EXECUTIVE SUMMARY
Krungsri Research sees the fertilizer industry facing moderate growth over the period 2023 to 2025. Fertilizer prices will tend to drift downwards, though more expensive energy will keep the cost of imported materials elevated, and this will maintain domestic prices above their pre-Covid level. At the same time, domestic demand for fertilizer should grow at an average annual rate of 2.0-3.0% on: (i) continuing growth in the Thai economy, which will add to demand for some foodstuffs; (ii) high farmgate prices that will incentivize farmers to expand the area under cultivation for the major crops of rice, rubber, and oil palm; and (iii) weather that is likely to be favorable over the short term. However, demand for fertilizer will soften through 2024 and 2025 if as expected, drier El Niño conditions become dominant.
Producers and distributors will likely develop a range of marketing channels to broaden their revenue streams and put their businesses on a more secure long-term financial footing. This will include adding additional value to their products by developing customized made-to-order fertilizer mixes, expanding their reach through greater use of online channels, and exploiting opportunities for export growth in markets in the CLMV countries. However, players will have to navigate challenges arising from high global energy prices that will keep the cost of imported raw materials elevated, thus adding to overheads, and because it will be difficult to pass these on to buyers, profits will come under pressure.
Krungsri Research view
The outlook for players in the fertilizer industry is as follows:
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Manufacturers: Income should increase steadily in step with economic recovery and growth in consumption, while demand will be lifted by an expansion in the total area of the major cash crops under cultivation. However, the tendency for incomes to strengthen will be limited by: (i) the impact of more expensive energy on fertilizer prices, which will encourage some farmers to switch to cheaper organic alternatives; and (ii) the fact that fertilizer prices are a major component on agricultural production costs, which makes it difficult for producers to raise the prices. Within the industry, larger players will benefit from their superior cost control and their ability to develop new marketing channels, which will leave them much better placed than SME producers to broaden their income base.
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Distributors: SMEs will tend to be exposed to more intense competitive pressures, given the large number of players in the market and the likelihood that they will experience difficulties sourcing products when supply is tight. In addition, SMEs are at a disadvantage relative to larger players with regard to both the range of products that they sell and their distribution costs. Smaller distributors will thus need to exercise considerable care in how they manage their stock and balance potentially competing demands on the demand and supply sides of the market. In addition, importers may face higher costs from the need to hedge against swings in the currency market, and because this will impose heavier overheads than those faced by domestic fertilizer manufacturers, their profits are likely to narrow.
Overview
Chemical fertilizers are manufactured by synthesizing different chemicals from naturally occurring plant nutrients, of which by far the most important are nitrogen (N), phosphorus (P, often in the form of P2O5) and potassium (K, often as potash or K2O). There are three major categories of chemical fertilizer:
1) Straight fertilizer contains only a single plant nutrient, although this will be synthesized into a compound that will also contain other elements. For example, of the three elements needed in large quantities by plants, urea (46-0-0) and ammonium sulphate (21-0-0) contain only nitrogen, triple superphosphate (0-46-0) is composed of only phosphate, and potassium chloride (0-0-60) contains only potassium. (The numbers refer to the percentage of nitrogen, phosphorus and potassium in the fertilizer.)
2) Compound fertilizer contains at least two of the three major plant nutrient elements. These will have been combined in a chemical process into a single compound, and so these products contain nutrients in a more regular or stable form than do mixed fertilizers. Common examples of this class of fertilizer include potassium nitrate (KNO3), diammonium phosphate (NH4)2HPO4 and potassium metaphosphate (KPO3).
3) Mixed fertilizer contains, as its name suggests, a mix of two or more straight fertilizers. For example, a commonly used fertilizer is 15-15-15, which contains equal amounts of nitrogen, phosphorus, and potassium straight fertilizers to provide equal portions of each of the three main plant nutrients.
Demand for and production of fertilizer is steadily increasing worldwide, helped in part by trends that are encouraging greater consumption of food crops and, from the other side of the market, a squeeze on farmland as urbanization and industrialization continues apace. This is then adding to the need for increasing per-unit yields, and with this, ever rising demand for fertilizer. In addition, one effect of the Covid-19 pandemic has been to raise the prominence of issues connected to food security, and in the post-Covid environment, countries are increasingly responding to these fears by expanding the domestic area under cultivation and building stocks of fertilizer. Data from the International Fertilizer Association (IFA) thus show that the volume of NPK fertilizer that was used globally grew from 176 million tonnes in 2011 to 202 million tonnes in 2020, or by an average of 1.8% per annum (Figure 1). Over the same period, production grew from 190 to 218 million tonnes, which represents annual growth of 1.7%. China is the world’s most important player in the fertilizer industry, and as of 2020, the country had a market share of respectively 23.4% and 22.5% on the production and consumption sides of the market (Figure 2). By type of fertilizer, nitrogen is the most important element, accounting for 58% of all fertilizer synthesized and consumed.
