Farmers facing inflationary pressure

Farmers were already burdened with inflationary pressure from 83 per cent higher fertiliser and 2.1x higher fuel prices in the last one year. Catastrophic floods piled on to their misery, destroying crops, cattle, infrastructure and land. After mass damage to the Kharif crops, the ongoing flash floods have begun to cause concerns regarding sowing cycle of the Rabi season, which begins from the middle of September and October.

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 to 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 to have lost its topsoil, as well, making planting impossible in the coming cycle.

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

Wheat, lentils, tobacco, rapeseed, barley and mustard make up the majority of the upcoming Rabi 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 per cent) are farmers’ saved, which have been damaged in the affected areas due to warehouses flooding with water.

The fertiliser application markedly reduced the fertiliser off-take, which 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 the fertilisers.

The areas most impacted are agriculture lands in Sindh and the lower Punjab belt comprising Dera Ghazi Khan and Rajanpur districts.

Wheat, cotton, sugarcane, maize and rice account for close to 90 per cent of the fertiliser consumption. Wheat has a 50 per cent share; followed by cotton with a share of 25 per cent. Sugarcane crop follows on the third place but nutrient and hectare is the highest on this crop.

We estimate 2.4 million acres to be impacted in Sindh (80 per cent of the last season’s wheat sowing target) and 1.3 million acres reported to have been impacted in lower Punjab. Of the total estimated cultivated land of around 22.5 million acres, these 3.7 million acres could result in at least 17 per cent of the area being unavailable for cultivation.

A standard rule of thumb for the fertiliser 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 370,000 tonnes of urea and 185,000 tonnes of DAP demand will be impacted. Using the five-year average off-take data, this translates into 6 per cent of annual and 21 per cent of the fourth quarter urea demand. This is only estimated regarding wheat sowing, while the 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 off-take at varying levels of affected area under cultivation, where every one million acres of wheat land being lost, urea off-take will reduce by 100,000 tonnes.