Category: Research

Abstract

The Philippines, as a net importer of fertilizer, is vulnerable to the rising fertilizer prices due to Covid 19 pandemic causing fertilizer shortages around the globe, higher input costs and fuel prices, disruption of production and trade, including geopolitical disputes (Russia and Ukraine). The study was aimed to analyze fertilizer import prices and dealer prices to provide proposals for importation, marketing, pricing, and other policy recommendations.

Results reveal that import prices vary from country to country and started to increase in early 2021. From February to April 2022, the lowest average import price of Prilled Urea is from Uzbekistan ($648.00/MT), Granular Urea from China ($602.00/MT), Ammosul from Japan ($296.58/MT), Complete fertilizer from Korea ($608/MT), Ammophos from Korea ($490/MT), MOP from Jordan ($570.37/MT), and DAP from China ($900/MT), thus automatically affecting regional dealers prices due to archipelagic situation that entails additional logistical cost. Prilled Urea had the highest price in Region VI (Php 2,814.83) and the lowest in Region XIII (Php 2,536.11); Granular Urea was high in Region V (Php 2,826.33) and low in Region VII (Php 2,430.00); Ammosul was high in CAR (Php 1,533.65) and low in Region XI (Php 1,302.31); Complete fertilizer was high in CAR (Php 2,220.37) and low in Region XII (Php 1,793.50); Ammophos was high in Region V (Php 1,948.55) and low in Region XII (Php 1,583.54); MOP was highest in Region IX (Php 2,054.51) and lowest in Region II (Php 1,749.20); and DAP was highest in Region VII (Php 2,944.30) and lowest in Region VIII (Php 1,883.33). This indicates that average prices of different fertilizer grades are generally lower in nearby seaports (i.e. Regions III, XI, XII, and XIII).

Likewise, variation in dealer’s prices is influenced more by the company, brand and logistical cost hence, the incorporation of Suggested Retail Price (SRP) and Maximum Retail Price (MRP) should be calculated based on the source of origin and be institutionalized by the Department of Agriculture (DA) and Department of Trade and Industry (DTI) centered on the location where the fertilizers are locally sold, and the government should open up bilateral agreement with countries (G2G) producing fertilizers for lesser acquisition cost.

Introduction

In recent months we witnessed a sharp increase in fertilizer prices worldwide. International prices of urea rose from $216/MT in June 2020 to $393.25/MT in June 2021, while prices of diammonium phosphate (DAP) soared from $263/MT in June 2020 to $604.75/MT during the same period of 2021 (Baffes and Koh, 2021). Global fertilizer prices increased during 2021 with limited supply brought about by the disruption of production and transportation due to the COVID-19 pandemic, higher input costs, hike in fuel prices, trade disputes and geopolitics, and the recent Russia invading Ukraine (Roldan et. al. 2021).

Countries (i.e., Australia, Brazil, India) also increased their fertilizer demand to stimulate local agricultural production, China even banned export of their fertilizer products (Mula, 2022). The situation was further aggravated by the conflict in Ukraine and the sanctions imposed by Western countries on Russia and Belarus.

Import prices remained volatile but are generally increasing, regardless of country of origin. The trend of average local dealers’ prices per month from 2019 to 2021 (Month 1 to 36), covering the pre-pandemic period to the height of global lockdowns to the gradual easing of quarantine restrictions is shown in Figure 1. Fertilizer prices in the Philippines started to increase during the mid-year (Month 19) of 2021 and further surged towards the end of the year (Month 24). While fertilizer prices are volatile, a relatively steady trend is observed until mid of 2021 (Month 1 to 18). During the stringent lockdown in the country in 2020 (Month 15), local prices of fertilizers remained close to the 2019 prices (Month 1 to 12); the price of urea even declined. Around May-June 2021 (Months 29 & 30), prices for all fertilizer grades started to increase and further surged towards December (Month 36).

Figure 1. Trend of average monthly dealer’s prices of the six major fertilizer grades, 2019-2021.

The price of urea during November 2020 (Month 23) recorded an average of Php 1,037.83 per 50-kg bag as compared to the November 2021 (Month 35) record of Php 2,082.14, indicating a hundred percent increase in a year. This was further increased in the following month (Month 36), reporting a 128% increase in price compared to December 2020 price (Month 24).

Ammonium sulfate price also increased by 109% in December 2021 (Month 36), compared to the same period of the previous year (Month 24). Ammonium phosphate and complete fertilizer posted more than 50% increase in price, while muriate of potash and diammonium phosphate prices have increased at around 40%.

Ultimately, this could initiate changes in cropping patterns and affect the country’s overall crop production. Farmers would likewise lessen fertilizer application, or decline their area planted. Challenges such as diminishing farm size, population growth, and climate change also adversely affect productivity.

The Philippines, being a net importer of fertilizer, is vulnerable to the shifts in the global market. Different chemical fertilizer grades are imported into the country from various countries. The primary sources of our fertilizer imports from 2018 to 2021 are China (40.66%), Indonesia (16.70%), Malaysia (12.20%), Qatar (7.37%), Canada (6.18%), and Japan (5.88%), according to the FPA 2021 data. Fertilizer imports from various countries also come with varying import prices.

However, the fertilizer peg at dealer prices is computed at the average notwithstanding where the origin of fertilizer comes from. Local fertilizer prices are only monitored at the dealer level and there is no data on fertilizer prices at the distributor level. Hence, comparison of fertilizer dealer prices per country of origin should be analyzed to determine if the trend of import prices is reflected in the local market. This study tends to analyze the import prices and dealer prices of the six major fertilizer grades from the month of February to April 2022, also provide proposals for fertilizer importation, a system of retailing monitoring, and other policy recommendations.

Methodology

The fertilizer importation data by country of origin and regional fertilizer dealer prices were analyzed to provide decision-making and policy direction of the Department of Agriculture (DA).

