The DoF has called on suppliers to raise DAP imports and production to increase availability for the peak summer kharif months and for the run-up to the winter rabi season.
The DoF noted a drop in DAP imports and domestic output this year, prompting its latest move.
Scheduled DAP imports in January-July total 2.38mn t, down from 3.12mn t during the same months in 2020 and 3.44mn t in 2019, Argus line-up data show. Chinese suppliers account for 1.17mn t of this year’s imports.
Indian DAP imports averaged 6.13mn t in 2018-20, Argus data show.
Domestic DAP output has similarly trailed recent years, with production slipping to 1.16mn t in January-May, down from 1.69mn t and 2.13mn t in the same periods in 2020 and 2019, respectively.
April production slumped to 146,000t, the lowest since 2015, when Argus records began.
The DoF today directed fertilizer firms to take steps to ensure continued supply, regardless of international prices. The DAP price has risen to a nine-year high of $590/t cfr India.
Demand solid, stocks down
DAP sales to farmers have remained historically high in the first half of this year at 3.33mn t. But this lags last year, when demand boomed following two heavy monsoons in a row, with offtake standing at 3.98mn t in the first six months. DAP sales in the first half of 2019 were 2.2mn t.
Continued demand from farmers, compounded by the slowdown in imports and domestic output, has pulled down DAP stocks (see chart). Countrywide inventories had fallen to 2.45mn t as of 29 June, provisional data show, up from a nadir of 2.02mn t at the end of March. But stocks stood at 4.5mn t at the end of June last year, with current stocks down by 46pc on a year earlier.
Low MRP, negative import margins
Despite this latest move from the DoF, Indian importers remain hamstrung, as they face losses on DAP purchases above $570/t cfr, Argus calculates. Latest sales have taken place $20/t higher, but spot liquidity has ground to a halt in recent weeks, with buying largely limited to contract cargoes.
The government is now seeking to ensure supplies for farmers as the kharif season hits its peak. The government’s supporters could argue that sufficient measures have been taken to ensure continued availability, following the decision to more than double the DAP subsidy on 19 May.
But buyers are constricted by the government’s proviso to cap the maximum retail price (MRP) at last season’s levels, when cfr levels were almost half those today. Any imports at current spot prices would render purchases loss-making.
But an increase in the MRP is politically sensitive and Delhi will look to avoid any further stand-offs with farmers, particularly following a flare-up in tensions since the fourth quarter of last year.
A short-term rise in retail prices seems unlikely. Importers face either pushing cfr prices down to breakeven levels, or paying up. Either way, the clock is ticking.
By Harry MinihanIndia DAP stocks vs monthly price
Source : Argus Media
