Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN) Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN)

Fertilizer Value Chain - Supply System Management & Servicing Farmers' Needs
8 November 2010 - 12 November 2010

Acknowledgements: FANRPAN acknowledges IFDC as the source of this document

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These are uncertain times for all involved in the fertilizer value chain: suppliers, importers, distributors, dealers, farmers and public officials have been exposed to great uncertainty and risk in fertilizer supply, demand and prices. During 2007-09 prices of such major fertilizer products as urea, DAP and muriate of potash quadrupled within a nine-month time frame; and then, in the case of nitrogen and phosphorous fertilizers, declined just as quickly and by almost the same magnitude. What happened and why? Numerous factors contributed to the volatility - global food security threats, the bio-fuel "hysteria" in North America, disruption's in fertilizer production in some markets, export restrictions by some key exporters to assure their own domestic fertilizer supply requirements and the continued credit market disruptions and instability. Clearly, the external market environment had a direct and compelling impact upon all involved in the fertilizer value chain.

Assurance of fertilizer supply on a timely basis, cost-containment to minimize the high costs of fertilizers in times of rapidly escalating/declining prices, and improving farmer access to fertilizers not only to improve food security but also to allow for acceptable financial returns to farmers using fertilizers have impacted decision-making at all levels. Policy makers, fertilizer suppliers, importers, distributors, dealers and farmers (as well as those providing logistics and financial services) face great risks associated with decision-making in fertilizer supply management. Servicing farmers' needs is critical to agriculture sector performance. At no time in recent history has there been a greater challenge in improving farmer access to fertilizers.

At the level of fertilizer policy, "smart subsidies" have been popular in some of the most vulnerable markets. One issue is how best to improve smallholder farmers' access to fertilizers and at the same time preserve market-based fertilizer supply systems. Foreign exchange limitations have necessitated emergency measures to allow for fertilizer importation. During the rapid run-up in prices, fertilizer procurement at the lowest price was a great challenge. And now with prices declining, some major buyers are applying web-based procurement strategies to generate lower quotations. Decisions on pricing, procurement, inventory management and financial management have never been more challenging. And maintaining good relations with supply chain members has never been more important to the long-term viability of private enterprises.

When one considers fertilizer supply, demand and international trade, Asia is arguably the most important region of the world. Asia represents more than 60 percent of the world fertilizer market. China is the world's largest producer and consumer of nitrogen fertilizers. India is the world's largest importer of urea fertilizer. International fertilizer market prices are directly and very substantially influenced by past, current and future developments in the Asian fertilizer market. And importantly, the fertilizer marketing systems in many Asian countries reflect a high degree of efficiency in import procurement, logistics management, fertilizer demand forecasting, advisory services to farmers and cost control.

While other areas of the world, such as Africa, have different challenges, the global fertilizer market impacts even the smallest fertilizer markets. Most countries in Africa are dependent upon imports (and thus international market prices) for their fertilizer supplies. Fertilizer promotion includes technology transfer, and that is paramount to increased demand, whether it is in Asia, Africa or Latin America. Inventory management, dealer network expansion and management, credit system management, policy influences and implications, pricing, the cost of doing business, sales forecasting, quality control and provision of quality service to farmers have never been more critical to long-term success in fertilizer supply and marketing.

To improve the knowledge, understanding and skills of those involved in the fertilizer value chain, in fertilizer supply management and in servicing the needs of small farmers, IFDC will conduct an international training program entitled The Fertilizer Value Chain - Supply System Management and Servicing Farmers' Needs. The program will be held in Bangkok, Thailand, November 8-12, 2010. This training program, which will draw on lessons learned and best practices from IFDC and partner organizations in Asia, targets mid- to senior-level officials in the public and private sector who are involved in fertilizer supply system and servicing the needs of smallholder farmers.

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