Data on regional dealer prices of the seven major fertilizer grades: prilled and granular urea (46-0-0), ammonium sulfate (21-0-0), complete fertilizer (14-14-14), ammonium phosphate (16-20-0), muriate of potash (0-0-60), and diammonium phosphate (18-46-0), and fertilizer importation data are obtained through the Fertilizer and Pesticide Authority (FPA) database on weekly bases. The data on fertilizer importation are taken from the VAT exemption invoices issued to the importers by the FPA.

These data are analyzed to investigate price trends, compare fertilizer import prices per country of origin, and compare dealer prices per region, country of origin, and brand.

Since local fertilizer price is only monitored at the dealer’s level, there is no data on the fertilizer prices at the distributor or wholesale level. A profit margin matrix was used to approximate fertilizer prices along the supply chain (Appendix 1 – Computation of fertilizer price matrix at various cost levels). The estimations in this matrix came from the fertilizer industry stakeholders.

Import prices are in US$ per unit MT (CFR values) of fertilizer. Payments for duties and other port costs are added to the import price to give the landed cost upon disport. These costs are estimated to be Php 90.00 per 50-kg bag of fertilizer. Importers then add imputed costs for trucking, warehousing, labor, tax (2.5%), and profit per bag (8%). The distributor’s price to the dealer adds to the price by following the same margin estimates as the importers. Lastly, the dealer’s price covers an additional cost for only trucking and labor, plus the tax (2.5%) and profit per bag (8%) (Appendix 1 and Figure 2).

Figure 2 presents the imputed costs of fertilizer prices along the supply chain. From the import price, costs are added to the fertilizer price in every market channel (Figure 3) and eventually come up with the dealer’s price – the retail price of fertilizer availed by the farmer end-users. 

Figure 2. Diagram showing the imputed costs of fertilizer price along the supply chain

Figure 3. Diagram of the fertilizer supply chain showing the handlers/stakeholders in the market.

Import prices will be compared depending on the country of origin to determine the source country with the lowest prices of fertilizer imports. On the other hand, comparison of dealer prices is to be assessed by country of origin, region of sale, and brand.

Results and Discussions

Price status of 7 major traditional fertilizer (February-April 2022)

Prices of fertilizer had been increasing since mid-2021 and soared especially at the end of the year. From February to April of 2022, import prices remained volatile and in upward trend regardless of country of origin. On the local retail level, average prices are observed to be increasing over the months (Figure 4). However, the movement of prices from the retail or dealer’s level does not directly reflect the movement of import prices (Appendices 2-8).

Figure 4. Trend of average dealer prices of the six major fertilizer grades, February to April 2022.

The effect of Origin and Branding

Assessing the fertilizer prices per brand at the regional level can be inferred the differences in prices (Appendices 9-20). The same fertilizer grade with the same brand could have varying prices in the same month, depending on the country of origin and the region of sale.

For example, in Region VII, complete fertilizer Atlas from China has a dealer price of Php 1,946.28 in April. The same brand sold in the same region but is from Korea has a dealer price of Php 1,960.63. In Region XI, the same Atlas complete fertilizer from China posted Php 1,820.00 per bag. One brand of fertilizer could also appear to be more expensive than other brands but could still be cheaper at some point due to varying prices depending on its country of origin and region. In April prices of MOP from Canada in Region IV, brand Amigo (Php 2,026.34) is more expensive than Atlas (Php 1,912.50). However, in Region XI, Amigo (Php 1,917.50) is cheaper than Atlas (Php 1,966.82).

The country of origin depends on the import price of the fertilizer, while region of sale could be attributed to the far proximity from ports, distance from ports and large distributors, and the number of handlers.

Import and Regional Dealer Prices

Prilled Urea

Import Price

The highest volume of prilled urea imported was from Indonesia with 22,445.03 MT or 42.82%, followed by Qatar (21,999 MT or 41.98%) (Table 1). Meanwhile, import prices from Uzbekistan are the lowest at $648.00 per MT, followed by Indonesia ($690.71/MT). Prilled urea from Vietnam has the most expensive price per metric ton at $942.50.

Table 1. Import price and volume of prilled urea, February to April 2022.

Dealers Price

On the regional average dealer prices of prilled urea, the highest price in February was noted in Region V (Php 2,673.523), Region VI in March and April at Php 2906.15 and Php 3,118.19, respectively. While the lowest prices were recorded in Region I (February – Php 2,380.00) and REGION XIII (March – Php 2,474.31 and April – Php 2,646.24) (Table 2).

Table 2. Regional dealer prices of prilled urea, February to April 2022.

Granular Urea

Import Price

Granular urea imports’ highest volume is Indonesia, with 39,104.60 MT or 42.92%, followed by Qatar with 22,000.00 MT or 24.15%. Regarding import prices, the highest price is Qatar with an average of $882.43/MT, while the lowest is from China at $602.00/MT (Table 3).

Table 3. Import price and volume of granular urea, February to April 2022.

Dealers Price

The highest average dealer prices of granular urea were observed in Region IV (February – Php 2,723.00), in Region XIII (March – Php 2,847.29), and in CAR (April – Php 3,100.39).  Region XI posted the lowest dealer price in January with Php 2,394.33/bag, while in March it was Region VII (Php 2,430.00/bag). Region XIII had the lowest in April at Php 2,728.01/bag (Table 4).

Table 4. Regional dealer prices of granular urea, February to April 2022.

Ammonium sulfate (21-0-0)

Import Price

Ammonium sulfate or ammosul has been sourced from only three countries over the past months, namely: China, Japan, and Taiwan. The highest volume of imports from February to April were China (37.36% or 1,067.27 MT). Both imports from Japan and Taiwan had substantial amounts of volume, each with around 31% of the total imported volume (Table 5).

In terms of price, ammosul from Japan are priced the lowest at $296.00/MT. Price of imports from Taiwan are slightly expensive at $300.00/MT, while the most expensive are from China ($355.76/MT).

Table 5. Import price and volume of ammonium sulfate, February to April 2022.

