The Philippine Fertilizer Industry

Agri-Food Trade Service
The Philippine Fertilizer Industry*

Florence Mojica-Sevilla
Senior Agribusiness Specialist
Center for Food and Agri Business
University of Asia and the Pacific 2006

Agriculture faces the challenge of increasing production to provide food for the growing population. Increasing population puts pressure on the cultivation of marginal land areas and results to land degradation and decline in soil production potential. To maintain soil fertility and productivity and to prevent land degradation and erosion, nutrients taken by crops must be replenished through the application of fertilizers.

Fertilizers are a major cost item in Philippine agriculture. They increase yield and enable the country to attain sufficiency in food and agro-industrial crops. Fertilizers have also made crop production possible in unproductive soils. Fertilizer is believed to contribute 30% to 50% of the increase in yield in crops. However, high fertilizer prices have become a cause for concern since they squeeze farm incomes.

Status of the Philippine Fertilizer Industry
Fertilizer plays a crucial role in improving crop production. A total of 1.7 million (M) tons of inorganic fertilizers were sold locally in 2004, with four fertilizer products representing 91% of the sales (Table 1). These include: urea (32%), complete or 14-14-14 (21%), ammonium sulfate or 21-0-0 (20%), and mono-ammonium phosphate or 16-20-0 (18%).

Table 1. SUPPLY-DEMAND OF FERTILIZER, CY 1995-2005 (Volume in Thousand Tons) SUPPLY
YEAR Production Imports Sales Export
1995 1,390 1,237 1,475 718
1996 1,613 1,202 1,637 528
1997 1,322 1,246 2,038 457
1998 1,181 787 1,545 439
1999 1,168 1,222 1,864 200
2000 1,069 1,260 1,840 233
2001 1,202 1,030 1,945 231
2002 1,340 910 1,805 362
2003 1,059 1,640 1,540 335
2004 1,073 8,872 1,671 364
2005 307 2,140 978 126

Source: Fertilizer and Pesticides Authority (FPA)

Based on preliminary reports submitted by fertilizer companies, sales in 2005 reached 978,000 tons. Luzon accounted for 50-60% of the inorganic fertilizer market, Visayas 17-20%, and Mindanao 20-28%. Regions II (Cagayan), III (Central Luzon), and IV (Southern Tagalog - Calabarzon and Mimaropa) are the biggest fertilizer markets representing nearly half of the total fertilizer consumption in the country.

An estimated 60% of fertilizer sales are used for food crops, principally rice and corn, with the remainder mainly applied to plantation crops such as banana, sugarcane, and pineapple.

Supply
Imports. Bulk (60%) of the inorganic fertilizer supply is imported. In 2004, the Philippines bought an aggregate volume of 8.8M tons of various fertilizer grades, with urea accounting for 30% and ammonium sulfate for 24%. Ammonium sulfate is imported when the international market price is lower than that of domestic production. The majority of the finished fertilizer grades are sourced from Saudi Arabia, Japan, Ukraine, China and Indonesia. Other important suppliers include Qatar, Malaysia, Singapore, Russia, Korea and Taiwan (Figure 1).

Figure 1. Urea Imports by Country of Origin, 2005 (Total: 570,286 tons)

Source of basic data: National Statistics Office (NSO)

As of 2005, there are 119 registered importers licensed by the FPA. Importers generally source directly from foreign suppliers or through indentors/traders. Among major importers are: AFC Fertilizer and Chemicals, Inc., Farmix Fertilizer, Soiltech Agricultural Products Corporation, La Filipina Uy Gongco, Modern Time Enterprises, and Norsk Hydro (Phil.).

Production. Domestic fertilizer production in 2004 totaled 1.1 M tons, largely in the form of 14-14-14 (33%), 16-20-0 (23%), 21-0-0 (15%) and 16-16-8 (12%) (Figure 2).

Figure 2. Inorganic Fertilizer Production by Grade, Philippines, 2004 (Total: 1,072,835 tons)

Source of basic data: FPA

The Philippines currently has three fertilizer manufacturing plants that produce various fertilizer grades for local use and for export; one is located in Luzon and the other two in the Visayas. These plants are into fertilizer blending, granulation and compaction. The fertilizers manufactured locally include 21-0-0, 16-20-0, 18-46-0, 0-18-0 (single superphosphate), 15-15-15, 14-14-14, 12-12-12, 16-16-8, 6-9-15, and 0-0-52 (sulfate of potash).

