Chapter 5. Prices of fertilizers and crops

Fertilizer prices for the entire country are set by the government agencies. Table 10 shows the official price of fertilizers during the period 1995 to 1999.

Although the official price of fertilizers did not change, the exchange rate of the Syrian Pound (SL) did change, especially the Government free rate (Table 11).

Information on fertilizer prices in the parallel market is limited and sketchy, with estimated figures ranging from 10 percent to 15 percent above official prices. One of the most important factors affecting the parallel market price is rainfall. With higher rainfall, farmers’ demand for fertilizer increases. For example, during exceptionally good years, it is possible for the market price to be 50 percent higher than official prices. In contrast, the margin between market and official prices can be less than 5 percent in dry years. Farmers may reduce their fertilizer use if they face two consecutive dry years, and very few of them then buy additional fertilizer from the parallel market.

* The official prices remained unchanged from 1995 to 1999.

Another important determinant of the quantity of fertilizer demanded from the parallel market is fertilizer availability from official channels. Since demand on this market represents aggregate excess demand, any increase in fertilizer availability that reduces fertilizer shortages at the farm level reduces demand in the parallel market. Lastly, increases in agricultural product prices (official or market prices) also increase farmers’ demand for fertilizers.

The Government has created a number of wholesale agencies, which buy directly from farmers or cooperatives, and sell to retailers or industrial users. Table 12 summarizes the average prices paid to farmers by Government marketing agencies.

Fruits, vegetables, dry broad beans, livestock, poultry, and animal products are the main products on the wholesale free market in the Syrian Arab Republic. Table 13 gives the wholesale prices of major agricultural products, from 1994 to 1998.

Fertilizer use profitability

The main criteria used in assessing the profitability of fertilizer use were value cost ratios (VCR). This is the value of the increase in output due to fertilizer use divided by the total fertilizer cost. A VCR of one just covers the cost of the fertilizer. With a VCR below one the cost of the fertilizers is not covered by the value of the extra yield. FAO considers that a VCR higher than two is needed to motivate and ensure a profitable return to the farmer.

Based on recommended fertilizer rates for each crop, VCRs were calculated for the different zones described in Chapter 2, with four assumptions concerning rainfall during the season. Irrigated and rainfed crops were considered separately and HYV (high yielding variety) wheat varieties are distinguished from local varieties.

Two sets of VCR values were calculated, the first based on local prices and the second based on international prices. The local price VCR (Table 14) is an indicator of the profitability of fertilizer application from the farmer’s viewpoint. The international price VCR (Table 15) reflects the economic viability of fertilizer use from the viewpoint of the economy as a whole.

Based on the assumptions mentioned above, the local price VCRs for irrigated crops range from 2.1 to 3.2. The VCRs for rainfed wheat are higher than two only in Zone 1 and only in good seasons. In Zone 1 the VCR for local varieties of wheat is higher than that of HYV wheat but evidently the total yield and return is considerably higher for the HYV variety, on which the recommended fertilizer rate is correspondingly higher. Except in very dry years, the VCRs of rainfed barley are two or higher in Zone 1 but in Zones 2 and 3 the VCRs are above two only in good seasons.

* Rainfed
** Mostly irrigated

Using international prices (Table 15), fertilizer use remains profitable on irrigated crops but the VCRs on rainfed wheat and barley are above two only in Zone 1 in good seasons.