Dealers Price

On the local side, ammosul average dealer prices are averaged at Php 1,387.57/bag in February, Php 1,403.49/bag in March, and Php 1,439.89/bag in April. The highest dealer prices were recorded in Region V (February – Php 1,506.47), and CAR (March – Php 1,526.24 and April – Php 1,591.87) (Table 6). Lowest prices, on the other hand, were in Regions VIII and XI. In February, ammosul price in Region VIII averaged at Php 1,300.08/bag, while in March, Region XI average dealer price was only at PHP 1,292.32/bag and Php 1,302.22 in April.

Table 6. Regional dealer prices of ammonium sulfate, February to April 2022.

Complete fertilizer (14-14-14)

 Import Price

Majority of complete fertilizer imports are from China (9,640.00 MT or 75.79%). The other is from Korea at 24.21% or 3,080.00 MT. Import price per MT is cheaper in Korea ($608.00/MT) than in China ($632.75/MT) (Table 7).

Table 7. Import price and volume of complete fertilizer, February to April 2022.

Dealers Price

National average prices of complete fertilizer increased within the three months, reaching Php 1,854.11 in February, Php 1,894.02 in March, and Php 2,103.21 in April (Table 8). However, complete fertilizer has been most expensive in Region V in February and March (Php 1,993.56 and Php 2,037.44, respectively). In the same months, the lowest prices of said fertilizer were recorded in Region XII (Php 1,715.38/bag in February and Php 1,740.50/bag in March). In April, the highest price was recorded in CAR (Php 2,706.80/bag), while Region XIII had the lowest at Php 1,896.06/bag.

Table 8. Regional dealer prices of complete fertilizer, February to April 2022.

Ammonium phosphate

Import Price

Ammonium phosphate or ammophos are imported from China (9,516 MT or 74.25%) and Korea (3,300.00 MT or 25.27%) during the months of February to April totaling to 12,816.00 MT (Table 9). However, the price in Korea ($490.00/MT) is much lower than China ($612/MT).

Table 9. Import price and volume of ammonium phosphate, February to April 2022.

Dealers Price

Local dealer prices of national ammophos are averaged at Php 1,631.03 (February), Php 1,684.92 (March), and Php 1,880.47 (April). The lowest prices were observed in Region XII (February – Php 1,464.19 and March – Php 1,496.17), and in REGION XIII in April at Php 1,644.18. On the other hand, Region V (from Php 1,879.05 in February to Php 1,913.04 in March) and CAR (Php 2,363.50 in Apri) posted the highest dealer prices of ammophos (Table 10).

Table 10. Regional dealer prices of ammonium phosphate, February to April 2022.

Muriate of potash

Import Price

During February to April, muriate of potash (MOP) was imported from six countries, namely, Belarus, Canada, Jordan, Laos, Russia, and Uzbekistan (Table 11). The highest volume of imports came from Canada at 19,001.00 MT (55.76%) while the least is from Russia (1,000 MT) and Belarus (500 MT). Moreover, prices of MOP imports are the lowest in Jordan ($570.37/MT), followed by Canada ($583.33/MT).

Table 11. Import price and volume of muriate of potash, February to April 2022.

Dealers Price

Regarding national average dealer prices, MOP posted an average price of Php 1,792.00/bag (February), Php 1,832.91 (March), and Php 1,999.63 in April (Table 12).

The regional average dealers lowest price of MOP were observed in Region II (February – Php 1,634.54 and March – Php 1,699.89), and in Region VIII (April – Php 1,853.63). In contrast, the highest dealer prices were noted in Region IX for the three-month period at Php 1,944.27 (February), Php 2,040.48 (March), and Php 2,178.78 in April.

Table 12. Regional dealer prices of muriate of potash, February to April 2022.

Diammonium Phosphate

Import Price

Imports of diammonium phosphate (DAP) were sourced from China (68.60% or 14,420 MT) and Vietnam (6,600 MT) from February to April (Table 13). Import prices from the two countries are lowest in China ($900/MT), while Vietnam is at $990/MT.

Table 13. Import price and volume of diammonium phosphate, February to April 2022.

Dealers Price

The national average dealer prices from February to April covers regions IV, VI, VII, VIII, IX, X, XI, XII, and XIII due to non-availability of this fertilizers in other regions (Table 14).

The lowest average dealer prices of DAP were obtained from Region VIII (February – Php 1,883.33); and in Region XIII (March – Php 2,405.81 and April – Php 2,430.00). Highest dealer prices were observed in Region VII (February – Php 2,788.30 and March – Php 2,980.74); and Region XI (April – Php 3,078.26).

Table 14. Regional dealer prices of diammonium phosphate, February to April 2022.

Conclusions

This data shows that prices of each brand is influenced more by the fertilizer’s country of origin and region. The same fertilizer grade with the same brand could have varying prices in the same month, depending on the country of origin and the region of sale. Variation in dealer’s price due to branding is also affected by other factors, such as retail price history, competition, and product cost (Li and Volpe, 2013). Farmers also have a preference for fertilizer brands. According to a study by Briones (2021), the more vital driver of monthly price is the international market rather than local variations in demand.

Import Price

While there are various sources of different fertilizers, cheaper fertilizers can be sourced from certain countries. Lowest prices of prilled urea comes from Uzbekistan ($648.00/MT), granular urea from China ($602.00/MT), ammosul from Japan ($296.58/MT), complete fertilizer from Korea ($608/MT), ammophos from Korea ($490/MT), MOP from Jordan ($570.37/MT), and DAP from China ($900/MT).

Dealers Price

Prilled Urea. On the regional dealer prices of prilled urea, the highest price in February was recorded in Region V (Php 2,673.523), Region VI in March (Php 2906.15), and April (Php 3,118.19). While the lowest prices were recorded in Region I in February (Php 2,380.00) and in Region XIII in March (Php 2,474.31) and April (Php 2,646.24).

Within the 3-month period, the highest average dealer price of prilled urea from Region VI at Php 2,814.83, while the lowest is from Region XIII at Php 2,536.11.