Three other chemical fertilizer plants ceased operation between the late 1970s and early 1980s due to uncompetitive production costs: Maria Cristina, Chemical Industries of the Philippines, and Planters Products.

Demand
Almost all (99%) of the 14-14-14 produced in 2004 were utilized locally. On the other hand, a total of 364,000 tons of fertilizers were exported primarily 16-16-8 (45%), 18-46-0 (18%), 16-8-8 (11%) and 16-20-0 (11%). Some amount of ammonium sulfate is also exported to Malaysia, Thailand, Vietnam, Pakistan, and Palau (Figure 3). For the manufacturer of these various nutrient grades, local fertilizer plants depend partly upon the use of imported raw materials such as rock phosphate, anhydrous ammonia, and sulphuric acid.

Figure 3. Ammonium Sulfate Export by Country of Destination, 2005 (Total: 72,154 tons)

Source of basic data: NSO

The most widely used fertilizer grades are urea, 21-0-0 and 16-20-0. Urea is mainly used as a nitrogen source while 16-20-0 is applied as a source of both nitrogen and phosphorus. In some areas 18-46-0, and to some extent, 14-14-14, are used instead of 16-20-0.

Organic Fertilizer
The government and some private enthusiasts and environmentalists are now into the re-introduction of organic faming. Organic farming is a farming system that promotes, among other practices, the use of organic fertilizers. Organic matter is an essential component of healthy soils, and all sound farming practices integrate and allocate available organic materials to maintain or improve soil fertility. The Philippines, with its agricultural based economy, has a plentiful supply of organic wastes. A wide variety of organic materials can be used as fertilizers, such as animal manures (e.g. livestock dung, liquid manure from livestock holding facilities), agricultural by-products and processing wastes (e.g. mudpress), green manures (e.g. grass, leaves), domestic wastes (e.g. sewage), and industrial wastes (e.g. wastes from distilleries, sugar refineries, fish canning plants). Chicken manure is the standard organic fertilizer used locally, although cattle and carabao manures, mudpress, and rice bran are also used at a lesser extent. Unlike inorganic fertilizers, animal manures not only provide nutrients but also organic substrate vital for enhancing primary productivity within aquatic environments. Chicken manure is the most valuable because of its effectiveness in promoting natural food growth, its availability, and its ease in handling and application.

Processed organic fertilizers
Processed organic fertilizers are composed of a mixture of animal manures, agricultural wastes (e.g. mudpress), and limestone, composted for at least a week through biological, chemical, and mechanical action. These are usually enriched with primary and secondary nutrients, and in some cases, also with trace elements. The product appears like soil or peat and normally contains two to six times more nitrogen, phosphorus, and potassium than fresh manures.

Because animal manures are a major ingredient in processed organic fertilizers, it should not come as a surprise that many of the manufacturers are located near poultry and livestock farming centers. Some of the manufacturers of organic fertilizers include Absolute Chemicals, Inc, (Abono), Alcolex Corporation (Ferti King), FEACO (Feaco), Greenbelt Manufacturing Corp. (Greenbelt) and Proganic International, Inc.

Domestic organic fertilizer production in 2005 totaled 25,465 tons (Table 2). Sales during the period amounted to 20,650 tons.

Table 2. Organic Fertilizer Supply-Demand, 1995-2005 (Volume in Tons) Year Production Sales
1995 21,769 28,090
1996 14,754 12,734
1997 11,651 12,102
1998 16,893 15,684
1999 8,951 9,764
2000 12,108 11,961
2001 6,969 6,770
2002 21,160 1,914
2003 2,758 3,523
2004 19,389 16,235
2005 25,465 20,650

Source: FPA

Marketing and Distribution
The Philippine fertilizer industry operates largely under a free market system. Production, importation, marketing, and distribution of fertilizers are being handled by the private sector. Following the trade liberalization policy and the removal of levy and other restrictions, smaller companies engaged in agricultural trading were able to enter into the fertilizer market, once controlled only by a few private and government-assisted firms.

