Chapter 3. The fertilizer sector

MINERAL FERTILIZERS

Mineral fertilizers account for more than 90 percent of fertilizers used by all types of farming systems in Malaysia. The main fertilizers are urea, ammonium sulphate, calcium ammonium nitrate, phosphate rock, super phosphates, ammonium phosphate, potassium chloride, potassium sulphate and NPK, NP and PK compound fertilizers. Due to the rapid expansion in crop production, especially of plantation crops (rubber, oil-palm and cocoa) there has been a corresponding increase in fertilizer use. Potassium fertilizers have shown the largest increase. This large increase in the use of potassium fertilizer is due to the continued expansion of oil-palm cultivation, which requires significant amounts of this nutrient. The estimated nutrient removed by oil-palm (producing 25 t/ha fresh fruit bunches (FFB) per year) are 192, 11, 209, 36 and 71 kg/ha per year of N, P, K, Mg and Ca, respectively (Goh and Hardter, 2003).

Organic fertilizers

The government is promoting the use of organic fertilizers in Malaysia for two main reasons. Firstly, organic agriculture is seen as important for the sustainable use and management of natural resources. Secondly, in the NAP3, organic agriculture is identified as a niche market opportunity for fruits and vegetables. In the NAP3, the government is prepared to provide additional one-off assistance in infrastructural development to organic farmers, in addition to eligibility for existing credit schemes and special loans. Organic farmers will also be helped in the marketing of their produce in the domestic and international market.

In an effort to reduce the dependence on mineral fertilizers and to move towards more natural and healthier methods of food production, the government is promoting programmes that encourage the recycling and use of agricultural waste. This includes rice straw and husk, empty oil-palm fruit bunches (EFB), saw dust, animal droppings, palm oil mill effluent (POME) and other materials (Faridah, 2001). The use of EFB at 37.5 t/ha per year in oil-palm fields has been shown to increase the FFB yield significantly and to improve soil exchangeable K, Ca, Mg and the pH (Lim and Zaharah, 2000).

TABLE 4
Number and area of organic producers per State in 2001

Source: Wai, 2001.

The Centre of Environment, Technology and Development, Malaysia (CETDEM) has been involved in many conversions of farms, especially vegetable producing farms, into organic farms. There are various forms of organic farming types in Malaysia, including nature farms, biodynamic farms, ecofarms, permaculture, Kyusu nature farms and Yoko farms (Hock, 1999). In 2001, there were 27 organic producers covering a total area of 131 ha (Table 4). This represents a fivefold increase in the number of organic enterprises compared with 1996. The government plans to increase the organic production area by 250 ha in the period 2001-2005 (Wai, 2001).

PRODUCTION AND MARKETING

Most of the fertilizer used in Malaysia is produced abroad. Urea, ammonium based and organic fertilizers are produced in large amounts but the urea used in Malaysia for agriculture is not locally produced material. This is because the prilled urea produced in Malaysia fetches a high price in the international market and is therefore exported. The parent fertilizer producing company, has two subsidiaries involved in the production of urea. These are:

• one subsidiary was incorporated in 1980 and located in Bintulu, Sarawak. The plant has a capacity to produce 600 000 tonnes of granular urea and 420 000 tonnes of prilled urea per annum.

• the other came into operation in 1999 and is located in Gurun, Kedah. It has an annual capacity of 650 000 tonnes granular urea. This second plant exports about 65 percent of its products to Australia, Thailand and other South East Asian agricultural countries. The remainder is sold to the National Farmers' Association, Malaysia's largest urea consumer, for distribution in Malaysia.

Most of the companies involved in fertilizer production engage in the mixing of straight fertilizers to produce compound fertilizers. The fertilizer industry in Malaysia is efficient and highly competitive. There are over 50 companies involved in the branded fertilizer trade with over 350 brands of various forms of fertilizers (Malaysian Agriculture Directory and Index, 2004).

The normal channels of distribution are shown in Figure 4. The Government, in its drive to help farmers, particularly smallholders, to procure fertilizers has:

• stimulated fertilizer consumption through subsidy and credit schemes;

• facilitated the supply and distribution of fertilizers through FELDA, RISDA, FELCRA and FOA;

• stimulated the establishment of a large number of distribution points through farmers' cooperatives;

• improved the cost-value ratio between fertilizers and agricultural produce by providing price support;

• provided extension services, research on fertilizer use and quality control (FADINAP, 1984).

The government has also encouraged suppliers to market fertilizers in packages smaller than 50-kg bags, to allow farmers who cannot afford 50-kg bags to purchase lesser quantities.

FIGURE 4
Marketing and distribution channel of fertilizers in Malaysia

Source: FADINAP, 1984.

IMPORTS AND EXPORTS

The total value of fertilizer imported into Malaysia fell from RM1 434 million in 1998 to RM1 144 million in 2001 (Department of Statistics, 2001). The importation of some of the major fertilizers for 2000 and 2001 are compared with 1998 in Table 5 and the imports from 1998 to 2001 are illustrated in Figures 5 and 6.

There was an increase in total fertilizer imports from 1997 to 2000 but imports declined by about 26 percent between 2000 and 2001. Figures 5 and 6 show that the greatest increase in imports was that of potassic fertilizers, due to a rapid increase in area planted to oil-palm.

In 2001, nitrogenous fertilizers were imported from Indonesia (33 percent), the Russian Federation (14 percent), Saudi Arabia (17 percent) and other countries (37 percent), with a total value of RM83 million.

The importation of phosphatic fertilizers is mainly in the form of phosphate rock. In 2001, 30, 21, 12 and 26 percent were imported from Christmas Island, Tunisia, China and Australia respectively. The value of the imports totaled RM73 million.

TABLE 5
Fertilizer imports

* Including tablets

FIGURE 5
Fertilizer imports: quantity

FIGURE 6
Fertilizer imports: value

As regards potassic fertilizers, in 2001 26, 24, 12, 15 and 25 percent were imported from the Russian Federation, Canada, the United States, Japan and other countries respectively, totaling RM493 million. Malaysia exports large quantities of urea and the export value and the quantity increased between 1997 and 2001 but declined slightly in 2002 (Figure 7). In 2001, RM446 million worth of urea was exported: to Australia (26 percent), Thailand (22 percent), Vietnam (6 percent), Japan (7 percent), Korea (4 percent) and other countries (40 percent).

FIGURE 7
Urea exports