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Philippines Country Paper:
Fertilizer
Roehlano M. Briones
What to expect
• Aims and scope
– Are farmers applying the right amount of fertilizer?
– Is price of fertilizer too high?
– What types of policies should be implemented to
facilitate the role of fertilizer in agricultural
transformation?
• Background: fertilizer supply and utilization
• Fertilizer market
• Fertilizer pricing
• Conclusion
2
Organization of the paper
Supply and use trends
• Fertilizer consumption
has been increasing
over the past several
decades, but suffered
a severe drop in the
late 2000s
• A large proportion of
the country's domestic
supply is sourced from
imports (average of
66%)
3
Produc
tion Imports Supply Exports
Imports-
to-net-
supply
ratio (%)
1990 934 1,118 2,053 449 69.7
1995 1,390 1,238 2,627 718 64.8
2000 1,069 1,332 2,401 233 61.4
2005 877 1,615 2,492 450 79.1
2006 778 1,438 2,217 245 72.9
2007 748 1,683 2,431 298 78.9
Impact and efficiency
Fertilizers combined with adoption of modern varieties was
and is a key contributor to farm productivity.
• Green Revolution: introduced rice varieties with higher
yield and superior yield-response to fertilizers.
• 1965 – 80: 30% of output growth due to > fertilization.
• Post-Green revolution period:
– 1985, 1986: Marginal product of fertilizer = 15.3 in wet
season, 8.3 in dry season
– 1996 – 2007: output elasticity of fertilizer is 0.08 for
irrigated systems, 0.12 for rainfed systems
4Background
Impact and efficiency
In the case of rice, where farmers are most
experienced in modern technologies, fertilizers
are apparently under-applied.
• IRRI study:
– farmers apply lower fertilizer (and earn less profit)
relative to SSNM
– Fertilizer use below optimum during dry season
• Possible explanations: ruled out as unlikely!
– Access to credit
– Risk aversion
5Impact and efficiency
Evolution of the sector and policy
• During the postwar period, growing fertilizer demand was
mostly met by increasing domestic production, supported by
incentives and price policies.
• Since 1986, government has implemented a series of reforms
which allowed a much greater scope for market allocation and
pricing.
– FPA ceded administrative controls
– The QR on imports abandoned, as well as price-setting
– Tariffs were also reduced; rates are either 1% or 3%
– Government withdrawn fertilizer subsidies
6Fertilizer market
Profile of the fertilizer market
7Fertilizer market
Area distributors Farmer cooperativesPlantation accounts
Farmers
Dealers
Cooperative growers
Growers associations
Distributors/Dealers
Importers/Manufacturers/Distributors
As of 2009: 483 handlers
• 134 importers
• 7 handlers large plantations
Price trends and patterns
• Variations over time
• ... over space - wide dispersion in retail prices
8Fertilizer pricing
Domestic and border prices
9Fertilizer pricing
Domestic and world market
integration
• Based on co-integration: 1% increase in the
world price raises domestic price by 0.72%
(long run)
• Error-correction model: 15% of a deviation
from long-run equilibrium is corrected in one
month: somewhat gradual
10Fertilizer pricing
Competition along supply chain
• Based on key informant interviews
– Importer’s margin: 3% [strong competition from
other importers]
– Distributor’s margin: ~$25.00 per ton [strong
competition from other provincial distributors]
• Margins are small, consistent with the large
number of players and a competitive
environment
11Fertilizer pricing
Key challenges and way forward
• Key challenges:
– Market level: persistence of apparent
inefficiencies in fertilizer marketing, as seen in the
large discrepancies in pricing across adjacent
regions for the same product
– Farm level: cultivators continue to apply sub-
optimal amounts of fertilizer
• Maintain market reforms
• Further research needed on farmer behavior
12Conclusion

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The Fertilizer sector in the Philippines- Roehl Briones

  • 2. What to expect • Aims and scope – Are farmers applying the right amount of fertilizer? – Is price of fertilizer too high? – What types of policies should be implemented to facilitate the role of fertilizer in agricultural transformation? • Background: fertilizer supply and utilization • Fertilizer market • Fertilizer pricing • Conclusion 2 Organization of the paper
  • 3. Supply and use trends • Fertilizer consumption has been increasing over the past several decades, but suffered a severe drop in the late 2000s • A large proportion of the country's domestic supply is sourced from imports (average of 66%) 3 Produc tion Imports Supply Exports Imports- to-net- supply ratio (%) 1990 934 1,118 2,053 449 69.7 1995 1,390 1,238 2,627 718 64.8 2000 1,069 1,332 2,401 233 61.4 2005 877 1,615 2,492 450 79.1 2006 778 1,438 2,217 245 72.9 2007 748 1,683 2,431 298 78.9
  • 4. Impact and efficiency Fertilizers combined with adoption of modern varieties was and is a key contributor to farm productivity. • Green Revolution: introduced rice varieties with higher yield and superior yield-response to fertilizers. • 1965 – 80: 30% of output growth due to > fertilization. • Post-Green revolution period: – 1985, 1986: Marginal product of fertilizer = 15.3 in wet season, 8.3 in dry season – 1996 – 2007: output elasticity of fertilizer is 0.08 for irrigated systems, 0.12 for rainfed systems 4Background
  • 5. Impact and efficiency In the case of rice, where farmers are most experienced in modern technologies, fertilizers are apparently under-applied. • IRRI study: – farmers apply lower fertilizer (and earn less profit) relative to SSNM – Fertilizer use below optimum during dry season • Possible explanations: ruled out as unlikely! – Access to credit – Risk aversion 5Impact and efficiency
  • 6. Evolution of the sector and policy • During the postwar period, growing fertilizer demand was mostly met by increasing domestic production, supported by incentives and price policies. • Since 1986, government has implemented a series of reforms which allowed a much greater scope for market allocation and pricing. – FPA ceded administrative controls – The QR on imports abandoned, as well as price-setting – Tariffs were also reduced; rates are either 1% or 3% – Government withdrawn fertilizer subsidies 6Fertilizer market
  • 7. Profile of the fertilizer market 7Fertilizer market Area distributors Farmer cooperativesPlantation accounts Farmers Dealers Cooperative growers Growers associations Distributors/Dealers Importers/Manufacturers/Distributors As of 2009: 483 handlers • 134 importers • 7 handlers large plantations
  • 8. Price trends and patterns • Variations over time • ... over space - wide dispersion in retail prices 8Fertilizer pricing
  • 9. Domestic and border prices 9Fertilizer pricing
  • 10. Domestic and world market integration • Based on co-integration: 1% increase in the world price raises domestic price by 0.72% (long run) • Error-correction model: 15% of a deviation from long-run equilibrium is corrected in one month: somewhat gradual 10Fertilizer pricing
  • 11. Competition along supply chain • Based on key informant interviews – Importer’s margin: 3% [strong competition from other importers] – Distributor’s margin: ~$25.00 per ton [strong competition from other provincial distributors] • Margins are small, consistent with the large number of players and a competitive environment 11Fertilizer pricing
  • 12. Key challenges and way forward • Key challenges: – Market level: persistence of apparent inefficiencies in fertilizer marketing, as seen in the large discrepancies in pricing across adjacent regions for the same product – Farm level: cultivators continue to apply sub- optimal amounts of fertilizer • Maintain market reforms • Further research needed on farmer behavior 12Conclusion