Granular Urea. The highest dealer prices of granular urea were observed in Region IV in February (Php 2,723.00), in Region XIII in March (Php 2,847.29), and in CAR in April (Php 3,100.39).  Region XI posted the lowest dealer price in January with Php 2,394.33 per bag, while in March it was Region VII with Php 2,430.00 per bag. Region XIII had the lowest dealer price in April at Php 2,728.01 per bag.

Granular urea average dealer prices in February to April was the highest in Region V with Php 2,826.33 and the lowest in Region VII with Php 2,430.00 (Table 15).

Ammonium Sulfate. Meanwhile, ammosul dealer prices averaged at Php 1,387.57/bag in January, Php 1,403.49/bag in March, and Php 1,439.89/bag in April. The highest dealer prices of ammosul were recorded in Region V in February (Php 1,506.47) and in CAR in March (Php 1,526.24) and April (Php 1,591.87).  Lowest prices, on the other hand, were in Regions VIII and XI. In January, ammosul price in Region VIII averaged at Php 1,300.08/bag, while in March, Region XI average dealer price was only at Php 1,292.32/bag and Php 1,302.22 in April.

CAR had the highest average ammosul dealer prices during the 3 months (Php 1,533.65), while Region XI had the lowest (Php 1,302.31) (Table 15).

Complete. Complete fertilizer has been most expensive in Region V in February and March, with average prices of Php 1,993.56 and Php 2,037.44 respectively. In the same months, the lowest prices of complete fertilizer were recorded in Region XII, with Php 1,715.38/bag in February and Php 1,740.50/bag in March. In April, the highest price was recorded in CAR with Php 2,706.80, while Region XIII had the lowest with Php 1,896.06.

Average dealer price of complete fertilizer in CAR is the highest from February to April at Php 2,220.37, while in Region XII is the lowest at Php 1,793.50 (Table 15).

Ammonium Phosphate. Local dealer prices of ammophos averaged at Php 1,631.03 in February, Php 1,684.92 in March, and PHP 1,880.47 in April. Lowest prices were observed in Region XII in February (Php 1,464.19) and March (Php 1,496.17), and in Region XIII in April at Php 1,644.18. On the other hand, Region V and CAR posted the highest dealer prices for ammophos. Prices in Region V averaged to PHP 1,879.05 in February and increased to Php 1,913.04 in March; in CAR, it posted Php 2,363.50 in April.

Ammophos in Region V has the highest average dealer price of ammophos during the three-month period, at Php 1,948.55. Region XII, on the other hand, had the lowest average at Php 1,583.54 (Table 15).

Muriate of Potash. Regarding MOP dealer prices, it posted an average price of Php 1,792.00/bag in February, Php 1,832.91 in March, and PHP 1,999.63 in April. Lowest price of MOP was observed in Region II during February (Php 1,634.54) and March (Php 1,699.89), and in Region VIII in April (Php 1,853.63). In contrast, the highest dealer prices of MOP were recorded in Region IX for the entire three-month period. MOP dealer prices at Region IX were at Php 1,944.27 in February, Php 2,040.48 in March, and rose further to Php 2,178.78 in April.

Region IX recorded the highest average dealer price of MOP with Php 2,054.51, while Region II had the lowest with Php 1,749.20 (Table 15).

Diammonium Phosphate. Comparison of DAP local dealer prices from February to April excludes regions I, II, III, V, and CAR from the analysis due to lack of data. With the data available, it shows that the lowest dealer prices of MOP were obtained from Region VIII in February, at Php 1,883.33; and in Region XIII in March (Php 2,405.81) and April (Php 2,430.00). Highest dealer prices of DAP, on the other hand, were observed in Region VII in February with Php 2,788.30, and March with Php 2,980.74; in Region XI in April with Php 3,078.26.

From February to March, the lowest average dealer price of DAP is from Region VIII at Php 1,883.33, while the highest is from Region VII at Php 2,944.30 (Table 15).

Table 15. Average dealers prices of the six major fertilizer grades per region, February to April 2022.

Average prices of different fertilizer grades show that fertilizers are generally more expensive in Region V and CAR, as the region are far from ports. On the contrary, fertilizer prices are generally lower in Regions XI, XII, and XIII due to close proximity to ports.

Recommendations

Given that the country is import dependent, including that of the local manufacturers raw materials 90% imported, notwithstanding the archipelagic situation of our regions which entails high logistical cost, the following recommendations based on this assessment are as follows:

• The government should open up bilateral agreement with countries (G2G) producing fertilizers for lesser acquisition cost.
• Regional dealer’s prices should be based on the source of origin of the fertilizer sold and logistical cost following calculated price matrix approved (Appendix 1).
• The incorporation of Suggested Retail Price (SRP) and Maximum Retail Price (MRP), as per PD 1144 S 1977, on the packs and bags should be institutionalized with the agreement between the Department of Agriculture (DA) and Department of Trade and Industry (DTI). However, the said retail prices should be computed based on the location where the fertilizers are locally sold.
• The adaption of the Calculation of Fertilizer Price Matrix at Various Cost Levels (Appendix 1) should be the basis for DA and DTI impose the SRP and MRP for every import entry.
• The inclusion of Batch and Lot Number in the packs and Bags to determine the entry of this fertilizer, its origin and landed cost.

Other Important Consideration in Mitigating Higher Fertilizer Prices

• Improve monitoring of fertilizer prices from imports to recording or dealer’s prices. The improvement of monitoring of fertilizer imports should require more information from the importers to aid in better record-keeping and estimation of actual prices. This will result in more accurate data and help improve price studies in the future. Moreover, reporting of price values in averages only might not be an accurate representation of the dealer’s prices given the differences in prices per region.
• To further improve the inventory monitoring through the fertilizer, watch system, batch number of importers and local producers should cover source of origin, manufacturing date, date of arrival, and landed cost (for imports).
• Importing companies be urged to coordinate and order bulk imports from certain countries, if possible, to avail of lower prices and discounts and save freight costs. Fertilizers imported at lower prices and less cost will result in cheaper fertilizers available for farmers in the market.
• Provide market assistance in regions where fertilizer is expensive to ensure supply and lower fertilizer prices by reducing additional transportation costs. Further market study should also be conducted at the regional level to assess the possibility of providing the same market intervention while conducting consultations with the stakeholders.
• The practice of balanced fertilization strategy should be introduced to lessen the impact of high fertilizer prices. The use of alternatives like organic, microbial, and biorational fertilizers, will also be explored to lessen dependence on chemical fertilizers.

