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August 15, 2008

Soaring fertiliser prices threaten world's poorest farmers

A global fertilizer crisis caused by high oil prices and the US rush to biofuel crops is reducing the harvests of the world's poorest farmers and could lead to millions more people going hungry, according to the UN and global food analysts.

Optimism that soaring food commodity prices could lift millions of developing country farmers out of poverty and lead to more food being grown have been dashed, says the UN. This is because small farmers either consume their own crop or have no access to global markets to take advantage of the higher food prices.

There is little prospect of relief. A world fertilizer forecast report due to be published by the UN this week states that prices will remain high for at least three years and possibly longer.

Fertilizer prices have mostly doubled and in some cases risen by 500% in 15 months as US farmers have rushed to plant more biofuel crops and countries such as India and China have bought fertilizer stocks in large quantities to guarantee their food stocks.

But while the unprecedented price explosion has barely affected large commercial farmers, it is leading directly to civil unrest among small farmers in developing countries. There have been fertilizer riots or demonstrations in Vietnam, India, Kenya, Nepal, Nigeria, Egypt, Pakistan and Taiwan in the last few months. Last week one man was killed in a stampede at a government handout of fertilizer in Hyderabad, India.

Senior UN Food and Agriculture organization analyst Dr Jan Poulisse warned the poor were being hurt the most by the crisis. "High commodity prices allow commercial farmers in developed countries to cope with high fertilizer prices. But rising food prices hurt subsistence farmers, particularly in Africa," Poulisse said. "People just cannot afford fertilizer. They were in dire straits before, but now the situation is worse."

Farmers in sub-Saharan Africa have been hardest hit because they have the least chance to benefit from soaring food prices on the world market, but desperately need fertilizers to replenish nutrient-depleted soils.

World fertilizer prices have risen more than oil or any other commodities in the last 18 months. Of the three main types, diammonium phosphate (Dap) sold for US $250 per tonne in January 2007 but has risen to $1,230 per tonne. Potash-based fertilizers have risen from $172 to over $500 a tonne, and nitrogen based fertilizers have risen from $277 to over $450 per tonne.Much of the price rise is attributed to first world farmers who have applied high levels of fertilizers to maximize harvests of grain to take advantage of record grain prices, said Dr Balu Bumb, policy leader at the International centre for Soil Fertility and Agricultural Development (IFDC) in the US.

The UN fertilizer forecast blames capacity constraints for the price rises. "Strong global demand for fertilizers is stretching current production capacity to its technical limits. This situation will persist until new capacity comes on line", it states.

"It can take 5-7 years to open a phosphate mine, 10 years for a potash mine and three years for a major nitrogen plant", said Dr Poulisse, one of the report's authors. At least 50 new plants to make nitrogen fertilizer are believed to be under construction, and phosphorous and potassium mines are being expanded.

Fertilizer prices have in the past been largely controlled by governments because they are so politically sensitive. But keeping prices down in the current crisis is now impacting heavily on other areas, such as education and health.

India is expecting to have to spend $24bn supporting fertilizer prices this year compared to only $4bn three years ago and countries such as Malawi have had to borrow millions to introduce a fertilizer subsidy program. However, the president of Malawi admitted last week that the subsidy program was failing the poor. "Sadly, it is the rich who are benefiting a great deal. They are selling maize to the poor at exorbitant prices," he said.

Agriculture and development experts say the world has few alternatives to its growing dependence on fertilizer. As population increases and a rising global middle class demands more food, fertilizer has become the preferred route to higher yields.

"Rises in basic commodity prices should be good for small growers but we are seeing that agri-business is reaping all the benefits. It needs a fundamental reform of the way agriculture is managed as well as more sustainable farming", said Amy Barry, an Oxfam spokeswoman.


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