Value added fertilizers in Asia set to drive global growthPosted On: 12-12-2017 By: Ali Asaadi
Integer’s Director of Fertilizers and Chemicals, Oliver Hatfield, provides insight on the state of the specialty fertilizer market, ahead of Integer’s second Value Added Fertilizer Summit Asia, to be held 6-7 Feb 2018 in Singapore.
If you’ve been doing the circuit, attending the regular commodity fertilizer industry conferences over the last few years, you’ll have noticed the increasing frequency of discussion and papers devoted to products referred to as premium, value added or specialty fertilizers. The value-added fertilizer business has become the industry zeitgeist, and what was once niche appears to be moving in to the mainstream.
However, for the commodity fertilizer audience, this end of the business can appear impenetrable. Whereas the commodity business is reasonably easy to figure out with a few nutrient categories, each containing a handful of homogenous products, the specialty business is more opaque, with a multitude of product categories, and further layers of products with diverse characteristics in each category.
Reflecting this shift in industry interests, the theme of the International Fertilizer Association’s (IFA) Strategic Forum which took place in November in Zurich, Switzerland, was the specialty fertilizer business, with a particular focus on improving the efficiency of fertilizer use. We at Integer have also embraced this shift, primarily through our Value Added Fertilizer Summit Asia 2017, which was held in Singapore earlier this year – and which will be repeated in Feb 2018.
At a high level, commodity and specialty fertilizer demand appear to be driven by the same macro business factors – applying nutrients improves crop productivity on increasingly scarce land resources, with rising demand for crops resulting from a growing population which is becoming increasingly wealthy. However, if we drill down further, what drives the market for value added fertilizer products is quite distinct from commodity products.
Commodity fertilizers like urea, DAP and MOP are relatively unsophisticated and of lower value. Farmers using these products are generally growing ‘broad acre’ crops such as grains and oilseeds, which are at the low end of the crop value spectrum. Fertilizer is applied in various ways from hand broadcasting to mechanised spreaders, in straight, blended or compound form. The degree of application precision is variable, largely as a function of the degree of farm level sophistication, and this in turn contributes to nutrient losses which can be substantial, particularly where fertilizer is available at low cost with little efficiency incentive.
In many countries, commodity fertilizers are subsidised to make them more affordable, but this decreases the efficiency incentive further. The benefits of balanced nutrient applications are often over-looked or even disincentivized. Broad acre crop irrigation is often left to the weather, although increasing demands on water mean that investment in irrigation is increasing.
By contrast, the target crops for value added fertilizers tend to have significantly higher financial stakes. For crops like fruits and vegetables, the crop value is normally significantly higher with farmers investing in greenhouses and polytunnels the norm. Since the rewards of increased crop yield and quality are greater, so is the incentive for ensuring availability of the full range of nutrients at the right time and at the right rate. This requires more sophisticated fertilizer products, which demands that they are of higher value. So too are the demands on water, requiring increasingly sophisticated irrigation systems.
The influence of higher value crops requiring specialty products is clearly increasing. As we show in the chart below, during the decade between 2004 and 2014, global area harvested to fruits and vegetables increased by around 18 million hectares.
Geographically, the development of the value added fertilizer business has traditionally been in the more developed regions and countries like the US, Japan and Europe. Many of the leading companies producing valued added fertilizer products became established supplying high value agriculture in these country markets. However, this is rapidly changing, with the balance now shifting towards Asia.
Again, looking at crop data highlights the rate of change. In China, between 2004 to 2014 fruits and vegetables area increased by a combined 7 million hectares, about 40% of the global change in the same period.
In India, fruits and vegetables area increased by more than 50% from around 10 million ha to approaching 16 million ha. The combined change in harvested area for fruits and vegetables in India and China between 2004 and 2014 made up more than 70% of the global increase.
In little more than a decade China has become the biggest market for slow (SRF) and controlled release fertilizers (CRF), approaching 3 million tpy. It has also seen the emergence of major Chinese producers of specialty fertilizer products like Kingenta, which is the dominant supplier of enhanced efficiency fertilizers (EEFs) to the Chinese market. Kingenta looks set to continue to benefit from and drive further the Chinese market expansion.
In July 2017, the company agreed a US$200 million finance package with the International Finance Corporation (IFC) which Kingenta plans to use to set up hundreds of new crop production service centres over the next 5 years. The project is founded on enabling China to raise crop production through nutrient use efficiency gains from greater use of (Kingenta’s) specialty fertilizer products.
The project ties in neatly with the government of China’s target of zero growth in fertilizer use by 2020 while continuing to raise crop production and yields. Kingenta is also increasing its international influence having acquired several European specialty companies in 2016.
India looks likely to be the next big market for value added fertilizer products. There would appear to be enormous potential to improve crop productivity, with Indian yields for grains and cereals below developed country levels and its main Asian economic rival, China. Some of this gap could be closed with a more sophisticated approach using commodity fertilizer products, and a greater focus on balanced nutrient use, but a rapid increase in the market size for premium fertilizer products also looks likely, because although still relatively embryonic, there are promising signs.
The government of India recently introduced the mandatory use of neem coating on urea, in order to boost use efficiency. Although the efficacy of neem is modest and dismissed in some quarters, it does indicate the direction of travel. The Indian market for water soluble fertilizers is still relatively small at around 200,000 tonnes, but major investments are being committed to improved crop irrigation, including drip irrigation which often goes hand in hand with a necessity to use water solubles.
Many farms in India which have recently invested in drip irrigation equipment don’t yet have fertigation systems, but again, the direction of travel is clear. Indian area with drip irrigation increased tenfold from around 350,000 hectares to 3.5 million hectares in 2015. India has not emulated China, and no big players in premium fertilizers have yet emerged. However, big players are emerging in India in advanced agriculture systems. For example, Jain, a company specialist producer of installation systems has seen its revenues grow from US$700 million in 2010 to US$1.1 billion 2017 and approaching half of its revenues are now generated outside India.
We have considerable experience at Integer not only in fertilizer market analysis but also providing insightful conferences where there are knowledge gaps. One of these gaps is in value added fertilizers in Asia. In February this year, we ran our highly successful Value Added Fertilizer Asia Summit 2017 (VAFSA 2017) conference in Singapore, which focused on improving margins, with new technologies, solutions and application methods.
This summit included presentations from market leaders in the value added business in the region and beyond like Kingenta and BASF, as well companies with a commodity fertilizer heritage who are quickly adapting and taking advantage of the growth in premium fertilizer markets like Yara, Coromandel, Tessenderlo and Eurochem.
Interest in this summit was overwhelming and the date to repeat the event is now set for 6-7 February 2018. Next year’s programme is already looking even more informative, covering the markets for EEFs, micronutrients and water solubles once again. We are also pleased to extend the coverage to include expert speakers on the market for biostimulants, a market with enormous growth opportunities.
We hope you can join us and your peers in the industry at VAFSA 2018.
More information on VAFSA 2018 and discount offer
Integer Research launched the Value Added Fertilizer Summit Asia 2017 (VAFSA 2017) earlier this year, in Singapore, attracting key decision makers, senior executives and thought leaders from across the industry.
VAFSA 2018 will continue and expand on VAFSA 2017, providing the perfect platform to discover the opportunities and discuss challenges for the value added fertilizer sector in Asia, with a focus on improving margins with new technologies, solutions and application methods.
$100 Discount on delegate tickets ends 12th January 2018
Just a few days left till the $100 discount ends – hurry and order your delegate ticket today.