The responsibility for an acute shortage of fertilisers and unprecedented hikes in prices is lost between the government and the private sector. Mona El-Fiqi digs up the dirt For weeks, farmers across the country have complained from a crippling shortage in chemical fertilisers. "Fertilisers are not available at the Principal Bank for Development and Agriculture [PBDA], government cooperatives or private sector outlets," grumbled Daqahliya farmer Samir Mahmoud. And when there's shortage, there's bound to be a spike in prices since market value is left to the dynamics of supply and demand. For chemical fertilisers, the increase was a shocking three-fold: from LE700 to LE2,000 per tonne. Fertiliser shortages are common in summer, since 55 per cent of the total annual consumption of fertilisers is used in this season to grow strategic corps, such as rice, cotton and corn. But this year, the problem is more than just a massive jump in prices. The crisis began in December, 2006, when the government decided to give the PBDA the right to buy extra amounts of fertiliser from factories in the free zones at international prices, estimated at $300 per tonne. "This decision raised the PBDA quota in controlling the market from 30 to 48 per cent, but the bank lacks an adequate marketing system in fertiliser distribution," suggested Mohamed El-Kheshen, chairman of the Fertiliser Division at the Egyptian Federation for the Chambers of Commerce (EFCC). What made the problem worse, according to experts, is that this decision was followed by another one reducing the quota of the private sector in fertiliser distribution. Two months ago, the government cut the private sector quota from 40 to 20 per cent of total production, despite the fact that the majority of farmers depend on this sector to meet their fertiliser needs. El-Kheshen was also critical of this move, saying that about 65 per cent of cultivated land uses fertiliser bought from private sector outlets. This is especially so because 35 per cent of farmland in new reclaimed areas is located where no banks or cooperatives exist, while 20 per cent of cultivated land has no ownership deeds by which their owners can receive fertiliser from the PBDA or government cooperatives. Another 10 per cent of land is grown by farmers who are not land owners, therefore they buy their fertiliser needs from the private sector. "This crisis is caused by the government relying on the PBDA and cooperatives to distribute fertiliser," asserted El-Kheshen. But while the private sector blames the government of depending on incompetent cooperatives and PBDA, the Ministry of Agriculture is accusing the private sector of hiking prices by selling to traders and creating a parallel market. Experts want the Ministry of Agriculture to end the quota system in fertiliser distribution, float prices according to market needs, and give farmers the liberty to choose whether to buy from the PBDA, cooperatives or private sector outlets. "The comprehensive liberalisation of the fertiliser market is the solution," proposed El-Kheshen. Local fertiliser production is estimated at 7.7 million tonnes annually, while total consumption is 8.6 million tones. One expert, who prefers to remain anonymous, suggested that the government should oblige factories in the free zones to fill this one million tonne gap and end the annual problem. Free zone fertiliser factories produce 7.5 million tonnes annually and make more profits exporting their products. El-Kheshen explained that although the government tried to do that a few weeks ago, when it decided to buy 1.6 million tonnes of fertiliser from the free zone, "it was too late and the problem had already mushroomed." More realistically, the government should have a standing agreement with these factories that it will buy their production at export prices. "The Ministry of Agriculture should guarantee that fertilisers from these factories are available on the market starting early March to avoid shortages in summer," proposed El-Kheshen. Another reason for the scarcity of fertiliser is that farmers use it excessively. El-Kheshen cited the example of Turkey, where cultivated land is three times as much as that in Egypt, but farmers there consume the same amount of fertiliser as does Egypt. Experts also suggest that the price of fertiliser be raised to comply with international prices. The average price of local fertilisers is LE700 per tonne compared to LE2,000 on international markets. "An increase in the price of fertilisers, which represents 12 per cent of the total cost of cultivation, will help ration the use of fertilisers and stop farmers from potentially harmful over-fertilising," stated El-Kheshen. In a recent meeting with the Minster of Agriculture, members of the Fertiliser Division at the EFCC called for a more effective role in the Agricultural Guidance Department. They want to educate farmers about rationing the use of fertilisers in order to avoid any negative impact on people's health. Meanwhile, an Egyptian Federation for Fertiliser Producers is currently being established, and will include 15 companies with total investments estimated at LE4 billion. The federation is expected to play an important role in coordinating between fertiliser factories in exporting operations. It will also handle training and technical issues related to fertiliser production. El-Kheshen pointed out, however, that the federation will not play a role in market stability since its main concern is production issues.
