NFF warns of domestic fertiliser market domination LUCY SKUTHORP 9/04/2008 1:24:00 PM The National Farmers Federation (NFF) has urged the Federal Government to keep an eye on market rationalisation of the fertiliser industry, in the NFF submission to a Senate Inquiry this week. NFF surveyed more than 200 farmers as part of its submission, with results revealing farmers were paying on average 107pc more for fertiliser than they were, 12 months ago, with similar prices recorded for chemical also.
NFF says in its submission, the increase in prices was "perplexing" given about 75pc of the key fertiliser ingredients of nitrogen, potash and phosphate were imported and the Australian dollar has appreciated by almost 15pc against the US dollar since the beginning of 2007.
It says higher fertiliser and chemical prices are eating into the margins of farmers and come on top of a growing list of additional input costs being faced by the farm sector, often forcing farmers to adjust their production systems at the expense of productivity.
"Seems to be too big of an increase in one year. So much so we cut back our tonnage," one farmer said in their survey response.
The survey found approximately 9pc of farmers were confined to a single supply source, thus exposing them to market power issues.
"It is prudent to examine the effect of increased rationalisation within the fertiliser supply market, particularly on the east coast of Australia, on the prices offered to Australian farmers," the submission says.
"Much of the focus within this element of the debate has centred on the operation of Incitec Pivot due to various mergers and acquisitions that have taken place in recent times.
"Incitec Pivot is the now dominant manufacturer and supplier of fertiliser to farmers in Australia's eastern and southern States, supplying more than 50pc of Australia's total agricultural plant nutrient needs.
"Recently, Incitec Pivot announced that it anticipated their 2008 earnings, before interest and tax, would be in the range of $700 million to $730 million.
"This amounts to an increase of up to 135pc on 2007 figures.
"The increased profits and positive forward prospects are clearly reflected by the more than 80pc increase in the Incitec Pivot Limited share price since November 2007."
That said, NFF said in its submission it was aware Incitec Pivot does have competition in most regions.
It said there were approximately nine Australian fertiliser manufacturers and 14 distributors, with 3.3 distributors on average in local regions, according to the farmer survey.
But the submission said while there are multiple suppliers or distributors in each region there were still only a limited number fertiliser companies who supply these distributors.
For example, there are seven stores in Bundaberg that sell fertiliser, with six of these selling Incitec Pivot.
The submission cites another example where lobby group Canegrowers attempted to facilitate bulk orders.
"Despite such efforts, the fertiliser companies were not prepared to enter into any arrangement with the knowledge that growers had limited alternative options besides buying the fertiliser at the prices offered," the submission said.
While the submission to the Senate Select committee investigating fertiliser prices acknowledges world price movements, global supply and demand factors and a growing population as major drivers in sky-rocketing fertiliser prices, it says the rationalisation of the domestic fertiliser market also needs to be examined by the inquiry in the context of the prices being forced on Australian farmers.
The Senate Committee will report on the issue by the middle of June and will conduct hearings in addition to examining submissions.
SOURCE: Rural Press national news bureau, Parliament House, Canberra
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