Fertilizer sector hopes monsoon arrival will revive sales

Fertilizer sector is pinning greater hopes on monsoon arrival to revive sales that have been stalled on the scorching summer and drought conditions across the country.

Highly placed sources in the sector said the absence of sufficient summer rains in the recent period has hit fertilizer sales, prompting farmers to back out from farming activities. Normally, fertilizer application for the ensuing Kharif season starts from the second week of May with the start of summer showers. However, this was delayed in the current season.

The emerging situation resulted in piling up of fertiliser stocks in manufacturing companies and it is expected that fertilizer movement will start with the commencement of rains, the sources added.

There are also reports that major port godowns are full with imported fertilizers such as urea, DAP, Potash due to subdued demand, the sources said adding that the sector is betting big on the IMD forecast of an above normal monsoon this year.

The public sector FACT is also keeping sufficient stock of Factamfos and Ammonium Sulphate in godowns. Despite these challenges, the company is going ahead with its production and import plans to meet the ensuing demand in the coming season, a company official said, adding that the surging raw material cost including gas price is also posing a problem.

Generally, the overall situation in the fertilizer industry is dull which is evident from the declining price of fertilizer stocks.

Akshay Agarwal, Managing Director, Acumen Capital Services, said Indian fertilizer companies’ latest quarter sales trend shows significant decline and increase in inventory because of the adverse effects of drought conditions. Major fertilizer companies, including Coromandel International and Chambal Fertilisers have recently released their March quarter results. While, Chambal recorded a 26 per cent year-over-year decrease in revenue for the Q4FY24, whereas Coromandel reported a revenue decline of 28 per cent, he said.

The fertilizer industry has demonstrated consistent positive growth from 2014 until recently. However, the industry is facing several challenges and the most important is its close link to weather conditions, as agriculture heavily depends on weather patterns. Another issue is its heavy dependence on imported raw materials. In the Indian context, government subsidies also play a crucial role, as the financial strain imposed by these subsidies poses a significant challenge to the industry’s growth, he added.

India is expecting a normal monsoon this year which would usually result in increased agricultural activity and greater demand for fertilizers. This can enhance the performance of fertilizer stocks, he said.

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