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Worries of unaffordable fertiliser have escalated
with the opening of each successive tender this
year. The trend, where prices have nearly doubled
since last year, continued in the fourth tender
opened last Wednesday.
Last year, Aychluhum Mojo, a farmer in East Shoa
Zone, Lome Woreda of the Oromia Regional State,
could afford to buy five quintals of fertiliser and
10 more on credit. He was content with the teff
yield from this input level. This year, however,
he is worried fertiliser price will hurt his yields.
"Many farmers will plant beans and lentils instead
of teff," Aychlum told Fortune,
predicting a shift toward less fertiliser-dependent
crops.
When the tender for 75,000 metric tonnes of Dap
fertiliser was opened on November 14, 2007, at
Bunanashai building on the road from Legehar to
Mexico, bidders such as Gozamen and Merkeb, Amhara
Regional State cooperative unions, along with the
state-owned Agricultural Input Supplies Enterprise (AISE),
showed interest. However, the price range presented
by the two main foreign suppliers - from 631.38
dollars per tonne offered by Amropa to Yara's 662.97
dollars per tonne bid - is no break from the first
three tenders.
Amropa offered to supply 25,000 metric tonnes to
Mekreb at 631.38 dollars per tonne and 651.38
dollars per tonne to Gozamen. Yara's offer went to
the state-owned Agricultural Inputs Supply
Enterprise (AISE) for 662.97 dollars per tonne.
The third tender opened on October 24, contended by
Becho Wolliso, Galema, Enderta and AISE
cooperatives, showed similar prices. Yara offered
Becho Wolliso 611.35 dollars per tonne, Enderta and
AISE each 647.38 dollars per tonne, while Amropa
offered Galema 631.38 dollars per tonne.
The Ministry of Agriculture and Rural Development (MoARD),
which presides over the National Fertiliser
Procurement Committee, awarded Becho Wolliso and
Galema the Yara and Amropa offers, respectively,
while the Enderta and AISE offers remain under
evaluation on grounds that the suppliers have tagged
similar prices for the two cooperatives, sources
revealed.
These prices that have escalated from the second
tender for Dap (500-550 dollars per tonne) have many
pointing to international causes.
One important input, phosphate, has skyrocketed
after shortages. Meanwhile, rising international
fuel prices have increased the cost of fuel
by-products, which are another input, and have
escalated the cost of transporting fertiliser.
Fertiliser prices are especially sensitive to rising
costs of distribution, as transportation accounts
for as much as 60pc of the final price in some
areas. Scarce manpower in the sector has contributed
to rising prices as well.
Mengistu Kebede, general manager of Chemtrade
International Plc, which is the sole agent of Amropa,
told Fortune that the international supply
market is thin as companies hesitate to enter the
sector and face many hindrances to production.
Moreover, European farmers that receive huge
subsides are often able to expend more on the
agricultural input inflating prices that trouble
poorer nations, a grain expert told Fortune.
"Their produces fetch higher prices and thus they
can afford the costly fertilisers," according to the
expert.
Combined, these factors have contributed to prices
shooting up by more than 600pc since 2004 when a
tonne was a mere 100 dollars. At this time, about
90pc of farmers in Ethiopia bought fertiliser
through the former Ethiopian Inputs Supplier
Cooperation, later renamed AISE.
Though fertiliser distribution was liberalised and
the subsidy package eliminated in 1997, the
government still has a stake in its supply as
guaranteed loans are offered to community
cooperatives.
After an initial spurt of interest from the private
sector, imports and wholesaling became concentrated
in the parastatal sector and a handful of party
affiliated companies, in part because of high
collateral requirements for import credit,
restrictions on participation by foreign fertiliser
suppliers, and a perceived lack of a level playing
for participating in fertiliser imports and
distribution, according the World Bank report in
2006.
The Agriculture Inputs Marketing Development under
MoARD has begun floating the fertiliser supply
tenders early this year to supply the necessary
530,000 metric tonnes, 350,000 of which is Dap,
beginning in the belg crop season. It is
acting in haste due to lack of stocks from the
previous year.
During the last fiscal year, the country needed
650,000 tonnes of fertiliser. However, since there
were about 145,000 tonnes leftover from the previous
procurement, a tender was floated for only 505,000
metric tonnes. But this amount was not obtained
owing to the fertiliser prices, leaving no stocks
for the current year, sources from MoARD disclosed.
Alarmed by the prevailing circumstances, the country
has reserved 100 million dollars more in the current
budget than last year's where it spent between 180
and 200 million dollars for fertiliser procurements.
This year the country has budgeted between 250 and
300 million dollars.
Techane Adugna, head of the Agricultural Input
Supply Marketing Department under MoARD, told
Fortune the cost of fertiliser has broad
macroeconomic implications.
"The drain on foreign currency from fertiliser
purchases is a real concern," Techane claims, adding
that local production may be the answer.
For now, however, demand has stagnated at about 30Kg
per hectare while only around 40pc of farmers apply
the product.
The low usage of fertiliser is attributable to lack
of government action as it has not been given the
attention it deserves, according to one expert.
"The fact that the commodity is not produced in the
country is a major failure," the expert told
Fortune. "It is important to set a new mechanism
for procurement and study alternative supply
options."
Sources from MoRAD, however, disclosed that this
procurement department suffers from a lack of human
resources due to an overload of duties and
responsibilities.
The expert sees room to create a specialised,
autonomous institution devoted solely to fertiliser.
Mengistu agrees that the process conflates
international factors citing speculation during the
three-week delay between opening and awarding of
tenders.
"An efficient tender process is needed to cancel the
inflated prices, Mengistu told Fortune.
These potential solutions have not given a break to
either the farmer or the consumers, though. The
consumer price index (CPI) on food items reached a
startling 19.7pc in July and has only shown a slight
decrease since.
As more farmers choose to change planting behaviour,
like Aychlum, certain crops may become even more
expensive to the consumers. For now, Aychlum is
constrained by an unrelenting market.
"I have to make money," Aychlum explained. "Fertiliser
prices are guiding what I produce."
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