Bangladesh Moves to Secure Fertiliser Amid Global Supply Chain Disruptions
The Cabinet Committee on Government Purchase (CCGP) has recently approved the procurement of 0.26 million tonnes of fertiliser, a crucial step given the current agricultural and global supply challenges. This purchase includes urea and phosphatic fertilisers from both domestic and international sources, such as KAFCO, Saudi Arabia, the UAE, and Morocco. While such procurements are typically routine, the current context is anything but ordinary. Bangladesh's farmers are preparing for winter crops and the upcoming Boro season, the largest rice crop, while the global fertiliser market remains disrupted by the Middle East war and shipping issues through the Strait of Hormuz.
Bangladesh's fertiliser supply chain faces significant vulnerabilities. The country's annual demand for chemical fertilisers stands at around 6.7 million tonnes, with urea accounting for about 2.62 million tonnes. However, domestic production has been hampered by chronic gas shortages, ageing plants, and recurrent shutdowns. The ongoing Middle East crisis has exacerbated these issues, with gas rationing forcing five of the country's six major urea factories to suspend production temporarily. This has also affected the state-owned DAP factory in Chattogram due to ammonia shortages.
The situation is further complicated by Bangladesh's dependence on imports, particularly from the Gulf region, which supplies a significant portion of the country's fertiliser needs. The Strait of Hormuz, a critical shipping route, has seen a sharp decline in commercial traffic due to the war, leading to higher insurance costs and disrupted supply chains. Earlier this year, urea prices reached their highest level since 2022 as Middle Eastern exports nearly stopped, highlighting the urgency of securing fertiliser supplies before shortages become apparent.
The broader global context adds another layer of complexity. The wars in the Middle East and Ukraine, along with the developing El Nino, are converging to impact the global food system. Rising energy and fertiliser prices, disrupted grain movement, and potential crop yield reductions due to adverse weather conditions are all contributing to a potential food crisis. The FAO's latest Food Price Index averaged 136.0 points in September, its highest level in nearly four years, with cereal prices up 17.2 per cent year-over-year.
To mitigate these risks, Bangladesh must diversify its import sources, maintain strategic buffers, and ensure reliable domestic production. Predictable gas allocation to fertiliser factories is crucial, as is improving plant efficiency and storage capabilities. The government's recent procurement move is a step in the right direction, but its effectiveness will depend on securing further supplies before peak demand, diversifying import origins, and ensuring fertiliser reaches farmers at official prices.