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MOSL: AGRICULTURE-A year of diverging fortunes for fertilizer industry

Agriculture: A year of diverging fortunes for fertilizer industry; Rabi fades Kharif enthusiasm; CRIN outperforms industry

 

Indian fertilizer industry volumes grew by a muted 1.7% YoY in 9MFY19 (according to the Ministry of Fertilizers data) due to anemic sowing activity in Rabi across key states. The Rabi 2018-19 season has turned out to be unfavorable so far, as farmers faced plights in the form of low reservoir levels (down by 37%, 28% and 23% YoY in Maharashtra, AP and Telangana, respectively) and reduced moisture content. In this note, we highlight key trends in the fertilizers industry for FY19:

• The situation was much better in 1HFY19 than in recent times, with a significant tapering in volume growth (from 7.8% YoY to -8.4% YoY now), manufactured NPK growth (from 20% YoY to 10.3% now) and manufactured urea growth (from 4.2% YoY to 0.3% now).
• The continuous rise in phosphoric acid prices has resulted in a shift in balance from manufactured DAP (-24.3% YoY in 9MFY19) to traded DAP (+59.3% YoY in 9MFY19).
• While hostile conditions have failed to fertilize industry growth, CRIN has bucked the trend by growing at ~7.9% YoY. The company’s NPK volumes increased 17.9% YoY in 9MFY19, with its market share in NPK expanding by 190bp and phosphatic fertilizer (NPK+DAP) volumes growing by 13.2% YoY.