Ensuring supply amid soaring fertiliser prices key to stable production

Thursday, Aug 19, 2021 07:43

Phung Ha, Vice President and General Secretary of the Vietnam Fertiliser Association

Fertiliser prices have increased sharply this year with no signs of cooling, adversely impacting agricultural production and the lives of farmers. Vietnam News Agency Television (Vnews) talked to Phung Ha, Vice President and General Secretary of the Vietnam Fertiliser Association, about solutions to stabilise the market

Prices of fertiliser products have climbed by up to 55 per cent this year. What are the main reasons for such a large increase?

Viet Nam has witnessed three dramatic increases in fertiliser prices in the past 40 years: one in 1980 when fertiliser prices soared 50-60 per cent, another in 2008 when prices more than tripled compared to 2000, and the latest one this year.

There are three main reasons. The first one the pandemic. Many countries in the world including the big fertiliser manufacturers like China and India had to stop production due to lockdown measures which disrupted supply. In Viet Nam, production has also been affected as workers have been distanced and unable to go to the factory.

The second and the most important reason is the sharp increases in prices of input materials such as ammonia and sulfur, which climbed between 150 and 200 per cent. Ammonia and sulfur are the main input for urea fertiliser production and a part of DAP fertiliser.

In addition, oil – which is another important input for production – also surged. Oil is currently trading at US$76-77 per barrel, almost double the price recorded the same time last year.

The last reason is the high shipping price. The logistics price and price of containers has sometimes increased up to three times this year.

How have high fertiliser prices affected production and farmers? What is your prediction about prices in the last months of the year?

Fertiliser is key to the agricultural industry. According to some calculations, production inputs including seeds, pesticides and fertilisers – depending on the type of trees and soil – account for about 60 per cent of production costs, of which fertilisers make up 30 per cent. Therefore, when fertiliser prices increase, production efficiency decreases. In many regions, farmers have been reducing plantation areas to avoid losses, especially with prices of many agricultural products dropping due to the pandemic.

Domestic fertiliser prices depend on world prices. Based on data from the World Fertiliser Association, the World Bank and other sources, fertiliser prices are forecast to continue rising. Some experts predict oil prices could rise to $90-100 per barrel by the year-end. And if oil prices increase, the prices of other inputs such as ammonia and sulfur will increase and fertiliser prices will rise too.

In addition, we have received information that China has advised their domestic manufacturers temporarily not to export fertiliser until prices become more stable.

Though it's difficult to predict how much fertiliser prices will increase, it’s important to ensure two things: enough supply and stable prices.

We will try to a certain extent to ensure domestic price stability, so that if domestic production is possible and domestic products will be cheaper than imported ones.

We have enough supply of urea and phosphate fertilisers. However, for DAP fertilizer, the annual demand is between 900,000 and 1 million tonnes. With only three DAP fertiliser factories, Viet Nam produces about 760,000 tonnes per year, lower than demand, so we need to import.

What recommendations does the association have for domestic manufacturers to minimise negative impacts on domestic production?

The association has asked manufacturing enterprise members to maximise production capacity, find ways to reduce the cost of energy and input materials, and try to supply fertilisers to dealers and farmers as soon as possible.

For commercial enterprises, we advised them to avoid hoarding and inflating prices, and especially to provide information for supervision agencies to assist in market management.

Recently, some experts recommended the authority require manufacturers to temporarily stop exporting fertiliser to help cool domestic prices. Though there is no document that prohibits exports, based on the situation and interests between producers and farmers, in the current period we may employ a “soft method” asking the Ministry of Industry and Trade (MoIT) to direct large enterprises to stop exporting, for domestic supply.

What should the Government do to ensure a transparent fertiliser market?

The association has made proposals to the Government, MoIT and Ministry of Agriculture and Rural Development. The first of our concerns, for many years, is to amend Law No 71 relating to VAT, which should have been passed by the 14th National Assembly.

If the amendment of Law No 71 removes fertilisers from VAT-free items, this will promote domestic production, helping fertiliser businesses have more sources to reproduce and reinvest. Fertilisers companies would be ready to invest in new production lines and technologies to produce new-generation and high-quality products. With a 5 per cent VAT deduction, competition between domestic fertiliser production and imported products will be fairer.

The second proposal is related to reviewing two types of tax – import-export tax and trade defense tax. The association recommends that the Government direct ministries to transparently and publicly assess the interests of producers and consumers, taking account for other factors such as tax requirements in bilateral and multilateral trade agreements.

Thirdly, it is recommended that the ministry pay attention to a number of legal documents related to the fertiliser industry development. Currently, the country has 800 fertiliser factories with tens of thousands of fertiliser production formulas, which is too many.

Finally, fertiliser prices may continue to increase, so farmers should try to change fertiliser products to reduce input prices to be more profitable. — VNS

Comments (0)