1. Role of Fertilizer Policy in Transforming Agriculture of Myanmar Hnin Yu Lwin, Theingi Myint, Shwemar Than, Nay Myo Aung, Cho Cho San, Dolly Kyaw, Tin Htut Yezin Agricultural Universityime

2. Focus on Four Domains 1. Trends in Fertilizer use, 2. Market Structure and Supply-side issues, 3. The Pricing Environment, and 4. Regional/Cross Border Trade Issues 2 3. Introduction Myanmar agriculture sector contributes about 36% of GDP, employing 60% of the workforce and 20% of foreign exchange earnings. Development issue is improvement in the productivity and profitability of agriculture. Myanmar envisions a high level of agricultural productivity that will ensure equity in household food security, income and employment and sustainable utilization of natural resources. 3 4. Role of fertilizer in crop productivity and self-sufficiency Chemical fertilizer is undoubtedly one of the agricultural inputs to increase the high yield when used in proper time and proper nutrient balance. In Myanmar, chemical fertilizer application for paddy crop started in 1956-1957. However, proper application was adopted in 1978 as part of the package of the IR 8, the first high yielding variety that supports the Green Revolution campaign. After 1978, farmers widely used chemical fertilizer because of the proven good response to the applied chemical fertilizer by high yielding rice varieties and fulfill food self-sufficiency. 5 5. Fertilizer subsidies In Myanmar, fertilizer prices were heavily subsidized by the government before 1990s. The government official price of fertilizer was kept low for 15 years until 1990, but after the 1990s, it slowly increased to a level close to the international price. Since 2003, the government was obliged to totally withdraw subsidies; the price was rapidly raised in the domestic market. Therefore, the fertilizer prices was totally free market price based on the international fertilizer price, transportation cost and exchange rate between currency of Myanmar and trade partners after 2003. 6 6. Table 1: Fertilizer consumption in Myanmar and public-private concentration Year Domestic Urea Production (MT) a Fertilizer Import (MT)b Total Consumption (MT) c MoAI Distribution (MT)d Government Concentration (%) e Private Concentration (%) f 2004-05 14,293 11,956 26,249 11,215 42.7 57.3 2005-06 4,580 19,363 23,943 11,762 49.1 50.9 2006-07 115,055 54,842 169,897 13,612 8.0 92.0 2007-08 110,031 33,686 143,717 7,687 5.3 94.7 2008-09 106,138 6,505 112,643 10,570 9.4 90.6 2009-10 69,776 28,380 98,156 7,560 7.7 92.3 Source: a FAOSTAT, 2013; b & d Myanmar Agricultural Statistics (1997-98 to 2009-10): c, e & f own calculation 7 7. Table 2: Proportion of fertilizer distribution by MoAI (%) Crop 1990-91 1995-96 2000-01 2005-06 2008-09 Paddy 72.0 82.6 81.5 27.1 66.9 Wheat 0.8 0.0 0.0 0.0 0.0 Maize 3.4 0.0 0.3 1.0 1.7 Millet 0.2 0.0 0.0 0.0 0.0 Groundnut 2.0 1.6 0.3 0.0 0.0 Sesame 1.8 2.0 0.6 0.0 0.0 Oil Palm 0.1 0.2 0.0 12.9 1.9 Sunflower 1.9 1.4 0.8 0.0 0.0 Cotton 1.1 4.0 3.3 14.4 5.4 Jute 4.9 2.1 1.4 19.1 9.8 Rubber 0.7 0.5 0.7 15.7 1.8 Pulses 6.0 1.9 2.0 0.0 0.0 Potato 0.0 0.0 0.0 0.0 0.0 Tobacco 0.2 0.0 0.0 0.0 0.0 Sugarcane 0.9 3.6 4.8 7.4 1.5 Fruits and vegetables 0.8 0.0 0.0 1.7 7.2 Others 3.2 0.2 4.4 0.7 3.8 Source: CSO, 2009 8 8. Table 3: Fertilizer consuming farm households in regions Region/State Number of households, by usage of fertilizer Organic Fertilizer % Inorganic/ Chemical Fertilizer % Union of Myanmar 4,415,732 100.0 3,930,370 100.0 Kachin 106,629 3.6 54,689 1.6 Kayah 21,390 0.7 27,064 0.8 Kayin 49,579 1.7 34,500 1.0 Chin 14,779 0.5 1,350 0.0 Sagaing 711,798 24.3 579,131 17.3 Taninthayi 73,663 2.5 61,730 1.8 Bago East 225,786 7.7 210,640 6.3 Bago West 270,297 9.2 265,198 7.9 Magway 573,633 19.6 525,221 15.7 Mandalay 694,618 23.7 597,009 17.9 Mon 142,108 4.9 144,554 4.3 Rakhine 268,604 9.2 189,919 5.7 Yangon 190,013 6.5 195,688 5.9 Shan South 213,552 7.3 196,818 5.9 Shan North 223,856 7.7 201,856 6.0 Shan East 39,959 1.4 38,704 1.2 Ayeyarwady 595,468 20.4 606,299 18.1Source: Myanmar Census of Agriculture, 2010 9 9. Table 4: Estimation of fertilizer consumption per hectare of gross area sown Year Gross Area Sown (000 Ha)a Total Fertilizer Consumption (MT)b Fertilizer Consumption per Hectare (Kg/Ha)c 2004-2005 17431.4 26,249 1.5 2005-2006 18754.4 23,943 1.3 2006-2007 20405.1 169,897 8.3 2007-2008 22117.0 143,717 6.5 2008-2009 22961.1 112,643 4.9 2009-2010 23362.6 98,156 4.2 Source: a MOAI 2010, b own calculation based on FAOSTAT data and Myanmar Agricultural Statistics (1997-98 to 2009-10); c own calculation 10 10. Table 5: Fertilizer use by farm size in the study area (Nay Pyi Taw, 2012) Farm Size (Hectare) Urea (Kg/Ha) T-super (Kg/Ha) Potash (Kg/Ha) Compound (Kg/Ha) 