KARACHII - Urea off-take has reached 5.5 million tons during the year 2008, depicting an increase of 12.5 percent, on a yearly basis. However, the growth in DAP off-take remained weak and down by 45.3 percent in the corresponding year due to volatility being observed in the urea prices internationally and a low amount of subsidy of Rs 470 per 50kg bag provided on DAP. In spite of witnessing downward revision in international urea prices in H2CY08 to close the year down on a yearly basis, the restricted local supply has appreciated urea prices by 26.5 percent during the last year. According to NDFC recent fertilizer numbers, the urea off-take during the month of December 2008 had dropped by 13.0 percent. Similarly, DAP off-take posted a decline of 27.1 percent due to limited supply in the local market as import remained in the pipeline. The fertilizer aggregates showed that the impact of ease in international prices had not seen in the domestic market on account of depreciation in rupee that could not pass the benefit of falling international prices to farmers during the whole CY08. It was estimated that fertilizer supply would be lower than its demand entirely due to shortages in the availability of urea, while availability of DAP estimated at 985 thousand tons (comprising 655 thousand tons of opening inventory and 330 thousand tons of local production) against an estimated demand of 8,85,000 tons, showing a comfortable supply and would leave 1,35,000 tons for kharif FY10 consumption. Aisha Kirmani, research analyst at BMA Capital is of the opinion that the federal government is not expected to continue with provision of providing subsidy on fertilizer during current calendar year keeping slowdown in the global urea prices that had eased to $320 per tons. She also predicts some element of uncertainty can be expected for companies sitting on DAP inventory such as FFBL and ENGRO. According to her observation, these companies will have no choice but to mark down existing inventories of DAP when importers bring cheap DAP into the country. Fertilizers off-take, (both urea and DAP), decreased during Jul-Dec FY09 amid weak demand due to higher prices and vague market signals. The decline in international fertilizers prices is attributed to slowdown in demand, decrease in fuel prices and fears of global recession. Other factors include, falling food prices and resumption of fertilizer export from China, previously reduced owing to high export taxes. In addition, fall in fertilizer prices also reflected by the slowing global credit crunch that has slowed down the entire fertilizer supply chain, 8 WB Food Price Index down by 32.3pc in Oct, 2008 from peak in June 2008.