Written by Myer Mula^1* and Kimberly Coronado²  l  Published: 04 July 2022

¹ Deputy Executive Director – Fertilizer and Pesticide Authority; National Program Director – Special Area for Agricultural Development (SAAD) Program; *Corresponding Author; email: dedfmyer.fpa@gmail.gov 

² Economist II – Fertilizer and Pesticide Authority, Department of Agriculture

Acknowledgment

The authors acknowledge the Field Operations and Coordination Unit (FOCU), Regional Field Units, and Fertilizer Regulatory Division (FRD) of the FPA for the data required in this study. To the Special Area for Agricultural Development (SAAD) farmers and fishers who voice there clamor on this issue.

References

Baffes, J. and Koh, W.C. (2021, June 8). Fertilizer prices expected to stay high over the remainder of 2021. World Bank Blogs. Retrieved from https://blogs.worldbank.org/opendata/fertilizer-prices-expected-stay-high-over-remainder-2021

Briones, R. (2021). Issues paper on the Philippine fertilizer industry. Quezon City, Philippines: Philippine Competition Commmission.

Li, C. and Volpe, R. (2013). Retail pricing patterns and driving factors of price variation. Paris, France: 88th Annual Conference, AgroParisTech.

Mula Myer (2022). Analysts expect global fertilizer to remain high in 2022 and what the OneDA response. Special Area for Agricultural Development (SAAD) Program. SAADvocacy 4(1):6. ISSN 2718-9791.

Roldan W, Mula M, Lansangan J, Reyes R and Layag I (2021). Rising fertilizer prices: A reality.  Special Area for Agricultural Development (SAAD) Program. SAADvocacy 3(12):4 & 8. ISSN 2718-9791.

*View the whole study attachment on this link: Philippine fertilizer price outlook: A reality for farmers and fishers

  Fertilizer and Pesticide Authority (FPA) Online ISSN: 2815-1674
  Published by the FPA Information and Communications Team

December 21, 2021 | Quezon City – The hike in fertilizer prices is a global trend and not in the Philippines alone. Economic analysts and fertilizer companies in the United States (US) shared that the trend will continue until 2022.

Expecting that prices won’t drop soon globally, farmers are now on the verge of considering decisions to catch-up with the crisis.

World energy prices influences fertilizer prices

Kreg Ruhl, Senior Market Manager at Growmark, an agricultural supply cooperative based in Illinois, USA, said that world energy market primarily influences price of fertilizer. Ruhl believes fertilizer will remain expensive until energy prices drops down.

According to Purdue University researcher and Ag Economy Barometer author Michael Langemeier, prices on all inputs, not just fertilizer, are at record highs, climbing a historic average of at least 12% across commodities. He said that `nitrogen sources used in fertilizer are tied to oil prices, and the more volatile the oil market is, the more the price of fertilizer will fluctuate.´

Shifting cropping patterns in 2022

A white paper published on farmdocdaily.illinois.edu titled `2022 Planting Decisions, Nitrogen Fertilizer Prices, and Corn and Soybean Prices,´ written by agricultural economists from the University of Illinois, suggests that farmers may change their cropping decisions for next year considering higher input costs.

Patrick Quaid, R.J. O’Brien & Associates commodities also said that production costs would influence decision of farmers on what crop to raise. A decrease in corn production, which requires expensive nitrogen fertilizer requirement such as urea, would be reduced.

`If farmers decide to alter their usual rotation for 2022, they may switch to a crop that requires less nitrogen fertilizer, like soybeans,´ Quaid said.

Quaid further states that the automotive manufacturers struggling to produce pickup trucks because of supply-chain shortages, farmers may shift their spending, for tax reasons, to the higher priced fertilizer. `However, if fertilizer supply remains the main worry, farmers will have no choice but to switch to planting more soybeans,´ Quaid explained.

Brazil is also expected to plant more soybeans, which could add to world supply, according to Bryan Doherty, Vice President of brokerage solutions and senior market adviser at Total Farm Marketing by Stewart-Peterson. `From a marketing perspective, it may be a good year to defend soybean prices soon (now) through either put purchases for next fall’s production, or forward sell and buy calls to re-own. This creates a balance of cash sales and the ability to participate in price rallies,´ Doherty stated.

Alternatives

The skyrocketing fertilizer market now made producers to either practice crop rotation next year or to lessen their acquisition of costly synthetic fertilizers to reduce farm expenses. Some of the suggestions include the use of chicken manure as an alternative nutrient source.

Chicken manure as alternative

Daniel Andersen, associate professor at Iowa State University, says that some manure will have more phosphate or excess nitrogen, when what the crop really needs is potassium. When deciding whether or not to spread manure, it’s important to determine the type of manure necessary for the particular crop type and current soil nutrient makeup. For example, if a farmer has planted a crop that needs a lot of phosphorus, but has soil that is low in phosphorus, they should shop around for nitrogen-rich manure, like poultry.

Dan Luepkes, a farmer in Oregon, Illinois, supports the idea that chicken manure has been effective on their fields.

`Natural fertilizers have no added salt, so they’re more usable for the plant. Chicken manure also contains some additional micronutrients and calcium that you won’t get in synthetic fertilizers unless you buy all those additional micronutrients,´ Luepkes shared.

Luepkes further narrates that in the soil tests he runs after using manure on his fields, he is seeing an increase in microbiology and insect presence, which brings additional carbon to the soil and increases the overall soil health, something Andersen recommends before purchasing manure.

