Tanzania: Walking the Talk – Why Fertiliser Subsidy Important
FARMERS in Tanzania can breathe a sigh of relief after President Samia Suluhu Hassan recently launched a fertiliser subsidy scheme to lower prices at the farm-gate level.
By Henry Lyimo
Under the scheme, price for DAP fertiliser will go down to 70,000/- from the market price of 136,135/- and the Urea from 124,714/- to 70, 000/-.
Price of CAN will be 60,000/- from 108,156/-, SA 50,000/- from 87,872/- and the NPK will be available to farmers at a cost of 70,000/- against the market price of 122,695/-.
The launch of the subsidy scheme came at the most opportune time as fertiliser prices are in record high due to supply shortages fuelled by the Ukraine-Russia conflict, along with a host of pre-existing factors.
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The amount of fertiliser available globally has almost halved, while the cost of some types of fertiliser have nearly tripled over the past 12 months, according to the United Nations.
That is having a knock-on effect in many countries in Africa, where farmers are dependent on imported fertiliser.
Analysts see Africa – which already uses the least amount of fertiliser per hectare in the world – is at high risk. Fertiliser consumption in Tanzania is rising but it remains below Africa’s average.
According to World Bank statistics, fertiliser consumption in Tanzania increased through 1969 – 2018 period ending at 15.9 kilograms per hectare in 2018 below average consumption in Africa of 17 kilogrammes per hectare and well below global level of 135 kilogrammes per hectare.
Agriculture Sector Development Programme II puts fertiliser consumption level in Tanzania lower than the World Bank statistics. It says Tanzanian farmers use about 8-10 kg of fertiliser per hectare (from 2008 to 2013), compared with an average of 16 kg/ha for Southern African Development Community (SADC) countries while Malawi uses 27 kg/ha and China 279 kg/ha on average.
A study by the Food and Agricultural Organisation (FAO) shows that the usage of fertiliser in Tanzania is about 13.68 Kg/ha much lower than the target set by the African Union in the Abuja declaration of at least 50kg/ha (FAOSTAT, 2018).
The FAO study points our reasons for low usage as limited awareness of the benefits of fertiliser amongst many farming communities in the country and price which is beyond what farmers can afford.
Analysts point out that the rising oil prices have pushed higher cost for agricultural inputs such as fuel and fertilisers.
“Fertiliser is very energy intensive. For nitrogen, a major input is natural gas. So, if oil goes up and natural gas goes up, that tends to put upward pressure on fertiliser prices,” said Prof David Nyange, the Coordinator of USAID’s Sera Bora Project implemented in Tanzania by Michigan State University and Aspires Tanzania.
“So fertiliser prices tend to increase with oil price. The impacts of Covid-19 and Russian Ukrainian war have caused fertiliser prices globally and in Tanzania to increase by over 80 per cent during the past 12 months. The subsidy programme will help to mitigate farm gate fertiliser price for farmers,” he said.
Writing for a World Bank blog, John Baffes Senior Agriculture Economist, Development Economics Prospects Group and Wee Chian Koh Researcher, Centre for Strategic and Policy Studies, Brunei Darussalam say fertiliser prices have risen nearly 30 per cent since the start of 2022, following last year’s 80 per cent surge and the prices are expected to remain higher for longer.
The soaring prices are driven by a confluence of factors, including surging input costs, supply disruptions caused by sanctions on Belarus and Russia, and export restrictions in China.
The Russia-Ukraine war has exacerbated the already limited fertiliser supply situation and in turn has triggered import-export restrictions that will compound shortage concerns, they say.
Urea prices have surpassed their 2008 peaks, while phosphates and potash prices are inching closer to 2008 levels. Concerns around fertiliser affordability and availability have been amplified by the war in Ukraine.
Explaining on record high input costs they say rising natural gas prices, especially in Europe, led to widespread production cutbacks in ammonia–an important input for nitrogen-based fertilisers. Similarly, soaring prices of coal in China, the main feedstock for ammonia production there, forced fertiliser factories to cut production, which contributed to the increase in urea prices. Higher prices of ammonia and sulfur have also driven up phosphate fertiliser prices.
The two say fertiliser prices rose in response to the war in Ukraine, reflecting the impact of economic sanctions and disruptions in Black Sea trading routes.
Russia accounts for about 16 per cent of global urea exports and 12 per cent of DAP and MAP exports, while Russia and Belarus together make up two-fifths of global MOP exports.
Adding to supply concerns, China has suspended exports of fertilisers until at least June 2022 to ensure domestic availability.
They foresee Urea prices to remain at historically high levels as long as natural gas and coal prices remain elevated. Similarly, DAP prices are projected to remain high until ammonia and sulfur prices ease. Apart from input costs, risks to the outlook depend on whether China’s urea and DAP exports will resume after June.
For potash, prices are anticipated to remain historically high through the next year unless supply returns to international markets from Russia and Belarus.