Is Bangladesh agreeing to pay a higher price?

Is the Government Paying a Premium for Di-Ammonium Phosphate (DAP) in Haste?

1. Recent Procurement Agreement:

   • In December 2024, Bangladesh struck a deal with Saudi company Ma’aden to import 1.2 million tons of DAP at USD 743 per ton.
   • The agreement ensures the supply of 0.6 million tons in each of the years 2025 and 2026 to the Bangladesh Agricultural Development Corporation (BADC).

2. Comparison with Current Prices:

   • The global import price of DAP currently hovers around USD 600 per ton.
   • On December 26, the ACCGP approved the purchase of 40,000 tons of DAP from Morocco at USD 584.50 per ton.
   • Two months earlier, BADC approved imports of 40,000 tons from China at USD 613.25 per ton and another 40,000 tons from Ma’aden at USD 606 per ton.

3. Global Price Trends:

   • According to the FAO, DAP was priced at USD 577 per ton in September 2024, significantly lower than its peak of USD 1,132 in April 2022.
   • Ma’aden's most recent sale price was reported at USD 643-644 per ton, while India imported DAP at USD 632 per ton in September 2023.

4. Rationale Behind the Deal:

   • A BADC release justified the agreement, emphasizing the timely availability of fertilizers and avoiding shortages for farmers.
   • However, the price discrepancy raises questions about whether the government is overpaying in its urgency to secure fertilizers.

5. Previous MoUs with Saudi Arabia:

   • Bangladesh signed MoUs in 2018 and 2023 with Saudi entities, proposing investment in a new DAP factory to ensure cheaper long-term supply.
   • These agreements have yet to yield tangible results.

6. Domestic Demand and Dependency:

   • Bangladeshi farmers require over 1.6 million tons of DAP annually, with over 90% of it imported.
   • DAP, containing both nitrogen and phosphorus, is a critical fertilizer due to its high nutrient content and suitability for farming.

7. Economic Considerations:

   • Futures contracts for DAP offer opportunities to mitigate risks related to price fluctuations.
   • The government’s decision to pay a higher price now may reflect concerns over future market volatility, but it also highlights inefficiencies in negotiating better terms.

The agreement ensures fertilizer availability but raises questions about cost-effectiveness, especially given current market trends and historical price data.