With a 15.7% share of global export volume, Russia is the world’s biggest exporter of fertilizer, followed by Canada, China, Belarus, and the United States. In terms of imports, Brazil is the most important market (it has a 13.7% share), followed by the US, India, and China. As for Thailand, the country is in 50th place in terms of exports with just a 0.1% market share, but 7th with regard to imports, or 2.6% share of the world market.
As of 2021, global fertilizer sales generated receipts of USD 194.7 billion, up 1.8% from the 2020 total (Figure 3). Almost 50% of sales were made in the Asia-Pacific region, which was followed in importance by North America (22%), Europe (17%) and South Africa (11%). 47% of sales were for nitrogen fertilizers, 17% were for phosphorus products, and 15% for potassium fertilizers. Export value also hit a historic high of USD 85.1 billion in 2021, having jumped 53.0% from a year earlier (Figure 4) on higher farmgate prices for major crops (e.g., corn and soy) and an expansion in the area under cultivation. Russia is the world’s most important exporter of fertilizer (by value, the source of 14.7% of global exports), followed by China (13.5%), Canada (7.8%), Morocco (6.7%), and the US (4.8%) (Figure 5). Prices for the most important fertilizers rose strongly through the year on tight supply, the latter a result of: (i) the repeat waves of Covid-19 infections, which caused periodic disruptions to output; (ii) worries over food security that encouraged major producers (e.g., China) to restrict exports of phosphates from September onwards; (iii) higher energy costs (2021 prices for Brent crude were up 66.5% relative to their 2020 levels); and (iv) high sea freight rates and a global shortage of containers (another result of the Covid-19 pandemic) that helped to restrict supplies of fertilizer, especially in the second half of 2021. Due to the combined impact of these factors, prices for urea and diammonium phosphate (DAP) surged by respectively 110.9% and 92.4%, hitting highs of USD 483 and USD 601 per tonne, their highest since 2008 (Figure 6)
The Thai fertilizer industry is positioned downstream of overseas producers, on which it is almost entirely dependent for imports. The latter may be split into two major groups: (i) As of 2021, 66.1% of imports were of straight fertilizer[1] that may then be subdivided into imports of nitrogen-based products (48.6% of imports), which originate from Saudi Arabia, Malaysia, China, Oman and Qatar, phosphorus products (0.1% of imports), which are imported from Egypt and China, and potassium (17.4% of imports), which comes from Canada, Belarus, Israel, and Germany. Fertilizer manufacturers import straight fertilizer for mixing with fillers to the required quantity and according to the required proportions (though with at least two of the major nutrients included). Most of this production is consumed on the domestic market, but around 5% of Thai output is exported, with most of this (80%) going to the neighboring countries of Cambodia, Lao PDR, Myanmar, and Vietnam. Domestic production (as opposed to mixing) of fertilizers is limited to only a few products, including ammonia and ammonium sulfate, of which around 800,000 tonnes is manufactured in Thailand annually. (ii) 33.9% of imports are of finished or semi-finished compound fertilizers to mix and pack for distribution to wholesalers and retailers. The most important sources of imports are China, Russia, Norway and South Korea (Table 1).
The most commonly used fertilizers in Thailand are: (i) for straight and compound fertilizers, urea (46-0-0), ammonium sulphate (21-0-0), potassium chloride (0-0-60), and diammonium phosphate (18-46-0); and (ii) for mixed fertilizers, 16-20-0, 15-15-15, 16-16-8, and 13-13-21 mixes. Thanks to their broad range of uses with rice, fruits, and other crops, these eight types of fertilizer comprise a combined total of more than 90% of domestic fertilizer consumption and over 80% of imports (Figure 7). Domestic sales of fertilizer production and distribution are controlled by the government, and players are required to register their fertilizer with the Department of Agriculture, as required by the 1975 and 2007 laws governing the production and sale of fertilizers.