The marketing of fertilizers passes through three main levels, namely: (1) importers/ manufacturers; (2) distributors; and (3) dealers. All importations can only be made by FPA licensed importers and cover only products registered at the FPA.

As of 2005, there are about 369 fertilizer handlers (manufacturers, importers, repackers, exporters, distributors) licensed by FPA. The fertilizer distributors or wholesalers constitute the second level of fertilizer marketing, and usually cover several provinces or an entire region. They sell to dealers or outlets. A few importers are also distributors themselves and this provides them with the advantage of direct market access.

The dealers constitute the last step of the marketing channel and are the ones in direct contact with the farmers. Because of the free market system, most distributors also hold a dealer's license, and sell directly in areas where there are no dealers or in conditions where local dealers are weak, or selling to plantation accounts which do not require the networking advantage offered by the dealers. In many cases, it is therefore difficult to draw the line between distributors and dealers.

Imported fertilizers, as finished products in bulk or in bags, are discharged in major ports such as Manila and Poro Point in Luzon; Iloilo, Bacolod, and Cebu in the Visayas; and Cagayan de Oro, Davao, and General Santos in Mindanao.

Pricing
The selling price of inorganic fertilizers is generally affected by the prevailing international market price, foreign exchange rate, and the local supply and demand situation as influenced by factors such as changes in rainfall pattern, type of crop planted, calamities, and importer speculation.

Retail prices of six major fertilizer grades are presented in Table 3. Prices of fertilizers have been increasing for the past eleven years due to rising world prices and foreign exchange. Prices of urea had tripled from a low of P314/bag in 1999 to P950/bag in 2005 (Figure 4). Retail prices of all other grades had been increasing. The highest jump was recorded for 18-46-0 with the highest price of P1,400/bag in 2005 compared to P396/bag in 1995.

Table 3. Average Retail Prices of Fertilizers, CY 1995-2005 (6 Major Imported Fertilizer Grades) - In Pesos per 50-kilogram bag Year Urea 21-0-0 16-20-0 18-46-0 14-14-14 0-0-60
1995 368.93 212.93 316.54 396.40 322.61 259.32
1996 378.05 217.16 325.97 409.21 332.78 279.83
1997 345.54 224.82 334.46 424.26 348.31 245.40
1998 365.64 239.03 285.89 468.13 390.59 340.72
1999 313.65 227.41 398.00 507.27 403.97 357.68
2000 365.43 231.87 398.87 515.57 402.72 379.23
2001 439.98 272.24 413.89 552.08 426.87 434.70
2002 424.44 269.81 422.71 564.71 435.82 460.44
2003 550.96 316.05 466.22 673.90 476.66 495.49
2004 741.75 489.91 634.65 863.46 659.83 663.08
2005 950.50 538.16 779.00 1,400.32 797.96 782.76

Source: FPA

Figure 4. Average Retail Prices of Urea and 18-46-0, CY 1995-2005

Source: FPA

Conclusion
Fertilizers are said to impact positively on crop production. They help in minimizing soil degradation, particularly soil erosion while maintaining and enhancing soil fertility as a whole. Studies show that combining inorganic and organic sources of plant nutrients is a beneficial option for the crop and soil system and hence can be of great benefit to both farmers and the environment.

The increasing cost of fertilizer, however, continues to be a major problem by farmers. Today, producers complain that fertilizer costs in the Philippines are far higher than those in Malaysia and Thailand. High fertilizer prices translate to higher production cost. Further because of high prices, fertilizer use is usually below the recommended levels.

The production and supply of fertilizers are of vital importance to food security. A prerequisite for producing the quantity and quality of affordable food is that the farming community has adequate access to fertilizers, i.e. proximity to markets on equitable terms. This requires that farmers are able to choose between various sources of supply of fertilizer grades, at prices they can afford and in the quantity, quality and at the time they are required. It is also necessary to provide an environment in which those involved in fertilizer production and supply can enter freely.

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* Published in the May 2006 issue of the Food and Agri Business Monitor, a monthly magazine of the Center for Food and Agri Business, University of Asia and the Pacific, Pasig City, Philippines.

How hard would it be to make your own organic fertilizer,"animal wastes,some plant material and agri. lime"???let it ferment for some time first,then apply.