October 20, 2014

 

Egypt tackles fertiliser black market by raising prices

     

  

Egypt's decision to raise the price of fertiliser to US$280/tonne is a move to tackle the local black market, said the country's minister of agriculture, Adel El-Beltagy.

 

The action also seeks to protect Egypt's producers who are facing possible bankruptcy, Daily News Egypt reports. It will allow government companies, specifically Abu Qir Fertilizers Company which supplies 60% of the Agricultural Credit Bank's needs, to increase production and meet farmers' demand.

 

In addition, the government may cancel a feed imposed on the fertiliser industry, according to investment minister, Ashraf Salman.

 

"Many fertiliser plants have halted production under the pressure of a lack of supply of contracted quantities and pressures of natural gas, which rendered companies unable to fulfil production agreements," said the chairman of the Chamber of Chemical Industries, Sherif El-Gabaly. "This led to the creation of a black market for nitrogen fertilisers, and exerted an adverse impact on farmers due to companies' inability to supply the contracted fertilisers to agricultural associations."

 

A price for a bag of urea will be raised to US$14, and nitrates at US$13.28. El-Beltagy explains that the current prices are close to 50% less than market prices as they are subsidised by the government.

 

However, Osama El-Gahesh, the head of the Farmers Syndicate, believes that changes will take time and questioned the government's ability to overcome the fertiliser black market, which accounts for a significant percentage of factory production.

 

El-Gahesh also predicts that an increase in black market prices, ranging between US$489.34 - US$559.25, will crippled farmers financially. He called for the government to provide subsidised fertilisers to farmers and not to land owners.

 

According to El-Beltagy, Egyptian farmers previously received two bags of fertilisers at about US$10.49 per bag, but were forced to purchase another two at a price of US$21 per bag from the black market.