In the wake of recent flooding and the use of fertilizers has seen a dramatic decrease in the last few weeks, which has put the brakes on any potential for growth in the near term.
“After large-scale destruction of the standing Kharif crop and the continuing flash floods have brought up concerns about the sowing season of Rabi season, which runs between mid-September and October. In this time of year wheat is the most important plant,” said JS Research fertiliser analyst Muhammad Waqas Ghani.
“There are implications for the offtake of fertilisers in the event of interruptions to the sowing cycle in certain of the areas most affected, i.e. Sind and the lower Punjab Lower Punjab, DG Khan as well as Rajanpur,” he added.
“The fertiliser industry is likely to be hit due to the recent flooding which have affected rice, cotton maize and sugarcane crop within the provinces Sindh as well as Balochistan,” said Topline Securities senior research analyst Sunny Kumar.
“We are also of the opinion that the current floods could affect the wheat sowing process, which generally begins around the beginning of October.” said the official.
“We believe at 2.4 million acres cultivable land have been affected within Sindh in Sindh and 1.3 million acres of land in the lower Punjab,” said Ghani. In the overall estimated cultivated area that is 22.5 million acres and 3.7 million acres, these 3.7 million acres may lead to at most 17percent of that total area not being cultivated as he said.
“With about 2 bags of urea and a bag of DAP needed for every acres that is sowing, it’s important emphasize that fertiliser offtake has an upside risk of 370,000 tons of urea – about 6 percent of annual and 21 percent from fourth quarter of offtake and 185,000 tons of DAP from wheat sowing in these areas.” repeated Ghani.
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“The effect on maize will be greater than the effects on maize,” he warned.
“In contrast, during the floods of 2010 urea as well as DAP sales fell by 12% the year and by 15% year on year,” said Kumar. According to the National Fertiliser Development Centre (NFDC) approximately 30 percent of urea as well as DAP revenues were diverted to Sindh and Balochistan the NFDC said.
“The crop that is affected, which includes rice, sugarcane, cotton and maize comprise about 40% of the fertilizer consumption. Wheat accounts for 50percent of fertiliser consumption” Kumar noted.
“With the current economic crisis, we expect the sales of urea to decrease by 5 to 7 percent annually,” said Abdullah Umer Khan Lodhi Fertiliser Analyst with Ismail Iqbal Securities. In the calendar year 2022, six million tonnes of sales are anticipated compared to numbers in 2021 of 6.3 millions tons for 2021. the analyst added.
“This situation could be different from the field use of urea since the majority of the areas of Sindh and the lower Punjab remain affected by flooding. But, because of the expected rise in the prices of gas as suggested by OGRA in the last few days, fertilizer dealers will continue to accumulate inventory, which could eventually stop the decline in urea applications,” he noted.
“For DAP, we expect that the ongoing destruction of demand will be sustained, with a 15% decline in annual offtake by FY 2022. The estimated sale next year will be 1.5 million tonnes versus 1.8 million in FY 2021 because of affordability issues,” Kumar stated.
“To summarize all this in an easy to understand format, the offtake of fertiliser will be affected over the next two months because of problems with mobility rather than a lower rates of application,” he explained.
“Furthermore farmers’ agricultural infrastructure , such as tube-wells, tractor and other equipment could be damaged, which will result in a decline in the purchasing power of the farmer as per Kumar.
