Pakistan’s DAP crisis deepens amid Hormuz disruption

The closure of the Strait of Hormuz has triggered a sharp escalation in global fertiliser prices, with urea surging nearly 47% in under a month. For Pakistan, the shock is not just about rising costs; it exposes a deeper structural weakness in its agricultural input economy. 

While the country has achieved near self-sufficiency in urea production, its dependence on imported phosphate fertiliser, particularly Di-Ammonium Phosphate (DAP) leaves it acutely vulnerable to external disruptions. The unfolding crisis highlights how decades of policy choices have created resilience in one segment of fertiliser supply while leaving another dangerously exposed.

Pakistan’s fertiliser policy has historically revolved around subsidising natural gas for domestic producers. Urea production scaled up, and Pakistan today produces enough nitrogenous fertiliser to meet most of its domestic demand. But this success is only half the story. The subsidy regime, which cost the state over Rs. 200 billion annually, was never extended to address phosphate fertiliser production. Urea became abundant, but phosphate remained structurally deficient. The result is a dual system: nitrogen self-sufficiency on one side, and phosphate dependence on imports on the other.

DAP is the second-most important fertiliser in Pakistan, accounting for 15–18% of total consumption. Unlike urea, its production requires rock phosphate, a mineral Pakistan does not possess. Consequently, domestic DAP output is limited to a single facility, Fauji Fertilizer Company’s Port Qasim plant, which produces around 800,000 tonnes annually. National demand, however, hovers between 1.3 and 2.3 million tonnes, leaving a gap of at least half a million tonnes that must be imported, primarily from the Middle East.

This structural deficit has now collided with geopolitical reality. With the Strait of Hormuz closed, global phosphate trade, nearly 20% of which passes through the chokepoint, has been disrupted. International DAP prices have spiked, and Pakistan, reliant on imports for nearly half its needs, finds itself exposed. Unlike oil, where strategic reserves and coordinated release mechanisms exist, fertiliser has no such safety net. The shortage simply compounds.

The impact is already visible. DAP sales in Pakistan declined by 23% during October-January of the current Rabi season, as prices soared to around Rs. 14,000 per 50kg bag. For farmers, the economics became unviable. Unlike urea, which is relatively affordable, DAP’s landed cost is now nearly three times higher. Faced with this disparity, many farmers are cutting back on DAP application, substituting with urea or reducing fertiliser use altogether.

This substitution, however, is agronomically flawed. DAP plays a critical role in early-stage crop development, particularly for wheat, rice, and cotton. Its phosphorus content cannot be easily replaced by nitrogen. Under-application of DAP leads to weaker root systems, lower yields, and diminished crop quality. The consequences ripple outward: reduced farm incomes, higher food prices, and mounting pressure on consumer inflation.

The vulnerability is not simply a matter of geology. It is also a policy failure. The billions spent on gas subsidies created windfall profits for fertiliser producers, Rs. 141.1 billion in net profit in 2025 alone, but did little to address phosphate dependence. The subsidy was captured by industry rather than redirected toward building DAP capacity, alternative sourcing infrastructure, or strategic stockpiles. Pakistan produces just 0.7–0.8 million tonnes of DAP against a requirement of more than double that amount. The gap remains unaddressed, even as the domestic fertiliser sector thrives financially.

This misalignment between subsidy design and structural need is now exacting a heavy price. The state built resilience where it was not most needed, and ignored vulnerability where it mattered most.

If the current disruption persists, Pakistan faces a serious agricultural challenge. Farmers skipping DAP to cut costs will see lower yields across staple crops. Wheat, rice, and cotton, the backbone of food security and export earnings, are all at risk. The harvest shock will not dissipate with a ceasefire; it will linger into subsequent seasons, compounding food inflation and destabilising rural incomes.

As DAP imports become more expensive and less reliable, the cost burden shifts to farmers and, ultimately, consumers. Food inflation feeds into headline CPI, creating pressure on monetary policy and eroding household purchasing power.

Pakistan’s fertiliser story is a tale of glaring omission. Urea self-sufficiency was achieved, but phosphate dependence was ignored. Today, that omission has become a national vulnerability. With DAP demand at 1.35 million tonnes and domestic production capped at 800,000 tonnes, the gap is filled by imports that are now disrupted and prohibitively expensive. Farmers are already cutting back, sales are down 23%, and crop yields are at risk. If this trend continues, Pakistan could face not just higher food inflation but a genuine food crisis.