Monsoon's early arrival boosts demand for fertilizers, yet pricing burdens remain a concern
India is set to witness a significant boost in fertiliser demand and production costs due to the upcoming South West Monsoon in Q1 FY26. The India Meteorological Department (IMD) has forecasted an above-normal monsoon at 106% of the long-period average for the fiscal year, indicating strong and timely rainfall across the country.
This favourable weather condition is expected to favour higher agricultural output, leading to increased sowing of kharif crops, which commonly require significant fertiliser use. As a result, the demand for essential nutrients like nitrogen, phosphorus, and potassium compounds is projected to rise.
According to reports, kharif crop sowing is already up by 11% year-on-year, which drives a corresponding increase in fertiliser demand. The uneven distribution of rains, with 44% of the country receiving excess to large excess rainfall, has not yet indicated any adverse impact, suggesting that fertiliser application schedules should proceed as planned without major disruption.
A robust monsoon typically boosts rural incomes and discretionary spending, enabling farmers to invest more in inputs, including fertilisers, further raising demand. This positive impact of the monsoon on the economy is evident in Crisil's forecast revision of India's GDP growth to 6.5%.
On the production cost dynamics, abundant rainfall tends to stabilize or reduce prices of agricultural commodities by increasing supply. However, the direct impact on fertiliser production costs is less explicitly documented. Typically, a favourable monsoon does not increase raw material costs; instead, it can ease distribution logistics due to better rural conditions, potentially reducing some cost pressures for fertiliser producers.
Inflationary effects can also be moderated by a good monsoon, which reduces reliance on expensive imports of food crops and raw materials linked to fertiliser inputs. This could indirectly help control production input costs.
Meanwhile, the global fertiliser market is experiencing its own challenges. The prices of raw materials like feedstock LNG, rock phosphate, phosphoric acid, sulphuric acid, and sulphur have surged, posing a problem for phosphatic fertiliser production. This surge in raw material costs has been evident since January.
In response, Fertilisers and Chemicals Travancore Ltd (FACT) has expedited the commissioning of plants under construction and the debottlenecking of other operating plants with digital capabilities to increase production. The company has also reported increased fertiliser sales in Q1 of the current fiscal year compared to the same period last year.
Despite being a leader in fertiliser production, imports, and consumption, India has not yet acquired the technology and expertise to domestically produce speciality inputs for agriculture. However, the availability of low-grade rock phosphate deposits in Rajasthan may be effectively used through advanced beneficiation.
The Chinese supply of urea, DAP, and speciality fertilisers has been dwindling for the last 4-5 years following a trade ban. On average, 2-3 lakh tonnes of speciality fertiliser products are consumed every year and are non-subsidised. Specialty fertilisers include slow and controlled-release fertilisers (SCRF), water-soluble fertilisers, liquid fertilisers for foliar application and fertigation, micronutrients, etc.
Recently, the prices of phosphoric acid and sulphuric acid have increased significantly, with the price of phosphoric acid rising over $100. Sulphur prices have also risen significantly during the first half of the year.
In summary, the above-normal South West Monsoon in Q1 FY26 is expected to boost fertiliser demand through increased crop sowing and higher rural incomes, while likely stabilizing or slightly lowering production costs by improving supply chains and moderating commodity prices linked to fertiliser inputs. This favourable monsoon scenario forms a key positive catalyst for the fertiliser sector in the current fiscal year.
- The increased agricultural output due to the favorable monsoon weather condition will lead to higher demand for essential nutrients like nitrogen, phosphorus, and potassium compounds in fertilizers.
- As a result of increased farming activities and fusion rural incomes, there will be a rise in demand for agricultural inputs, including fertilizers.
- The robust monsoon season could indirectly help control production input costs by reducing reliance on expensive imports of food crops and raw materials linked to fertilizer inputs.
- Global fertilizer market is facing its own challenges with raw material costs surging, posing a problem for phosphatic fertilizer production, primarily due to the increase in prices of feedstock LNG, rock phosphate, phosphoric acid, sulphuric acid, and sulphur.
- To combat these issues, Fertilisers and Chemicals Travancore Ltd (FACT) has taken measures such as expediting the commissioning of plants, debottlenecking of other operating plants with digital capabilities, and increasing fertilizer sales to increase production.
- Despite being one of the leading nations in fertilizer production, consumption, and imports, India still lacks the technology and expertise to domestically produce specialty inputs for agriculture, making it dependent on foreign suppliers for specialty fertilizers like slow and controlled-release fertilizers (SCRF), water-soluble fertilisers, liquid fertilisers for foliar application and fertigation, micronutrients, etc.
