Fertilizer Industry In Financial Deadlock

The relationship between farmers and the chemical fertilizer industry remains tense despite yesterday"s trilateral talks among representatives of the industry"s shareholders and unions and those of the farmers who all convened for the Problems of the Chemical and Petrochemical Industries Conference organized by the Federation of Chemical and Petrochemical Businesses.

Among the problems identified by all parties are the lack of funding or insufficient use of Romanian-made fertilizers in Romanian farms. After reaching a general agreement that farms without fertilizers or fertilizers without farms cannot exist, participants touched more sensitive subjects, such as the farmers" complaints about the price of fertilizers. Specifically, the farmers complained that the industry was exporting fertilizers for smaller prices than the prices they were asking from Romanian farmers. Moreover, farmers claimed that the price of chemical fertilizers had been increased unwarrantedly.

Farmers also stressed that the Government had granted chemical fertilizer producers, on two occasions, a price cut of 40 USD per thousand cubic meters of natural gas bought from the Romanian market specifically in order to discourage them to increase the price of fertilizers. Viorel Matei, President of the National Federation of Romanian Farmers (FNPAR), stressed that the price of Romanian-made chemical fertilizers had grown by 30-40% compared to 2007. Matei exemplified saying that one tonne of nitrogen-based fertilizers had gone up from 800 RON in 2007 to approximately 1,200 RON in 2008.

Farmers also accused the industry that they had taken advantage of the governmental subsidy to lower their production cost and then had started exporting fertilizers for less than the price required from Romanian farmers. "But farmers played smart and that"s why you ended up with stockpiled production!" farmers told the industry, adding that the price of imported fertilizers was 20% lower than the price of Romanian-made fertilizers.

The lack of funds is another core problem as Matei stressed that the State aid of 200 RON per hectare had only been disbursed for 60% of the farming land and therefore the quantity of fertilizers used in the autumn agricultural works had only equalled 5% of the production capacity of Romanian chemical fertilizer producers. Practically, this meant that only 15% of the quantity of fertilizers necessary for the crops was actually used. This is all the more a reason for concern as a foodstuff crisis is looming and Romanian farmers will definitely have very low productivity.

In turn, representatives of the chemical fertilizers industry stressed that the price of fertilizers had not increased as much as farmers had claimed. Moreover, the increase in price was a direct consequence of insufficient governmental support and a higher price of natural gas.

Marian Mirea, President of the Nitrofosfor Business Association, stressed that chemical fertilizers plants were stockpiling tens of thousands of tons of fertilizers amid a very difficult context for this industry, following the consequences of the economic and financial crisis. He also stressed that 60-70% of the operating costs were generated by natural gas. "Chemical fertilizer producers are in a critical situation because the demand for fertilizers is decreasing continuously, so the sale price must be decreased, while the production costs remain the same. Moreover, lending terms have become more restrictive," he explained.

Another problem, upon which both parties shared the same opinion, is related to the "middlemen" between fertilizer producers and farmers. Both ends of the chain believe they are confronting a "fertilizer mafia" and a growing black market. Farmers hinted that, because of lack of money, they were forced to turn to fertilizer dealers who either sold cheaper or accepted to sell on credit. The farmers" proposal is that the Fiscal Code should be changed especially concerning the matter of advance VAT payments. The Federation of Chemical and Petrochemical Unions (FSLCP) promised to prepare a set of anti-crisis social measures for the new Government"s consideration.