December 21, 2021 (MLN): The ongoing supply disruption of Urea has created a spell of worry among local farmers as they have to pay more (Rs600-700 per bag) than its actual price, as mentioned by news reports.
Since Urea is an important type of agricultural fertilizer, the hike in prices would definitely hit the end-users.
On Monday, the members of Punjab Assembly from both treasury and opposition benches took strong objection to the serious shortage of fertilizer and sale of this vital ingredient of cultivation in the black market to the poor farmers in the province, The News reported.
AKD Securities in its latest report said, “Despite 11.6% increase in urea offtakes CYTD, farmers are being charged Rs2,300 per bag— Rs2,400 per bag as opposed to official price of Rs1,800 per bag. The disparity in domestic and international prices of urea of Rs7,700 per bag has been the primary reason affecting retail supplies of the commodity.”
Wheat, the chief Rabi crop of the country, is currently in the sowing stages. The crop requires three bags of urea per acre, translating into annual demand of urea of around 3.4mnMT from wheat. However, the unavailability of fertilizers during the season may dent the overall production of the commodity where the average yield over the past five years has remained stagnant around 1.15MT per acre, the report added.
Also, the annual production of wheat during the last many years has averaged around 2.5mnMT while the same clocked in at 2.7mnMT last year and the government imported another 3.6mnMT last year to manage the short-term demand and supply gaps, it noted.
Consequently, there is ample supply of the commodity in hand but the shortfall of this year’s production may result in prices going north next season. To this end, every 5% increase in prices of wheat results in an inflationary impact of 23bps on an MoM basis.
The report says, “Commodity bull run and bumper crop production last season has improved farmers’ income significantly, therefore the farmer is less sensitive to the increase in the price of inputs.”
The support price of the commodity has been revised up to Rs2,200 per bag in Sindh and Rs1,950 per bag by the center, it added.
Meanwhile, strong administrative measures are taken by the federal and provincial governments over the last few weeks, discouraging the hoarders, which has also served to improve the availability of fertilizers in both Punjab and Sindh.
The report underlined that a huge disparity in prices of urea in local and international markets has opened a window for unwanted trading activities by the middleman which is resulting in the availability of urea in the local market and may dent the yield per acre of wheat during the Rabi season.
However, strong administrative measures and robust farm income is expected to allow farmers to sail through this period. Though the yield of the wheat crop is expected to come off slightly, the government has enough inventory on hand to manage the price fluctuations in short term.
Copyright Mettis Link News
29694
