Fertilizer application to markedly reduce due to floods

Karachi, September 07, 2022: Fertilizer sector offtake is expected to take a noticeable hit due to the flash floods as submerged cotton and rice growing regions will have non-existent demand for fertilizers.

The areas most impacted are agriculture lands in Sindh and the lower Punjab belt comprising of Dera Ghazi Khan and Rajanpur districts. Wheat, cotton, sugar cane, maize and rice account for close to 90% of fertilizer consumption.

Wheat has a 50% share followed by cotton with a share of 25%. Sugar-cane crop follows on the third place, but nutrient/hectare is the highest on this crop.

“We estimate 2.4mn acres to be impacted in Sindh (80% of last season’s wheat sowing target) and 1.3mn acres reported to have been impacted in lower Punjab.

“Of the total estimated cultivated land of around 22.5mn acres, these 3.7mn acres could result in at least 17% of the area being unavailable for cultivation,” said Waqas Ghani at JS Research.

A standard rule of thumb for fertilizer consumption for wheat crop is 2:1.5 of Urea:DAP on a per acre basis, which reduces to 2:1 for Urea: DAP when DAP becomes more expensive.

“We estimate that around 370k tons of Urea and 185k tons of DAP demand will be impacted. Using 5-year average off-take data, this translates into 6% of annual and 21% of 4Q urea demand,” he added. 

This is only estimated regarding wheat sowing, while impact of the same to Maize crop will be over and above to the aforementioned numbers.

“Given exact data is still rolling in, we also present a sensitivity of impacted urea offtake at varying levels of affected area under cultivation, where every 1mn acre of wheat land being lost, urea offtake will reduce by 100k tons,” said Waqas.

Recent flash floods have materially impacted the agri sector

Where farmers were already burdened with inflationary pressures from 83% higher fertilizer and 2.1x higher fuel prices in the last 12 months, catastrophic floods piled on to their misery, destroying crops, cattle, infrastructure and land.

After mass damage to Kharif season’s crops, the ongoing flash floods have begun to cause concerns regarding sowing cycle of Rabi season, which begins from mid-Sep/Oct.

Most of Sindh and Southern Punjab is submerged under water just days before the start of the wheat planting season. Rehabilitation efforts are underway but the water will likely take some time to drain.

According to agri experts, boundaries between farms have also vanished and will need to be redrawn. It is expected that some land will likely have lost its topsoil as well, making planting impossible in the coming cycle.

Primary agricultural infrastructure of farmers like tube-wells, storages, seed stocks/fertilizer inventory, various agriculture machinery and equipment – all have faced damages. These losses would result in reduced farmer income and it will take months to restore the infrastructure.

Wheat, lentil, tobacco, rapeseed, barley, and mustard make up the majority of the upcoming Rabi cycle’s crops where Wheat is the most crucial being the staple crop and, therefore, essential for the food security of the country.

Since wheat is a self-pollinated crop, most of the seeds used (75%) are farmer saved which have been damaged in the affected areas due to warehouses flooding with water.

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