1. Fertilizer Policy in Thailand
Nipon Poapongsakorn
Danop Aroonkong
TDRI
26 September 2013
At Apsara Angkor Resort & Conference
Center, Siem Reap, Cambodia

2. Outline
1. Objective
2. Summary of findings
3. Fertilizer policies in Thailand
3.1 Trade policy
3.2 Support policy
3.3 Price control
3.4 Tailor-made and site-specific fertilizer
projects
4. Conclusion and recommendation

3. 1. Objective
 Our main objective is to answer: how do
government fertilizer policies affect the
fertilizer market in Thailand?
 To answer, we focus on:
o What were the fertilizer policies in Thailand? What
is the rationale?
o What were their impacts on the market?

4. 2. Summary of findings
1. Trade policy was implemented to protect companies,
fortunately, it no longer exists.
2. Support policy in Thailand has been mostly about
providing credits and selling fertilizers at lower-than-
market prices. Now, the role of government has been
reduced to credit provision through the BAAC.
3. Wholesale price control was implemented during the oil
shock in 208, but was unsuccessful and resulted in
distortion. After that, the control price is not binding.
4. Farmers’ farms using the recommended site-specific
fertilizers have lower fertilizer cost, and for a few crops,
higher yields. However, most smallholders do not
embrace the suggestions, thanks to the transaction cost.

5. 4. Government policy
 3.1 Trade policy:
• Started in 1968, government started to impose
import taxes and bans on various fertilizers to
protect the Chemical Fertilizer plant
 Ban on domestic fertilizers
 Bans on urea, ammonia sulfate, single-nutrient nitrogen
fertilizer imports
• Shortage in supply and resulted in high prices of
fertilizers
• By 1993, all import duties and value-added taxes on
fertilizers for agricultural use were at zero percent

6. National Fertilizer Company (NFC)
• Objectives:
 1) To secure fertilizer supply and reduce price fluctuations for farmers
 2) To promote the use of fertilizers and use of appropriate grades
 3) To reduce the amount of adulterated fertilizers in the market
 4) To increase competition in the fertilizer market
• Rationale:
 Second world oil shock in 1979-1981 – prices of fertilizers increased
as oil price increased.
 Around the same time, natural gas was discovered in the Gulf of
Thailand
• Performance of NFC
 Unable to meet demand
 Little or no influence in promoting fertilizer use
 Low quality and adulterated fertilizers could not be controlled by one
single plant
 The plant was more of a cartel as most firms had a share holding.
 It was not subject to the competition law
• Fall of NFC
 Unable to service debt after the baht depreciation in 1998
 Problems related to the technological design of the plant

7.  3.2 Support policy
• 1966: Establishment of the Bank for Agriculture and
Agricultural Co-operatives (BAAC)
 Provided credit, but also forced farmers to purchase
fertilizers from the Bank’s cooperative
• 1974: The BAAC established the Marketing Cooperative
For Farmers (MCF)
 BAAC asked farmers to buy fertilizer from MCF
 A study by TDRI (2010) reveals that BAAC clients reported
that MCF fertilizer prices were lower than the market prices
and thought that MCF fertilizers were of better quality
• Prior to 1998, the Department of Agricultural Extension
(DOAE) distributed free fertilizers

8.  3.3 Price control
• Objectives:
 To lower input costs accrued to farmers and ideally
 Prevent dealers and importers from intentionally storing
fertilizers to take advantage of the increase in chemical
fertilizer prices in the world market by controlling prices.
• Rationale:
 Prices of fertilizers were surging in 2008.
 Being a controlled good, the Price Control Act of 1999 and
the Fertilizer Act of 2007 allowed the government to directly
intervene.
• Impact of price control on the market
 At the wholesale level, some large-scale companies stopped
giving credit to dealers/wholesalers
o Some asked their customers to pay the price difference between
the actual price and controlled price in terms of rebate at a later
time.
 Introduction of other uncontrolled fertilizer grades with
similar nutrient contents to the controlled grades
o I.e., 16-16-16 as an alternative to 15-15-15
• In January of 2013, price ceiling was relaxed

9.  3.4 Tailor-made (TMF) and site-specific (SSF)
fertilizer projects
• Origin:
 Started by a professor at Kasetsart University, who
experimented on farms using tailor-made/site-specific
fertilizers. Results were impressive and the government
was showed interest.
• Objectives:
 The TMF project was officially launched in 2011 to
promote efficient agricultural production through the
use of appropriate fertilizer grades and to reduce
farmers’ input costs
• Rationale:
 The mentioned Kasetsart University professor has
tested tailor-made fertilizers on farms and found that
cost per rai in the TMF plot was lower than that of the
farmers’ plots by about 35-45%

10. • Project was terminated in 2011:
 Short period of preparation
 Conflict of interest between the Land
Development Department and Kasetsart
University
 Implementation problems for small farmers:
o Extra transaction costs to smallholders, i.e.,
problems with leftover fertilizers, extra labor cost
• Project is now called the SFF project, which
is more of an information-based program

11. 4. Conclusion
 Given the neutral trade policy and no government intervention,
the domestic fertilizer prices reflect the world prices
• Competition exists as new entrants can start importing due to no import
tariffs.
 Government intervention has proven to cause shortages and that
prices rose
 Support policy can potentially increase competition by forcing
other firms to reduce price and increase quality
 Existing problems:
• Policies to encourage appropriate use of fertilizers have yet come to
fruition
 Implementation issues
• Adulterated and low quality fertilizers
• Exaggerated advertisements
• Still distortion in the output market (rice), thanks to the rice pledging
policy

12. Factors explaining fertilizer import: regressions
 2.2 Factors explaining fertilizer import:
regressions
Independent
variables
Dependent variables
Total fertilizer import Total fertilizer import per area
Robust Robust
(model) (1) (2)
priceratio
-744331.70**
(-5.03)
-36.58**
(-5.27)
ricepledge
491148.20*
(1.99)
19.39
(1.61)
exchangerate
-29926.42**
(-2.18)
-1.24*
(-1.95)
agriarea
118.13**
(2.63)
-
(-)
year
131211.80**
(9.62)
6.45**
(10.45)
constant
-2.60x108**
(-9.87)
-12644.87**
(-10.46)
# of observations 33 33
F-stat 2253.60 1428.35
R-square 0.9526 0.9506
R-square adjusted - -
D-W test 1.7338 1.7329