Fertiliser prices surge on massive rupee devaluation

Published June 26, 2022
Di-ammonium phosphate and urea are being retailed at Rs12,500 and Rs2,200 per bag, respectively.—Dawn
Di-ammonium phosphate and urea are being retailed at Rs12,500 and Rs2,200 per bag, respectively.—Dawn

LAHORE: Fertiliser prices have skyrocketed as a result of rupee depreciation and rising production costs, putting agriculture and food security in greater jeopardy than previously anticipated.

Di-ammonium phosphate (DAP) is currently being sold for between Rs11,500 and Rs12,500 per bag, according to market trends. A bag of sulphate of potash (SoP) has gone up to Rs1,600 and the muriate of potash (MoP) price has jumped to Rs11,000 per bag. The urea, though out of demand, still costs Rs2,200 per bag in pockets of the province.

Engro Fertiliser increased DAP prices last week to Rs12,100 per bag, which is Rs700 more than what Fauji Fertiliser sells at. The SoP was being sold at Rs11,000 per bag till last week, which has jumped by Rs5,000 per bag to be sold for Rs16,000. The MoP has experienced the biggest jump – from Rs4,000 to Rs11,000. Urea, which had a fixed price of Rs1,850 per bag but dealers were allowed to sell it at Rs1,950 per bag, is now being sold at Rs2,100 to Rs2,200 per bag at different locations in the Punjab.

The farmers warn that these kinds of fertiliser prices could render the entire sector commercially unfeasible. “Rice plantation is about to begin. Expect it to be the first victim of this spiral. Maize, to be sown in July-August, may be next in line. If rice were to be the first victim, wheat would be the biggest loser. Growing wheat would be impossible at the current price of Rs2,200 per maund. With these fertiliser prices, wheat would not make commercial sense, even at a price of Rs3,000 per maund. The majority of farmers would almost certainly miss the wheat season, and the country would be in for an even worse food security disaster than it is now,” warned Abad Khan. He urged the government to take immediate action to halt the situation, or else farming and the country would face even bigger and deeper problems.

A high-ranking industry official, however, shifted the blame to the sliding value of the rupee. “What can one do if the free-on-board (FoB) price of SoP or MoP hits $1,000 per tonne and the rupee goes down to over 200 for a dollar?” he asked.

“At this price, each bag costs Rs10,000. Calculating this price becomes easier when you add port charges, unloading, loading, inland transportation, importers’ margin, and dealers’ profit. So, essentially, it is a dollar phenomenon that is setting off a multiplying disaster in the supply and agriculture chains,” he said.

The official added that if this equation worsens, fertiliser prices will rise even more. This high trend is causing much more serious damage to agriculture than suggested by this direct disaster, he said.

“If urea prices were kept artificially low while all other kinds of fertiliser prices multiplied, what would happen? Urea would become the only fallback and its application would become irrational and damaging to the cropping cycle. This is what is happening and this is what would continue to happen if the bigger fertiliser picture is not corrected immediately,” he said.

Published in Dawn, June 26th, 2022

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