Meanwhile, Anderson recommended that farmers need to conduct soil test in their farms to know exactly which nutrients their soil needs and what kind of manure to look for, noting that the nutritional value of manure can change from farm to farm and from season to season. From this, he recommends requesting a manure sample from the farm before farmers will buy.

Use of technology

Once a farmer has secured fertilizer, using it to its fullest potential is imperative to getting his money’s worth. Variable-rate technology allows producers to optimize the spreading and application of fertilizer in specific zones, ensuring less is wasted, exclaimed Madelyn Ostendorf of the agriculture.com.

Matthew Lau, global product manager of scripting for The Climate Corp., added that automatic zone creation gives growers a much higher level of flexibility and accuracy to optimize inputs. `It also allows growers to test different layers and different hypotheses and compare those to determine which one they feel will be the best choice to move into that next season. We know every year is different, and every year brings its own set of challenges,´ she said.

References

Abbott, C. 2021. More farmers worry about large increases in input costs. Retrieved

https://www.agriculture.com/news/business/more-farmers-worry-about-large-increases-in-input-costs

McGinnis, M. 2021. Factors expected to drive the 2022 corn market. Retrieved

https://www.agriculture.com/markets/factors-expected-to-drive-the-2022-corn-market

Ostendorf, M. 2021. What is going on with fertilizer prices? Retrieved

https://www.agriculture.com/news/crops/skyrocketing-fertilizer-market-has-farmers-analysts-and-companies-weighing-in

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  Fertilizer and Pesticide Authority (FPA) Online ISSN: 2815-1674
  Published by the FPA Information and Communications Team

November 19, 2021 | Quezon City – The Department of Agriculture (DA), the Fertilizer and Pesticide Authority (FPA) and the Fertilizer Industry Association of the Philippines (FIAP) convened via zoom virtual meeting on November 17, 2021 to tackle rising fertilizer prices. FIAP is an association composed of 19 fertilizer manufacturing and importing companies.

The meeting was led by DA Secretary William Dar with the assistance of FPA Executive Director Wilfredo Roldan. Also present from DA are Engr. Ariel Cayanan, Undersecretary for Operations and Agri-fisheries Mechanization; and Dr. Leocadio Sebastian, Chief of Staff.

Recent updates provided by the fertilizer industry highlights how situation in the European Region, China, and other producing countries drive global fertilizer prices.

Factors influencing global fertilizer situation price trend

World fertilizer market situation

Mr. Nilo Arteche Cabrera of FIAP presented the world fertilizer market situation. He cited that the COVID 19 pandemic brought significant impact to the price trend as each country tried to secure domestic food production by increasing their crop areas. For instance, big countries like India, Australia, and Brazil have increased fertilizer demand than their pre-pandemic requirement.

He added that the recent gas shortage in Europe made domestic fertilizer manufacturers to cut production due to hike in energy prices. The region now has to compete in the global fertilizer demand. Fertilizer prices in North Africa (Egypt) and the Middle East prices have been also moving upward.

China curtails fertilizer exports

With the rise in energy prices, fertilizer manufacturers in China cut their energy use. The Chinese government also made the decision to reduce carbon emission in preparation to their hosting of 2022 Winter Olympic Games. Reduced energy and carbon use now means reduced fertilizer production of the country.

Moreover, with the implementation of the China Inspection and Quarantine (CIQ) policy, fertilizer exports were curtailed due to complex procedures and strict measures for export cargoes. Urea, DAP, MOP, NPK and other fertilizer grades are among the items covered by the CIQ policy.In addition, China has to secure its domestic requirement first.

South Korea immediately felt the impact of said Chinese policy. Now, it has to source out its urea demand to other countries at higher prices. Urea is vital to the country for it is being used as fuel to diesel cars and cargo trucks.

Price increase of fertilizer grades

The FIAP explained the reason behind the price increase of various fertilizer grades, citing HeartyChem Corporation as their data source:

• Urea (nitrogen) – The hike in urea prices started from Europe and aggravated by the China restrictions for cargo exports until it was felt all over the world. For instance, Korea is buying it close to USD1,000/MT Cost FR FO in bulk. It was USD230-240/MT CFR at the beginning of 2021.

• DAP (di-ammonium phosphate) – Due to China CIQ policy, DAP prices started to soar with fixing price now moving close to USD1,000/MT in bulk from USD600/MT CFR in Korea last September 2021. For the fourth quarter, India recorded price of Phosphoric Acid at USD1,330/MT CFR in bulk from the USD170/MT in the third quarter.

• MOP (muriate of potash) – Large volumes of imports from Brazil and the increased demand in Belarus affected global MOP prices. At the beginning of 2021, it was USD230-240/MT CFR, but it is now close to USD700/MT CFR.

• NP/NPK (nitrogen and phosphorous/complete) – With the soar in raw material prices’, NP/NPK prices are moving upward continuously. This increase has been propelled mainly by the Chinese export policy on legal inspection. With ceased China NP/NPK exports, other producers in the world are moving up the prices along with increasing feedstock prices.

Cabrera expressed that today’s fertilizer crisis is different from the 2008 crisis which was more financial in context. The status quo is more complex which is interlinked to the problems brought by the pandemic, issues on food security, energy shortage, and monopoly and control of powerful countries when it comes to trading.

Comparative import data from 2018-2021

Michael Ardieta, FIAP President, presented (Table 1) the comparative import data from January 2018 to October 2021 in metric tons (MT). A notable increase in fertilizer imports can be observed in 2020 which was due to government’s implementation of the fertilizer subsidy program. The 775,145 MT year-end forecast for 2021 was lesser compared to 2018 and 2019 data, but this could also be the spill over of supply from year 2020.

 Table 1.  Comparative import data of the six-major fertilizer grades from January 2018 to October 2021 (MT).

Further, Mr. Ardieta noted that the global fertilizer situation will be felt towards the end of 2021 which is the dry season for crops. Looking at Table 2, import forecasts for November 2021- January 2022 is lesser than what was recorded on the previous years.

