s buying power,’’ assessed Kumar.­­

Published in The Express Tribune, September 8^th, 2022.

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