Neville Spike, Business Writer
John Allen general manager of Newport-Fersan (Jamaica) Limited inside his office in Kingston. - Peta-Gaye Clachar/Staff Photographer
John Allen, general manager of Newport-Fersan has something every farmer wants and needs: fertiliser.
And as the sole supplier of fertiliser in the island you'd expect Allen, an agronomist by training, to be ecstatic each time the price spikes.
He's anything but. For each time fertiliser prices climb, market demand falls and Newport-Fersan's business dwindles.
For example, between December 2006 and September 2007, local fertiliser prices jumped 57 per cent to 75 per cent.
Correspondingly for Newport-Fersan, plant output fell from 53,000 tonnes to 43,000 tonnes, or just above half the 80,000 tonne plant capacity.
Allen who was born in Top Hill, outside Martha Brae, Trelawny, associates the fall in demand to the inability of revenue-challenged local farmers to buy at the new prices.
Small farmers
"The majority of farmers in Jamaica are small farmers," says Allen who worked for 10 years at the Sugar Industry Research Institute, leaving in 1979.
"Each time there is a price increase farmers find it harder to buy in the quantity they would like. The inability of farmers to buy our products impacts on our production output. Each time there is a price increase we've not been able to meet our production targets."
It will be a tall order for Newport-Fersan to meet its target any time soon, says Patrick Maitland, publisher of the Agriculturist, though the need for the product exists.
"Our soil is not rich enough to sustain adequate production without inputs of fertiliser," said Maitland. Farmers, he said, are using about 30 per cent of the fertiliser required.
"Presently Newport-Fersan is operating at around 50 per cent of its capacity. At current levels the plant is well under-utilised. It's not only tight for farmers but also for Newport-Fersan."
To regain market, Fersan has to contain fertiliser prices, but that lies largely outside its control.
The company, which has a staff of 33, is in stiff competition for nitrite, phosphate, and potassium -the key ingredients in the production of fertiliser.
According to the International Center for Soil Fertility and Agricultural Development, between January 2007 and January 2008, diammonium phosphate or DAP prices rose from US$252 per ton to US$752 (US Gulf price).
Prilled urea rose from US$272 to US$415 per ton (Arab Gulf price); and muriate of potash (MOP) rose from $172 to $352 (Vancouver price).
Competition areas
John Allen, general manager of Newport-Fersan (Jamaica) Limited, stands before the company's warehouse in Kingston. - Peta-Gaye Clachar/Staff Photographer
The competition for the raw materials needed by Newport-Fersan is coming mainly from China, India and Brazil.
In the last 12-15 months these countries have been putting more and more acreage of soya, wheat and corn into production, increasing the price of fertiliser input costs.
As a small player in a huge international market place, there is not much Allen or Newport-Fersan can do to influence these price hikes.
However, there is one thing which Allen can do and which he does religiously: study raw material trends for bargain opportunities.
Sitting in his modestly furnished two-storey Newport West office from which he can see the ships in Kingston harbour bringing in the raw material needed for the 30-plus blends of fertilisers made by Newport-Fersan, Allen pores over various reports showing movements in fertiliser prices and fertiliser input costs.
The most recent reports inclusive of graphs are showing what Allen doesn't want to see: skyrocketing prices.
Increases in shipping costs are also a worry.
Allen has to contract ships to bring the raw materials he needs to Jamaica. But ships aren't always available at the time he requires them as many are on contract to transport crude oil.
And when they become available Allen finds that he has to pay a premium for their services.
Faced with increased raw material and shipping costs, Newport-Fersan increased fertiliser prices 60 per cent to 75 per cent over a nine month period last year.
It wasn't a move which went down well with farmers and farming interests.
Criticism followed each increase.
The Ministry of Agriculture also had concerns.
Ministry officials were worried that given the low productivity levels of the Jamaican soil, continued increases in fertiliser prices could result in reduced fertiliser usage and reduced domestic food output.
The Ministry called for consultation "to unearth the reasons for the increases and to locate a cheaper source of fertiliser".
Ominously for Allen and Newport-Fersan, the Ministry said that it wanted to determine the degree to which the increases in fertiliser prices were influenced by raw material price increases and manufacturers' and distributors' mark-ups.
Allen who attended the Jamaica School of Agriculture before earning his agronomy degree and postgraduate diploma from the University of the West Indies was confident that once the meeting was convened it would become clear that Newport-Fersan wasn't price gouging farmers but that the increases were beyond the company's control.
When the consultation commenced, Allen and his team made a convincing presentation. They showed how increases in the cost of raw material internationally as well as the spike in shipping costs gave Newport-Fersan no choice but to increase the price of its fertiliser.
Tough choice
Given the facts, the Ministry faced a tough choice: should it allow prices to continue on its upward climb or intervene? The Ministry opted to intervene.
The intervention saw Newport- Fersan receiving $70 million in subsidy support that was to last from November 2007 to February 2008.
It resulted in a 10 per cent reduction in the factory price of fertiliser to farmers.
Transportation and profit margins were added after the commodity left the factory.
Allen, from experience knew once the subsidy was removed that prices would again climb and demand fall.
The subsidy was lifted February 28 and as anticipated fertiliser prices jumped 30 per cent.
"We have not met our production targets since the removal of the subsidy" Allen confided.
He is looking to new business segments such as the expanding greenhouse and drip irrigation market.
Allen who does backyard farming in pots at his Liguanea, St. Andrew home, growing a variety of fruits and vegetables, seldom misses an opportunity to visit these groups to promote his company's menu of soluble fertilisers.
Expansion
Another option is expansion of Fersan's regional export markets.
But, as engaged as he is in seeking out areas to grow his business, Allen remains concerned about the state of agriculture in the country.
"I'm hoping that as a country we will take agriculture more seriously," he says.
"We know that as a small country that we won't be able to produce all the food we require. But in those areas in which we have a competitive advantage, we should be moving at speed to get production up and running. It can only be good for agriculture and also for the country."
As for Fersan's prospects: "As long as there is an agriculture sector, there will be need for fertiliser and we will be in business," Allen says.
nevillespike@yahoo.com
