The government's decision to fix fertilisers prices might ease a chronic seasonal problem, reports Mona El-Fiqi The fertilisers market has witnessed a clear fluctuation of prices during the past few weeks. A bag of fertilisers, 50kg in weight, was sold on average for anything between LE31 and LE40. The reason behind this disparity in prices is attributed to the Principal Bank for Development and Agricultural Credit's (PBDAC) decision to reduce its fertilisers prices. The bank announced that this move is aimed primarily at supporting farmers. But PBDAC is not alone in the market. The bank's decision has triggered complaints from private sector distributors who were losing their clients to the bank. The Egyptian Fertilisers Distributors Association, which represents some 400 private sector distributors presented a memo to Minister of Agriculture Amin Abaza. The minister of agriculture subsequently formed a committee to study the causes of the problem and devise a solution acceptable to all parties. The committee revealed that there is a clear disorder in the fertilisers market, coupled with real price fluctuation during the summer -- a season of high demand for fertilisers. To put an end to this almost annual problem, the committee presented a memo to the minister of agriculture wherein it decided to fix the price per packet at LE35, for all public as well as private distributors. "If a private sector distributor violates this decision, he will be severely punished by the Egyptian Fertilisers Distributors Association," said Mohamed El-Kheshen, deputy chairman of the Egyptian Fertilisers Distributors Association. The committee also decided to maintain the shares of local fertilisers distribution at their current levels. PBDAC is responsible for distributing 30 per cent of local production. Private sector distributors receive 35 per cent, while agricultural cooperatives receive 35 per cent. The decision has been in effect since 12 June 2006. Private sector fertilisers distributors nevertheless still blame PBDAC for causing this fluctuation of prices. Ehab Adel, an expert and marketing manager at El-Monoufia Company for Fertilisers and Chemicals said the problem started last year. The PBDAC imported 2.5 million tons, which is a big amount that exceeded the market's needs. The greater part still resides in the bank's stores until now. Adel added that the quality of imported fertilisers has also declined because of bad storage. He added that some "50 per cent of the PBDAC stores are uncovered, so fertilisers are exposed to sunlight which causes them damage," Adel explained. This is why PBDAC has decided to sell imported fertilisers at low prices. One more step taken by the PBDAC to get rid of imported fertilisers is that it no longer insists on selling them to farmers who possess land ownership licence. It sent a condition that a farmer should buy two imported packets when he buys a local fertilisers packet. Adel also charged that the bank's decision has caused dumping on the fertiliser market. To avoid such decisions, the private sector suggested that its share of fertilisers should be increased. "The government will lose nothing if it tries to raise the shares of private sector to 50 per cent and decrease those of the PBDAC for one month, then finds the result. If the private distributors are not committed, it can cancel its decision," Adel added. Fertilisers are used intensively in Egyptian agriculture. El-Kheshen, said that the consumption of fertilisers was 9.2 million tons, while the local production of fertilisers was estimated at 8.3 million tons in 2005. This gap is filled by imports estimated at around 900,000 tons annually. Abu Qir Company for Fertilisers and Al-Delta Company for Fertilisers are producing 60 per cent of local fertilisers production. The Egyptian fertilisers industry enjoys certain advantages on the international market. Egypt has the second largest reserves of natural gas in the region. in addition to skilled manpower. Since the sector is one of the least liberalised in the country, domestic fertilisers prices are determined by the Egyptian government. This is done with a view to support farmers and prevent fluctuations in fertilisers prices. He notes that the government provides natural gas to fertiliser-producing companies at a subsidised price. The government's policy of providing gas at low prices and determining prices of local products has already led to a great gap between local and international prices. The international prices of fertilisers is $250 per ton, while the price of local fertilisers is LE500 per ton. "Local fertiliser companies are ready to buy natural gas at its international prices. If they do so, they can sell their products at higher prices. The return of higher prices can be used in reforming these local companies," El-Kheshen added.
