Fertiliser threats to production

Abdel-Razek Mohamed , Wednesday 1 Dec 2021

Agricultural production in Egypt could be negatively affected by increases in the price of fertilisers.

Fertiliser threats to production
Fertiliser threats to production

The price of fertilisers has increased by 36.7 per cent, with one ton reaching LE4,500, up from LE3,296, as a result of the global rise in the price of natural gas, which is an important input in fertiliser production.

Observers say the increase will adversely affect agricultural production, and hence lead to a rise in food imports, which will add more pressure on Egypt’s foreign currency holdings and render imports more prone to price fluctuations in the international commodities markets.

The move came on the back of an end of October decision to hike the price of natural gas for fertiliser, steel, and petrochemical factories from $4.5 to $5.75 per million British thermal units (mBtu) as a result of the global rise in gas prices.

The increase in prices also comes amid a shortage of fertilisers, blamed for creating a black market.

“A 50kg sack of fertiliser now sells for LE500 on the black market, up from LE250 at the [government] agricultural cooperatives. The problem is that it is not available at the cooperatives for that price,” said Shehata Mohamed Abdallah, a farmer from Sohag in Upper Egypt.

“Over the past few days, the government has raised the price of fertilisers from LE160 to LE250 per sack. But because it is not available, a black market has been created,” he added.

“One feddan of land needs seven 50kg sacks of nitrates at 33 per cent concentration, or five 50kg of urea at 46.5 per cent concentration, in the winter and four sacks in the summer to fertilise it,” Abdallah said.

A feddan of sugar cane, heavily planted in Upper Egypt, needs 17 sacks of fertilisers per season, he noted.

“A small number of farmers received half the amount of fertiliser they need this week. The rest are lining up in front of the agricultural cooperatives,” he stated, suggesting that agricultural banks be responsible for distributing fertilisers instead due to their greater ability to fund purchases from factories.

Upper Egypt has been the most affected by the shortage of fertilisers over the past few years due to its need for a different formula from that used in the Delta and the longer distance to the factories in the north.

A presidential directive to the ministries of agriculture and trade and industry and specialised research centres has asked them to study the production system to ensure the availability of fertilisers in the local market and to provide what is needed to increase agricultural land through projects for desert reclamation.

Egypt’s agricultural land needs between eight and nine million tons of fertilisers, said Nader Noureddin, a professor of land and water resources at Cairo University’s Faculty of Agriculture. As Egypt expands its land reclamation, more fertilisers will be needed, he added.

According to the Central Agency for Public Mobilisation and Statistics (CAPMAS), Egypt’s agricultural land reached 9.2 million feddans in 2019.

Egypt produces 23 million tons of nitrogen fertilisers through 15 companies. Their factories are committed to supplying 3.5 million tons of fertilisers to the Ministry of Agriculture at the new price to cover the needs of agricultural land at subsidised prices, said head of Egypt’s Agriculture Syndicate Farid Wasel.

According to sector regulations, producers are required to sell 55 per cent of their production at the subsidised price of LE4,500 to the Ministry of Agriculture. Another 10 per cent is sold on the free market, and producers can export their remaining production.  

However, the global rise in fertiliser prices has led some Egyptian factories to breach their agreements with the government, exporting half of their raw ammonia, the price of which has increased by 300 per cent abroad, Noureddin said.

 “The government should ban the export of raw ammonia so that factories commit to supplying their full share of fertilisers agreed with the Ministry of Agriculture,” he added.

When the Nile floods stopped in 1970 due to the construction of the Aswan High Dam, the flow of silt was halted and the need for fertilisers increased, Noureddin said, adding that “nitrogen fertilisers have become important as an alternative to the lost silt. Fertilising land with the recommended quantities increases yields by 50 per cent, while reduced fertilisation limits crops by 30 per cent.”

“Not using fertiliser at all reduces production by 50 per cent, which represents a grave danger, especially for strategic crops such as wheat.”

Wasel believes that there is an agreement with the Abu Qir, Delta, Suez, and Helwan fertiliser factories to supply sufficient amounts to solve the crisis. But more factories are needed, he said, and small agricultural holdings of less than 25 acres should also be supported.

Wasel wondered why the commercial banks were not more involved in the fertiliser sector, especially since Upper Egypt is facing a bigger crisis than the Delta. He proposed that the private sector be more involved, particularly because there had been a decline in fertiliser production in Delta factories providing about one million tons to the state.

He said that there was no objection to fertiliser companies making profits by benefiting from the increase in prices. However, the agricultural sector must be viewed as a strategic sector for Egypt, and therefore any decline in agricultural production would put extra pressure on the budget as the country would have to expand food imports.

Wasel asked the ministries of agriculture, public enterprise, and industry and trade to come up with solutions to the crisis and compel companies to supply the required fertilisers to the local market. He suggested submitting a report to the prime minister asking that 60 per cent of production be directed to it.

One official from a fertiliser company who preferred to speak anonymously said that stopping fertiliser exports would deprive companies from making profits, especially with the rise in energy prices. The factories were seeking to coordinate with the government to resolve the crisis in a way that would not compromise their investments but would fulfil the needs of the local market, he added.

Ali Odeh, head of the Multi-Purpose Agricultural Association responsible for providing for agricultural cooperatives, said there were structural problems in the cooperatives, and they did not have the facilities to deal with digital systems, such as the new farmer’s smartcard system.

The smartcards are part of ministry plans to digitise the services it offers to farmers, among them help in selling crops and accessing fertilisers.

*A version of this article appears in print in the 2 December, 2021 edition of Al-Ahram Weekly.

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