Karachi, December 21, 2021 (PPI-OT): Pakistan Fertilizer: a curious case of fertilizer shortage

The issue of unavailability of urea has started to reach mainstream media where our channel checks suggest farmers being charged PkR2,300/bag – PkR2,400/bag as opposed to official price of PkR1,800/bag. The disparity in domestic and international prices of urea of ~PkR7,700/bag has been the primary reason affecting retail supplies of the commodity.

The supply side concerns come at a time when the wheat sowing is in full swing posing risks to overall acreage of the crop which has been stagnant around 1.15MT/acre over the last many years, and to production target set for current season of 30mnMT.

That said, we see limited risks materializing owing to better farm economics (as a result of bumper crops last season and favourable pricing trends) and increase in support prices. The support prices of the commodity have been revised up to PkR2,200/bag in Sindh and PkR1,950/bag by center.

Country reported a bumper wheat crop last year of 27.3mnMT and also imported another 3.6mnMT to build buffers to manage end-user prices. Hence, we do not see price pressures in the immediate run, however realization of risks to wheat production target may hit the prices in the medium run.