Table 2. Projected data comparison of November to January importation in 2018 to 2022 (MT)

Clarifying the 2022 fertilizer supply forecasts, Mr. Ardieta said that the industry is currently trying to import, as much as possible, and bring in products to serve the market. However, he raised the questions as to 1) where will be their source; and 2) if farmers could still afford increased prices. FIAP added that available supply could still serve local demand for the dry season.

Next steps

Moving forward, Sec. Dar expressed that the country could utilize government to government relations with China and other countries to address prevailing issues. China serves as the major source of Philippines fertilizer imports due to lower cost than other producing countries such as Vietnam, Qatar, Indonesia, Malaysia.

The Secretary also shared that this could be just like what the Embassy of Iran did when they expressed willingness to a Mutual Agricultural Cooperation with the country, which includes exportation of fertilizers. He advised the FIAP to coordinate with FPA and present their proposed government actions. Agreements shall be endorsed by the FPA and DA to the Office of the President for him to have informed-decision on the matter.

  Fertilizer and Pesticide Authority (FPA) Online ISSN: 2815-1674
  Published by the FPA Information and Communications Team

Quezon City, November 11, 2021. The Fertilizer and Pesticide Authority (FPA) recognizes the ongoing plight of local farmers relative to the hike in fertilizer prices. With increased farm production expenses (vis-à-vis increased fertilizer prices) comes reduction of profit margins.

Why are the prices of fertilizers increasing? Can FPA control the prices?

As an explanation, FPA attributes the current price hike to the following: 1) liberalization of fertilizers; 2) the country as a net importer of fertilizers; 3) strengthened global fertilizer demand; 4) increased prices of raw materials; and 5) increase transport and logistical costs.

Price uptrend, current supply

Fertilizer prices were stable until the uptrend started in March 2021 for the six (6) major fertilizer grades (Figure 1). As of October 2021, the increase in prices for 50kg/bag ranges from 18% to as high as 38% namely: Muriate of potash (MOP) at Php 1,412.98 from Php 1,195.43 (18% increase); Di-ammonium phosphate (DAP) at Php 1,927.57 from Php 1,602.86 (20% increase); Complete fertilizers (T14) at Php 1,378.17 from Php 1,112.70 (24% increase); Ammonium phosphate (Ammophos) at Php 1,275.60 from Php 976.34 (31% increase); Nitrogen (Urea) is at Php 1,540.17 from its Php 1,166.14 in January 2021 (32% increase); and Ammonium sulfate (Ammosul) at Php 842.86 from Php 612.44 (38% increase).

Figure 1. Trend of Fertilizer Prices for the Six Major Grades (2019-2021)

The regional average retail price of the six (6) major grades of fertilizers per 50kg/bag as of October 22, 2021 is shown in Table 1.

Table 1. Average Retail Price per 50kg bag of Six Major Grades of Fertilizers (October 18-22, 2021)

Table 2 presents the available stock inventory of fertilizers from the different handlers nationwide. This presents the current supply of fertilizers (per bag) in each region and the total available stock nationwide.

Table 2. Stock Inventory of the six Major Grades of Fertilizers per 50kg/bag (October 18-22,2021)

Liberalization of fertilizers impacts users

Because of the implementation of the Tariff Reform and Import Liberalization Program in 1986 leading to the liberalization of fertilizer importation and other agricultural products, the government has since then stopped imposing import quotas for fertilizer and reduced the corresponding import duties and tariffs on fertilizer imports (Briones, 2020).

In response to the program, FPA issued a Memorandum Circular No. 1 series of 1986 which provides the decontrol guidelines for the fertilizer industry. This issuance relinquished the FPA of its control over procurement of fertilizers particularly on the determination of import requirements and allocation of import volume, and conducting tenders or canvasses for fertilizer importations.

Thus, the FPA lose its capacity to “assure the agricultural sector of adequate supply of fertilizer and pesticide at reasonable prices…” as stipulated under PD 1144.

Philippines: Net importer of fertilizers

The country has been for a long-time a net importer of fertilizers. About 90% of the country’s needs for fertilizer are mostly imported from China, Indonesia, and Malaysia. Some are being imported from Qatar, Canada, Korea, and the Middle East, while local production accounts for only 10% of the country’s fertilizer supply (Table 3).

There are two major local producers of fertilizer namely: Atlas Fertilizer Corporation and the Philippine Phosphate Fertilizer Corporation (Philphos). Small to medium sized fertilizer manufacturers also contribute to the local production but in smaller quantities.  According to Vice President Tomas Guibanni, Philphos capacity to operate is only at 20% (interviewed November 9, 2021). Raw materials being used are likewise imported and fertilizer production requires large amounts of fossil fuels. Much so, it would not be feasible for the country to produce its own fertilizers given that the Philippines is not an oil-producer.

Table 3. Exporters of Six Major Grades of Fertilizer in 2020

Global Scenario: Increased fertilizer demand

With the country’s dependence on imported fertilizers, the current global demand greatly affects the entry of fertilizer imports in our country. This caused limited local fertilizer supply that influenced the escalation of local prices.

According to the World Bank (2021), fertilizer prices are expected to stay high over the remainder of 2021. Their report indicated that an increase in the importation demand of fertilizers were recorded, particularly urea, in countries like the US, Brazil, India, and Australia. These countries have increased production area for corn, soybeans, and wheat requiring large volumes of agricultural fertilizer inputs.

As such, some countries have also made an advanced booking of fertilizer particularly urea to meet their domestic demand. India has already made an advance booking of fertilizer supply (1.8M MT) for them to meet their domestic demand of approximately $501/MT. In the US, prices of corn are fueling expectations of higher demand for urea, hence higher prices. In Australia, a forecast of a 2% yearly increase in fertilizer demand has been recorded, with crop areas expanding by almost 400,000 hectares yearly in New South Wales. In Brazil, corn production has been increased for livestock use (forage) whereby urea imports grew to 8 million MT until 2022.

Moreover, China, the highest origin of Philippine fertilizer imports, has  allocated their local fertilizer production for their domestic use. This resulted in reduced fertilizer exports to the Philippines.

