National Fertilizer Development Corporation (NFDC) has released fertiliser data for the month of May 2011. During the month, urea and DAP offtake registered a decline of 20 per cent (year on year) and 39 per cent (year on year) to 473,000 tonnes and 30,000 tonnes, respectively. On a monthly basis, both urea and DAP sales dropped by three per cent and 45 per cent, respectively.
Urea offtake is lower due to decreased product availability owing to the gas curtailment issue. Total urea production in May 2011 stood at 445,000 tonnes compared to 360,000 tonnes in April 2011 whereas DAP production was registered at 68,000 tonnes in contrast to 48,000 tonnes a month back.
In 5MCY11, urea offtake was down by 11 per cent to 2,187,000 tonnes mainly hit by lower production and untimely imports. Likewise, DAP sales suffered a contraction of 12 per cent to 248,000 tonnes on an annual basis. During this period, DAP offtake normally remains dull prior to the Rabi season for which procurement starts from June-July. A company wise DAP sales breakup shows that FFBL sold 160,000 tonnes (an increase of 17 per cent in 5MCY11); while Engro’s offtake stood at 74,000 tonnes, compared to 92,000 tonnes in the same period last year.
This slowdown in sales is mainly attributable to a 53 per cent surge in the product prices since last year. Average retail urea prices for 5MCY11 stood at Rs1,183 per bag, a rise of 44 per cent. Similarly DAP prices stood at Rs3,602 per bag, an increase of 42 per cent. In the near future, both urea and DAP prices are expected to rise on account of increase in fuel and feedstock gas prices.
Moreover, internationally urea is trading at a premium of 108 per cent at Rs2,600 per bag. Urea demand is expected to remain robust at 6.45 million tonnes in CY11, a rise of 5.3 per cent despite the recent price surge. However, DAP demand is likely to suffer contraction on account of skyrocketing prices despite improved conditions of farmers. Currently, retail DAP prices are hovering around Rs4,000 per bag. This could force farmers to use substitutes of DAP such as NP and NPK, which are trading at a discount of Rs1,500 per bag as compared to DAP prices.