CAIRO: The government’s spree to unite domestic and international prices will soon affect fertilizers. The Ministry of Agriculture recently announced that prices of fertilizers would rise to international levels in preparation for lifting subsidies from the product entirely.
“The government’s official price for fertilizers is between LE 35-LE 38 per bag. However, there is not enough supply at this price range, and farmers have to resort to the black market where they pay LE 110-LE 115 per bag, said Mahmoud El-Rafey, managing director of the Egyptian International Center for Agriculture (EICA).
Producers, he added, do not want to sell fertilizers at subsidized prices so they abstain from supplying ration shops, thereby driving farmers to buy them at higher prices.
A deficit of supply on the market is another factor behind the current price hikes in fertilizers. “One possible explanation would be that producers intentionally freeze supply to the market to further raise prices, explained Ahmed Al-Sayed, owner of agricultural land.
“Another [scenario] would be: International prices are going up, and producers know that in turn, prices on our market will go up. So, they might have decided to cut supply short until prices further intensify and thus increase their [profits], he added.
“Such practices [have led] the government to lift off subsidies and officially raise prices of fertilizers, he explained.
Plans to lift subsidies off fertilizers mean that the government will raise financial support initially given to producers and farmers alike. In the production phase, the fertilizer industry is a heavy consumer of energy. Under the government’s current energy restructuring program, such industries would no longer receive subsidized fuel and energy prices. Therefore, farmers would not receive the final product at subsidized prices.
“We believe this to be a step in the right direction, as the price of energy going to the fertilizer industry was subsidized and the final product was subsidized, as well, commented Beltone Financial.
“We believe it would be a better step, on the government’s part, to lift subsidies on energy going to the industry [as is currently being implemented] and on fertilizers in general, granting only subsidies to farmers in need of financial support. This would remove distortions in the energy and fertilizer markets without negatively impacting farmers. However, agricultural experts believe that the current price upsurges in fertilizers add a financial burden on farmers that can exceed LE 200 per acre. “Any extra cost will naturally be mirrored on prices of agricultural crops on the market, El-Rafey pointed out.
Al-Sayed, on the other hand, does not foresee “catastrophic consequences on prices of crops. “Prices of crops have already soared on the market which reduced some of the burdens of price increases in fertilizers and enabled farmers to make a [profit-margin].
If prices of crops rise, he added, it will be a result of an escalation in global food prices. “On an international level, prices of crops are expected to rise further and further in the next coming months, which will in turn raise our domestic prices.
