Pakistan Low Fertilizer Offtake Due To Strained Agronomics – OpEd
Urea offtakes in September 2024 plummeted 35%YoY to 365,000 tons in Pakistan.
The drop in offtake can be attributed to: 1) strained agronomics caused by Rabi 2024 wheat crisis, 2) a 50%YoY drop in cotton crop yields, and 3) delay in crop cultivation owing to extended monsoon rains.
Urea offtake in 3QCY24 dropped 17%YoY to 1.5 million tons. The market share of FFC/FFBL improved by to 38% and 9% respectively during the quarter, while EFERT share plunged to 30%.
Urea Inventory in September has reached an alarming level of 622,000 tons. This is the highest level of urea inventory (10% of annual sales) since November 2020.
EFERT accounted for 34% of the industry’s closing inventory while FFC/FFBL contributed 10% and 4% respectively. Continued production and lower offtakes are key reasons for the inventory buildup.
Urea ex-factory prices declined 2%MoM to an average price at PKR4,644/bag (Sona) and PKR4,497/bag (other) during September. The decline is attributed to elevated levels of Urea inventory.
DAP offtake rose by 27%YoY to 133,800 tons in September 2024. Higher offtakes are attributed to stocking up of DAP amid the start of wheat cultivation by the end of October. Industry DAP inventory was reported at 383,000 tons.
Despite higher inventory, DAP prices remained stable at an average of PKR11,820/bag due to high demand in September.
Intermarket Securities expects 4QCY24 offtakes to remain strained due to 1) weak farmer economics, 2) expectation of lower cultivation for wheat crop in Rabi 2025, and 3) concerns around government considering to abolish Support Price Regime for major crops. However, October offtakes may improve with sowing for wheat crop to start later in the month.
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