04/12/2008 (The Star Online) - THE cold war between fertiliser manufacturers and local planters has taken a new twist with six top local plantation companies last week taking a united stand to put on hold their purchases for the next six months.

The action was a clear sign of the planters’ defiance against paying such high fertiliser prices, which have jumped almost three-fold over the past one year to RM3,600 to RM4,000 per tonne.

Some smallholder associations have also agreed to join the big boys to put pressure on fertiliser players, as planters grapple with high costs amid escalating fertiliser and lower crude palm oil prices.

Despite government intervention in asking fertiliser suppliers to slash prices by 15% three weeks ago, planters are crying foul over the miniscule price cut.

They are demanding a steeper cut of at least 50% to commensurate with the sharp drop in crude oil prices.

On the back of this sticky situation, there have been proposals like the setting up of a National Fertiliser Board to monitor irregular fertiliser prices and using the Malaysian Palm Oil Board’s RM500mil cess under the palm oil price stabilisation scheme to subsidise local fertiliser prices.

It is interesting to note that policies to bring down the fertiliser prices in the past seem ineffective given the multiple international determinants.

Fertiliser manufacturers and importers meanwhile, are not taking things lying down. A day after the planters’ call to freeze purchases, the Fertiliser Industry Association of Malaysia held a meeting with Agriculture Minister Datuk Mustapha Mohamed to discuss its members’ next course of action.

Industry sources have indicated that fertilisers companies are currently in talks to settle the pricing issue amicably with planters.

Primary Industries and Commodities Minister Datuk Peter Chin Fah Kui had also warned planters not to place such high expectations on the price cut. Another 20% to 30% reduction will be more reasonable and a potential revision seems likely by February.

To ease the planters’ burden, the Government has also abolished import duty on fertilisers effective since Sept 1, 2008.

Local planters, especially oil palm plantations, have been too dependent on fertiliser imports. This year, the figure is targeted to reach 3.5 million tonnes valued at RM5bil from 3.4 million tonnes in 2007.

The question now is whether the Government is willing to approve a dedicated fertiliser board or further negotiate with fertiliser companies on an effective pricing scheme.

During the current hard times, most independent smallholders cannot even afford to buy fertilisers, which are sensitive to rising costs of distribution, as transportation accounts for as much as 60% of the final price in some areas.

One possible solution to address this issue is to encourage local manufacturers to increase production at locations closer to the estates so that transportation costs can be reduced.