Increased cost of raw materials

The World Bank (2021) reported that the high price of fertilizers has been bolstered by increased prices of raw materials to produce fertilizers. For instance, the cost for phosphates raw material costs, particularly sulfur and ammonia, have increased sharply due to COVID-19 restrictions on transport that caused limited input supplies. In addition, urea feedstock costs have also risen, including natural gas prices (to produce urea) which jumped in early 2021 due to unusually cold weather.

Increased transport and logistical expenses from importation to retail

The increased transport expenses in the delivery of fertilizers from its country of origin to local dealer’s level also affected local fertilizer prices. Among the overhead expenses include duties, arrastre, wharfage checkereage, stevedoring, weighing or bagging and trucking.  This will be incurred upon the landing of fertilizers from port to its transport to the distributor’s warehouse and to the different dealers nationwide. An increase in freight cost in ASEAN has been also recorded from $20 to $40 in recent months.

Table 4 illustrates the imputed costs across the supply chain – from the time fertilizer is unloaded in our ports to the point the dealers sell it to farmers. For instance, if the import price is $700 per metric ton, the computed price per bag (at a foreign exchange rate of Php50.00 per $1) is Php1,750. Add the duties, arastre and stevedoring (which is around 3% of import price according to industry standards), then you come up with the landed cost of Php1,803. The importer and distributor then shall impute their margins and costs at 7% and 10% respectively for logistics, labor, and local tax to come up with importer’s price to distributors and distributor’s price to dealer. Finally, the dealer’s price to farmers shall now include all the imputed costs across the supply chain would be approximately Php2,376.

Table 4. Sample Computation of Fertilizer Price at Various Level (Php)

To illustrate the 32% additional value (from the time the fertilizer is unloaded in Philippine ports by importers),  if the import price is $1,000, price per bag in peso (50 kgs) would be Php2,500. An additional Php75 (3%), constituting import duties, arastre and stevedoring expenses, will be added to the import price. Successively, 12% or Php309 will be added by the importer upon selling to distributor. Another Php202 (7%) will be added by distributor to dealers. Finally Php309 (10%) will be added by dealers upon selling to farmers. From the Php2,500 landed cost of fertilizer, the farmer would now have to buy the fertilizer at Php3,394 with the addition of transport and logistical charges from various level (Figure 2).

  Figure 2. Schematic Diagram Showing the Increasing Fertilizer Price from the Landed Cost of  Php2,500 to Farmer’s Level

Proposed interventions to combat increase in fertilizer price: OneDA approach

To address the concern of high fertilizer prices, FPA proposes eight strategic interventions:

– 1^st, Government needs to increase farmers fertilizer subsidy by 25%  from the initial grant of Php 1,000 (Table 5). The enhanced fertilizer subsidy would defray farm expenses of farmers and cover a higher target area of application for increased production.

Table 5. Proposed 25% Increase from Traditional Fertilizer Subsidy of Php 1000

– 2^nd, Government to provide a subsidy of at least 60-70% of the prevailing price on traditional and non-traditional fertilizers.

– 3^rd, Government must encourage Farmers’ Federations and Associations to import fertilizers. Subsidize cooperatives/associations by providing loan on zero interest. This would increase local fertilizer supply and promote market competition to balance local prices.

– 4^th, Government to provide soft loan assistance, or in other forms, to Philphos to fully operate in order to increase local production by 20% or more in the market.

– 5^th, Government should introduce a Price Guide Indicator at various import price levels. This will facilitate easier price monitoring of fertilizers to allow distributors and dealers to maintain reasonable fertilizer prices.

– 6^th, FPA to constant monitor and conduct surveillance on stock inventory and local pricing.

– 7^th, FPA shall also strengthen its awareness campaign efforts to educate farmers to use cheaper FPA registered fertilizer brands in the market that has the same efficacy as the known brands.

– 8^th, FPA will also promote the use of Balance Fertilization Strategy to farmers to address problems on land degradation and decline in soil fertility through adjustments in the cropping and management of farming systems by means of cover cropping of short duration leguminous crops (i.e. mungbean) and introduce non-traditional fertilizer subsidies such as organic fertilizers, fortified organic fertilizers, and the microbial/biorational fertilizers.

The use of fortified organic fertilizers (organic + inorganic) is advantageous. Given that we have all the ingredients (i.e. dung – poultry and livestock,  crop refuse)  and producers to manufacture this, specific nutrient formulation that will suit crop requirement is vital.  

This strategies will allow farmers to minimize the use of costly fertilizers through effective and efficient input application.

References:

Briones, R. 2020. The Unfinished Agenda of Trade Liberalization in Philippine Agriculture: Assessing the Impact of Reducing Tariff and Nontariff Barriers. Retrieved https://pidswebs.pids.gov.ph/CDN/PUBLICATIONS/pidsdps2042.pdf. P9.

Baffes, J. and Koh, W. 2021. Fertilizer prices expected to stay high over the remainder of 2021. Retrieved https://blogs.worldbank.org/opendata/fertilizer-prices-expected-stay-high -over-remainder-2021

Written by ¹Wilfredo Roldan, ^*2Myer Mula, ³Julieta Lansangan, ⁴Rowena Reyes, and ⁵Ivan Layag    l   Published: 11 November 2021

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¹  Executive Director, Fertilizer and Pesticide Authority (FPA)

^*2 National Program Director, Special Area for Agricultural Development (SAAD) and Deputy Executive Director for Fertilizer, Fertilizer and Pesticide Authority (FPA)

³  Division Chief , Fertilizer Regulations Division (FRD), Fertilizer and Pesticide Authority (FPA)

⁴  Supervising Agriculturist, Fertilizer Regulations Division (FRD), Fertilizer and Pesticide Authority (FPA)

⁵  Information Officer III, Planning, Monitoring and Information Division (PMID), Fertilizer and Pesticide Authority (FPA)

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  Fertilizer and Pesticide Authority (FPA) Online ISSN: 2815-1674
  Published by the FPA Information and Communications Team