Serious problems threaten viability of fertilizer

The over-P11 billion fertilizer industry is plagued with a plethora of problems that is undercutting its capacity to support the government ’s thrust to boost agricultural production and reduce widespread poverty.

Bearing the brunt of these problems is the chemical fertilizer sector, which accounts for about 95 percent of the industry. Organic fertilizers account for only five percent.

One problem is the lobby mounted by diehard environmentalists who want to scrap chemical fertilizers altogether without realizing that the industry is still vital to the success of agriculture.

Raul "Jun" V. Aristorenas Jr., president of the Fertilizer Industry Association of the Philippines (FIAP), said they have been "much- maligned and unfairly lumped together with toxic chemical pesticides and accused as mostly multinational firms."

Recent studies by agricultural scientists led by Dr. Rogelio N. Concepcion, director of the Bureau of Soils and Water Management (BSWM), show that "balanced fertilization," or mixing organic and chemical fertilizers according to specific crop and soil types, is the ideal and scientific approach that achieves the best results.

Even Dr. Severino Magat, one of the country’s top agricultural scientists, admits that "some soil types can take organic fertilizers solely 100 percent, but in others they are inadequate and ineffective. And there are 500 types of soils, many of them requiring specific chemical fertilizer grades."

Concepcion acknowledges that chemicals have damaged many farmlands, "but this is because the same fertilizer grades have been used for three decades. There is an overdose of the same ingredients in fertilizers, but a depletion in the soil’s nutrients that need to be replaced with other fertilizer grades or nutrients."

A bigger problem faced by the industry is the current "price-cost squeeze." Costs of operations have soared the past years, while prices have dropped in real terms, thus affecting profitability. Alarico S. Lim, another FIAP member, says profit margins, which used to be 10-15 percent have dropped to a fragile two percent.

Antonio M. Kosca Jr., president of Atlas Fertilizer and Chemicals Inc., said "we used to buy our need at P26 to a dollar but now we are paying at over P50 to a dollar." Being petroleum-based, the industry is import-dependent by 80-90 percent and is thus greatly affected by peso depreciation. Estanislao J. Chupungco, a FIAP consultant, added that "for every peso depreciation, costs of fertilizer products increase by P6-7 per 50-kg. bag.

Kosca said they could not just pass on their additional costs to farmers as they may complain and stop buying. "Out of our selling price of P400 per bag, we only make P10," he said. He revealed that had it not been for the entry of Japanese investors into their company they could have probably closed shop already.

Dr. Walfredo R. Rola of UP Los Baños cited statistics showing the continued deterioration of the industry. He noted that while volume production increased steadily from 934,346 tons in 1990 to 1.6 million tons in 1996, it dropped by almost 22 percent to 1.25 million tons in 2000.

Similarly, sales which were earlier increasing steadily from 1991 to 1997, declined suddenly and continuously during the 1998-2000 period. If not arrested through agricultural programs that will help boost anew the demand for fertilizers, this declining trend will continue as farmers are already squeezed too much. Farmers can no longer afford to spend more on farm inputs, particularly fertilizers.

Even fertilizer exports, which should compensate for a collapsing local market, have steadily declined from 717,578 metric tons in 1990 to only 232,638 MT in 2000.

Other problems faced by the industry are structural like inadequate port facilities, poor roads and related infrastructures, inefficient transport system, etc. Also adding to the burden are shrinkage, pilferage, and unnecessary but costly "tong" protection.

Chupungco revealed that "moving stocks inter-island down to a dealer’s store along costs as much as P50 per bag." Add to this the inventory cost which is estimated at P25 per bag.

And even if fertilizer stocks reach the farms a host of problems makes their usage ineffective. Farmers lack financing to buy inputs, while fertilizer firms lack the resources to conduct training and technology transfers. Government extension workers can no longer be relied upon for support as they have now been devolved to the local government units.

Two other serious problems are the dumping of cheaper imports from China and Korean and the decades-old restriction on new fertilizer grades.

All these problems are putting the tottering industry on the verge of collapse that could possibly compromise efforts to boost agricultural production. – PAJ News Service