0.2 2.02 119.1 13.5 9.2 71.3 2.14 4.05 120.7 16.4 12.3 65.1 4.17 6.07 154.3 12.8 15.9 70.3 6.48 17 148.1 26.2 20.3 64.0 Note: Number of sample household = 652 Source: Household survey at Nay Pyi Taw, 2013 11 11. Table 6: Response of rice to fertilizers in the rain-fed farms (Nay Pyi Taw, 2012) Land Holding Area (Hectare) Average Fertilizer Utilization (Kg/ Ha) Paddy Yield per Hectare (MT/Ha) Partial Factor Productivity of Fertilizer 0.2 2.02 213.1 4.5 21.2 2.14 4.05 214.4 4.3 20.1 4.17 6.07 253.4 4.7 18.5 6.48 17 258.6 4.4 17.0 Note: Number of sample household = 652; these response results are based on products Source: Household survey at Nay Pyi Taw, 2013 12 12. Fig 1: Fertilizer import through normal trade and border trade Imported fertilizer (mainly T-super, Potash, Compound) from Vietnam, Thailand, Germany etc. (CIF Yangon) Companies at Yangon (Branding) Diamond Star, Golden Lion, Myanmar Awba etc. Retailers Local wholesalers Farmers Ministry of Agriculture and Irrigation (MoAI) State Owned Enterprises under MoAI Imported fertilizer (mainly Urea & compound) from China (Border price Muse) Traders at Mandalay (no brand) Source: Own estimation 14 13. Fig 2: Domestically produced fertilizer distribution Quota Domestic (Urea) fertilizer manufacturing factories Ministry of Energy Local wholesalers State owned enterprises Ministry of Agriculture and Irrigation Regional Authorities Farmers Source: Own estimation 15 14. Fertilizer retail market level Retailers exist at village level Buying behavior Late payment for branded fertilizer ordered from companies Direct payment for non-branded fertilizer Selling behavior to farmers Mostly direct payment Late payment with interest rate: 5% /month 16 15. 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 Urea(Kg/ha) Source: CSO Various Issues 18 Fig 3: Urea fertilizer application rate in paddy production based on MOAI distribution 16. Fig 4: Ratio of urea fertilizer price to paddy price Source: DOA and MIS various issues 0 2 4 6 8 10 12 Urea/paddypriceratio Fully Subsidized Period Partially Subsidized Period Liberalized Period 19 17. 0 100 200 300 400 500 600 700 800 900 2006Jan. April July Oct. 2007Jan. April July Oct. 2008Jan. April July Oct. 2009Jan. April July Oct. 2010Jan. April July Oct. 2011Jan. April July Oct. 2012Jan. April July Oct. Urea China at Yangon('000 k/MT) Urea China at Mandalay('000 k/MT) Prilled Urea fob bulk at Baltic ($/MT) Prilled Urea fob bulk at Yuzhny ($/MT) Source: MIS Various Issues 20 Fig 5: Urea fertilizer prices in domestic and international market 18. Regional/Cross Border Trade Issues Exemption of import tax on agricultural inputs is one of the significant reform measures in the country underlying market economy. Cross-border trade from China is affecting unregistered, low quality fertilizer supply in the market. Lack of bilateral agreement between China and Myanmar on imported fertilizer quality control Although there is no restriction on fertilizer import, product registration to MoAI and import license application to MoC are necessary. Law enforcement on product quality and unregistered product is still weak. 22 19. Summary of fertilizer market performance Indicators Issues/ constraints Price Unfavorable fertilizer/output price ratios High fertilizer import cost Uneconomic use of fertilizer Low output price Low crop response Accessibility Lack of market information about global, regional and local prices and quantities Limited product and use knowledge by farmers and public High inland road freight rates Quality of fertilizer use at the farm level Lack of legal and regulatory framework for monitoring product quality and illegal traders Market development Inadequate financial available for importer, wholesaler and retailers 23 20. Ways forward Fertilizer market in Myanmar are still underdeveloped and there is still room to create well-functioning market. Domestic fertilizer production and upgrading quality should be promoted. As the unregistered or informal trade is heavy, there is a discrepancy between national data and data under HH surveys. Therefore, it is recommended to improve 'data collection' in the future. Support research to increase fertilizer use efficiency is highly appreciated. Necessary to examine possibility of joint ventures with international organizations to attract FDI. To develop dealer network to bring in finance and share risk. Improve infrastructure in order to reduce the transaction cost. Intensify field extension-demonstration activities, farmer meetings, use of mass media to improve farmers knowledge of product and nutrient management. Develop effective market information system Enforcement of regulation on product registration and quality control 24 21. Thank You!!!