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FEED Business Worldwide - August 2012
Middlemen and the Philippine fertiliser dilemma
by Gemma C. DELMO
With the Philippines' 92 million population rising rapidly alongside increasing per capita meat consumption, domestic agribusiness is under pressure to provide ever more feed grain from a constant land area which suffers from low soil productivity. Hence, to maintain or regain soil fertility, nutrients taken by crops must be replenished through the application of fertilisers.
Import dependent
Fertilisers boost yields by 30-50%, which enables the country to attain sufficiency in key feed crops such as corn. They also make economical crop production possible even in unproductive soils.  In a data by the University of Asia and the Pacific (UA&P), an estimated 60% of fertilisers are used for feed crops, with the remainder mainly applied to plantation of crops such as banana, sugarcane and pineapple.
As fertiliser production is energy intensive and the Philippines is a net importer of all fossil fuel types, its domestic manufacture cannot be easily justified. Hence, much of the industry revolves around preparing imported N-P-K compounds or offering organic alternatives.
Generally, the domestic fertiliser sector performs the blending of basic N-P-K fertiliser compounds, their granulation and impaction so as to make them suitable for farm field application. According to the UA&P study, fertiliser combinations manufactured locally include ammosul (21-0-0), ammophos (16-20-0 and 18-46-0), superphosphate 0-18-0, completer (15-15-15, 14-14-14 or 12-12-12), 16-16-8, 6-9-15, and sulphate of potash (0-0-52).
The most widely-used fertiliser grades are urea, 21-0-0 and urea phosphate 16-20-0. Urea is mainly used as a nitrogen source while 16-20-0 is applied as a source of both nitrogen and phosphorous. Depending on soil composition, in some areas 18-46-0 and to an extent, 14-14-14 are used instead of 16-20-0. According to UA&P's study, the main island of Luzon accounts for 50 - 60% of the inorganic fertiliser market, Visayas 17 - 20%, and Mindanao 20-28%.
High domestic costs hold back crop yields
Unfortunately, while fertilisers are a critical factor in achieving high feed crop yields, there are factors restricting their use. According to Florence Mojica Sevilla, senior agribusiness specialist for UA&P's Centre of Food and Agribusiness, high fertiliser prices have become a cause for concern since they squeeze farmer incomes. Moreover, with fertilisers dependent on fossil fuels for their production, today's high energy costs have put a high cost floor below their production.
From 1995 to 2005, Sevilla reports that prices of fertilisers significantly rose. For instance, prices of urea had tripled from PHP314 (US$7.50) per 50-kilogram bag in 1999 to PHP950 (US$22.68)/bag in 2005. NPK 18-46-0 posted the highest jump at PHP1400 (US$33.43)/bag compared to PHP396 (US$9.45)/bag in 1995.
Fertiliser prices went to historic, all time peaks in 2008 but even after they crashed, they never returned to the levels taken for granted in the 1990s. In the May 2012 data by the Bureau of Agricultural Statistics, relative to last year, urea posted an increment of 19.03% at PHP1,307 (US$31.20) per 50 kilogramme sack from PHP1,000 (US$23.87) during the 2010-11 at the same period; complete 14-14-14 rose 10.35% to PHP1,270.75 (US$30.33) per 50 kilogramme sack, from PHP1,040 (US$24.82); ammosul 21-0-0 was 23.71% higher at PHP768.31 (US$18.23) per 50 kilogramme sack from PHP500 (US$11.93); and 7.45% for ammophos 16-20-0 was up 11.28%, to PHP1,112.85 (US$26.57) per 50 kilogramme sack, from PHP1,000 (US$23.87) in the same period of 2011.
Even Fertilisers and Pesticides Authority (FPA) director Norlito Gicana admits that high fertiliser prices make for a huge marketing challenge. As the agency tasked to oversee the fertilisers and pesticides industry, stabilising prices of fertilisers and making them affordable to farmers has been quite difficult since local prices are dependent on the world market.
Local players boost costs
But there's more to expensive Philippine fertiliser than just high international energy prices. Sevilla notes that domestic fertiliser costs are far higher than those in Malaysia and Thailand, even though Thailand is a net energy importer. This translates into lower fertiliser utilisation rates and, inevitably, lower crop yields. Hence, one major reason Philippine agribusiness lags that of its Southeast Asian neighbours is the inefficiency of domestic fertiliser blenders and distributors, which boost production costs all the way up the feed-to-meat chain.
But while the strangely high fertiliser costs require investigation, Gicana reveals that FPA only has 100 people nationwide, with only a small portion involved in investigation and enforcement. Gicana also hopes that a government sponsored private-public sector partnership will entice investors to put up more fertiliser plants, as at this time it is 60% sourced from Saudi Arabia, China, Malaysia, Indonesia, the US and Canada.
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