Actual fertilizer market overview in the light of the accession
The accession of Hungary means new challenges and new opportunities for our country. The situation is the same for manufacturers dealing with row crop and arable farming. The accession makes significant effect to the market of several input materials and the domestic fertilizer supply, as well.
The period and challenges of preparation
Looking back to those few months of preparation prior to the accession, locally rather the challenges put the members of the fertilizer market to the test. In the last fertilizing season unlike the most of the accessing countries the Hungarian fertilizer supply was seriously influenced by the toll allowance that was introduced by the initiation of the Nitrogénművek Rt. despite the exclamation of the agricultural organizations. (Ammonium nitrate: 11.600 HUF/t+VAT) Under the protection of this the Nitrogénművek Rt. was able to formulate its new business policy under strict dealer contract obligations.
In a situation like this a fertilizer dealer that - concerning market share - determines the market has to review its goals and commission.
The role of a good fertilizer dealer is to maintain proper relationship between the demands of the growers (demand) and the fertilizer manufacturers (supply).
-
On the one hand the manufacturers expect the dealer to represent their products, business- and price policy.
-
On the other hand the dealer's obligation is to loyally represent the interests of its partners, and - looking beyond the present situation - to cooperate with the growers in long term looking for profitable solutions.
The IKR is bound to the growers by its roots and these roots are so strong to show the direction firmly in the storms of the market. The toll allowance would have charged the fertilizer using farmers with 8 - 9 billion HUF.
Besides the product of the usual nitrogen fertilizer consumption and the 11.600 HUF/t there were other bad signs indicating the problem. Because of the toll allowance and the loyalty of the dealers of the Nitrogénművek the experts expected the dramatic fall of the import and forecasted supply problems. This was confirmed by the 2003 4th quarter remarks of the ammonium nitrate at the product exchange where the price / ton of the ammonium nitrate were forecasted to 60.000 HUF for March 2004.
Looking back to the 32 - 34.000 HUF/ton spring prices, according to this some forecasts promise more than 50% price rise.
Finally the forecasts were wrong. Besides the supply of the dealers of the Nitrogénművek the IKR supplied 230.000 ton import fertilizer to the domestic growers. As a result the bad forecasts about the supply problems did not come true and in contrast with the 50 per cent price rise despite the high season-end prices we faced with 11 per cent average price rise only. Additionally this includes approximately 11.000 tons of mezo-element that were missing earlier. The importance of these elements is not questioned.
Success is the result of the cooperation developed by mutual advantages and interests
Remark: In the meantime the Competition Council of the Financial Competition Office evaluated the supply restriction element of the dealer contract of the Nitrogénművek Rt. According to the evaluation respecting the competition law the supply restriction is not reasonable so the Nitrogénművek Rt. and its dealers will have to modify the contract.
More sophisticated composition, better quality
Another good result of the IKR's market share is that new, modern fertilizers appeared on the market in high amount that will help the growers to successfully hold on in the EU markets.
These products braking the oppressive dominance of the conventional ammonium nitrate as spring fertilizer besides nitrogen content they include such important complementary components as calcium, magnesium, sulphur, phosphor that might become the key of quality and so productivity. We experience day by day what quality means concerning marketability and price.
The usage of these sophisticated products ensures in practice that vegetation specific nitrogen fertilizers can be offered. This spring the use of these nitrogen fertilizers has increased to 250% concerning the basis year.
We have to mention that the constructive behaviour and guidance of the experts of the Department of Agriculture and Country Development provided significant help.
It is also an advance of quality towards the EU practice that 50 per cent of the solid fertilizers sold by us was granulated in contrast with the conventional prill-grained (Péti salt, Péti ammonium nitrate) fertilizers.
