Farmers Worried About Possible Fertilizer Price Surge... Government Says "No Involvement in Price Adjustment" and Stands Aside

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[Sejong=Asia Economy Reporter Moon Chaeseok] The possibility of fertilizer price hikes becoming a reality is increasing. If the rate of increase is significantly adjusted upward in the fertilizer system contract scheduled for next month, it is expected to cause an emergency for next year’s farming as well. Concerns are rising that agricultural products will once again stimulate inflation in a situation where inflation worries have already grown.

According to fertilizer manufacturers and the agricultural sector on the 24th, the possibility of fertilizer price increases being reflected on an ongoing basis from next year has grown. This is because the NongHyup Central Association has decided to shift from an annual fertilizer purchase contract to quarterly contracts starting next month. Farmers can only hope that the NongHyup Central Association will minimize the price increase rate when negotiating with domestic fertilizer manufacturers such as Namhae Chemical at the beginning of the year, but the reality is different. Considering that raw material prices have more than doubled, the cost pressure burden on fertilizer companies cannot be ignored. A Namhae Chemical official said regarding the possibility of fertilizer price increases next year, "It is something that can only be known after bidding negotiations," and refrained from making any predictions at this time.

Although November and December are off-seasons agriculturally, the rise in fertilizer prices is a practical problem for some farms. They need to carry out sowing work for winter crops such as onions, rapeseed, and barley in November and December, and sow spring crops such as potatoes and vegetables in January and February next year. Even if they try to obtain fertilizer, it is difficult to find it on the market at an affordable price. The government recently announced it would supply an additional 1,810 tons of urea to Jeju, Gyeongnam, and Jeonnam, but officials from local NongHyup branches and fertilizer company dealerships unanimously said that fertilizer stocks have still not been replenished. A materials department official at a NongHyup branch in Gyeongsangnam-do said, "Although many farmers are rushing to buy fertilizer due to the government announcement, we have not received any official document from the NongHyup Central Association specifying how many tons will be supplied by when, so we are at a loss."

In particular, the shortage of urea fertilizer, which directly affects the production volume and quality of most crops such as rice and vegetables, has not been resolved. A representative from the Jeju Federation of the National Farmers’ Federation said, "Not only single fertilizers (Danbi) but also compound fertilizers contain urea components, and since urea is experiencing a shortage, there is a practical shortage of fertilizer for the current citrus farming as well as for spring crop sowing next year."

Government Hesitant to Support Fertilizer Prices

The government has consistently maintained the position that it cannot intervene in fertilizer companies’ price adjustments. This is because it is difficult to provide support for chemical fertilizers. However, in 2008, when fertilizer prices soared, the government temporarily provided emergency support by allocating about 30% of the additional burden through supplementary budgets to reduce farmers’ burdens. For this reason, the National Assembly and farmers’ organizations are demanding support based on this precedent.

The government is also lukewarm about quarterly contracts. A government official explained, "System contracts are autonomously made between the NongHyup Central Association and manufacturers, so it is difficult for the government to intervene, and if the government increases support for chemical fertilizers, it could lead to disputes over violations of World Trade Organization (WTO) trade rules."

Food Price Index Highest Since July 2011

The rise in fertilizer prices is likely to be reflected in agricultural products from next year. Already, global agricultural product prices are soaring. The Food and Agriculture Organization (FAO) of the United Nations announced that last month’s global food price index was 133.2 points (assuming the 2014?2016 average as 100), up 3.0% from the previous month and 31.3% from the previous year. This is the highest level since July 2011, when it was 133.2. It is a sharp increase compared to 113.5 in January and 129.2 in September, when the urea crisis became full-scale.

Professor Moon Junghoon of the Department of Agricultural Economics and Sociology at Seoul National University said, "From the producer’s perspective, input costs such as fertilizers and pesticides are as important as labor costs and land rent. When these costs increase, agricultural product prices naturally rise and are reflected in inflation. Agricultural products also have the risk that if raw materials (fertilizers) are not applied timely according to the plant growth process, the quality deteriorates, which is a serious problem."

This content was produced with the assistance of AI translation services.