The proper grain size, the guaranteed grain solidity, the homogeneous granulated structure are the substance of the uniform, sparing and effective fertilizer spreading.
compacted grains (irregular, fragmented surface)
It is a proven fact that the unreliable spreading uniformity of the dusty, prill or irregular shape, fragmented surface, compacted grain fertilizers can cause high inaccuracy and wastage in fertilizer spreading.
prill grains (cavernous, diverse grain size)
Because of the better features of the granulated products it is expected that in the future besides the conventional prill grain ammonium nitrate the more sophisticated foreign made granulated ammonium nitrate appears on the market, as well.
granulated grains (uniform, well spreading)
Problems with the ammonium nitrate
Of course there are other reasons why the ammonium nitrate consumption decreased to almost two third in the previous year. Besides the agronomical and agro technical reasons the storage and transportation problems question the use of this product, as well. The sad events of the past prove that the transportation and the storage of the ammonium nitrate require extreme caution! After the French (Tolouse) and North-Korean accidents the ammonium nitrate fertilizer caused terrific devastation in human life and property in Spain and recently in Romania. (See: www.fn.hu)
Explosion of fertilizer transporting truck on Monday morning
An ammonium nitrate transporting truck exploded on Monday morning in Romania, Buzau county. The ammonium nitrate is used in the agriculture as fertilizer. 16 persons died, 11 injured. Among the dead there are 7 firemen, 2 journalists and 8 passengers of the cars parking nearby. 1 soldier and 3 inhabitants are missing. The number of the dead is not definite. Due to the explosion the roof of 17 houses damaged, the windows broke. At the site of the detonation an approximately 10 meters deep crater opened. The explosion damaged the pavement of the road on a 40 meter long section. /FigyelőNet.portál 24th May 2004/
|
The ammonium nitrate is extremely heat sensitive. Even in the summer heat it is susceptible to crystallize, some grains weather so that the spreading of the product becomes difficult, the spreading pattern becomes irregular.
For this reason the quality of the stored and transported product can be saved only with special care. (Image: under summer heat the ammonium nitrate grains swell, weather and flake.)
Ammonium nitrate grains
(weathering and flaking grains under heat)
It is extremely dangerous that above 170 °C irreversible exothermic chemical disintegration may start in the ammonium nitrate molecule producing toxic and explosive gases. For this reason it is very important that the product has to be transported and stored only in predetermined and restricted mass and height only packed, protected from heat, flame, organic and incompatible materials, Furthermore in case of legal obligations safety analysis has to be made according to the valid law. The transportation and storage of ammonium nitrate is controlled and monitored in Hungary by the National Disaster Recovery Inspectorate according to strict EU regulations (SEVESO II.) (See: 1999/LXXIV disaster recovery law and enforcement instructions 2/2001 Cabinet regulation)
What shall we expect in the EU?
One of the cornerstones of the IKR's successful performance is that our company has countrywide fertilizer supply network that is unique in Hungary. Furthermore the forwarding relations of the IKR are a guarantee to exploit the opportunities of the capital economy without being defenceless.
After the accession of Hungary on 1st May 2004 the validity of the 11.600 HUF ammonium nitrate fertilizer import toll allowance introduced by the initiation of Nitrogénművek Rt. has terminated. After our accession the EU laws, regulations, tariff articles and dumping tariff articles are valid in Hungary. However these regulations charge specific products from specific countries with so called dumping toll. Considering all of these there is no toll allowance for the import of Romanian ammonium nitrate anymore.
The European Council studies the facilitation of the import of specific fertilizers (ammonium nitrate, potassium) from the CIS countries to simplify the continuous supply of the growers and to create stable and balanced market conditions. Petitions and studies were made to assure dumping duty-free import of CIS fertilizers (ammonium nitrate, potassium) with quantity quotes.
The reason of these interventions basically is to protect the consumers, users and to avoid the causeless price fluctuations and supply problems. Hopefully the accession of Hungary and the studies of the European Council will end up with good results, and considering the domestic and import fertilizers by creating a supply market ensure stable prices and supply in contrary with the past to provide the domestic consumers with favourable price products.
Concerning both prices and variety favourable procedures are experienced that hopefully will be durable helping to strengthen the competitiveness of the growers.
Market conditions and not the peremptory of the manufacturers or hospice stock sold on discount price will reduce prices of the nitrogen fertilizers now and in the near future. Soon the growers can expect supply market and it is advisable to calculate more aspects (risk of storage, quality, quality failure, agent, price, price modification, etc) before purchase.
Contact our colleagues!
At the IKR, together with our colleagues we still trust that in the future we will be able to summarise the challenges and opportunities in the light and not in the shade of the accession.
Hereby let us express our sincere thanks for the trust of our agricultural partners!
Károly Aranyosi
Fertilizer Trade Department manager