The cost structure of the industry is such that almost 80% of overheads are attributable to purchases of imported raw materials, such as urea, diammonium phosphate, and potassium chloride (Table 2). The remaining 20% of costs are for other areas, such as power and transport. Given that such a large proportion of operating overheads arise from imports, overall costs are clearly highly dependent on the direction of import prices, which are themselves determined by the prices set on world markets, although variations in the exchange rate may also add to costs. At the same time, it is difficult for manufacturers to compensate for higher costs by raising their prices because in line with the 1999 Prices of Goods and Services Act, fertilizer prices are controlled by the government via The Department of Internal Trade’s central committee on goods and services, which specifies recommended prices for some fertilizers. Manufacturers and retailers of these are then not permitted to sell goods in excess of these prices and so profit margins may be put under pressure, particularly for importers of mixed fertilizers since these carry higher costs than do straight fertilizers (Figure 9). Given this, operators typically try to expand their income base by distributing in volume.
Annual demand for chemical fertilizer ran in the range of 5.0-6.0 million tonnes over the years 2016-2021. This demand falls into two groups. (i) 3.0-4.0 million tonnes of straight fertilizers based on the main plant nutrients of nitrogen, phosphorus and potassium were sold annually during this period (source: Mordor Intelligence, Figure 10), and 46.1% of this was for nitrogen-based fertilizer which is the most used since this is the main product applied during the initial stages of plant growth (nitrogen promotes stronger and faster plant development). As for phosphorus (P) and potassium (K), these contributed 0.2% and 23.3% of total straight fertilizer consumption, respectively. (ii) 1.0-2.0 million tonnes of various mixed fertilizers were also consumed annually in this period. The largest share of fertilizers was used in applications for rice (41% of all chemical fertilizers were used by rice farmers over 2019-2021) but this is because over 70 million rai (11.2 million hectares) of land is given over to rice cultivation in Thailand. Rice was followed in importance by rubber (28%), oil palm (12%), sugarcane (7%), maize (7%), and cassava (5%) (Figure 11). However, in terms of the quantity applied per unit, oil palm and rubber are the most heavily fertilized crops, followed by sugarcane, off-season rice, maize, cassava and first season/rainy-season rice (Figure 12). Given this, increasing or decreasing the area of commercial crops that is cultivated will clearly have a direct impact on demand for fertilizers.
As of June 2022, there were 1,016 manufacturers of fertilizer registered with the Department of Business Development. Of this total, 1,002 (or 98.6%) were SMEs or micro-producers and so only 14 (or 1.4%) were large-scale operations, although the latter enjoyed a combined 75% market share (Figure 13). This disparity is due to the advantages of large players in terms of lower manufacturing costs, greater ability to win contracts to distribute through government channels (through competitive bidding), and their ongoing marketing campaigns. SMEs are, on the other hand, restricted by their uneven production quality, which makes it difficult for them to expand their output.
There are 4,074 fertilizer distributors in Thailand (a group that includes wholesalers of synthetic fertilizers and other agricultural chemicals), though 98.0% of these are SMEs (Figure 14), which are spread throughout the regions of Thailand. Given the fact that the costs of setting up in business are relatively low and operations are fairly straightforward (goods can easily be sourced from manufacturers and importers and these are then sold on to buyers), there are only low barriers to entering the market and so levels of competition are somewhat intense. Some operations also double up as re-exporters, importing goods for onward shipment, in particular to neighboring countries. Against this background, the 2.0% of players that are large-scale operations have advantages stemming from: (i) their ability to buy in bulk, which gives them lower per-unit costs, in addition to which, the majority of large players are subsidiaries of manufacturers or have agreed some form of commercial alliance with these and so enjoy a more favorable negotiating position; (ii) their strong relationships with local farming communities and their favorable negotiating position with regard to local buyers; and (iii) their wide stock holdings, which allows them to meet the demands of growers of different crops at different times of the growing season and so maintain sales across almost the entire year.
The major players (both manufacturers and distributors) active in the Thai market are: (i) Chia Tai, distributors of the Kra-Tai and Chor Fah brands; (ii) Thai Central Chemicals, manufacturers of the Hua Wua-Khan Thai brand; (iii) Yara (Thailand), distributors of the Viking Sailing brand; (iv) ICP International, manufacturers, importers, and distributors of the ICP brand; (v) Terragro Fertilizer, manufacturers of the Mongkut and Trathip brands; (vi) ICP Fertilizer, manufacturers of the Mah Bin brand; (vii) World Fert, manufacturers of Rot Kaset brand; and (viii) Saksiam International, manufacturers of the Ploy Kaset brand. These companies generally have healthy finances and can develop new products and market these successfully, thus ensuring that their income base is dynamic and flexible.
Situation
Domestic demand for fertilizer is largely determined by a combination of: (i) the total area under cultivation, especially of rice and rubber (these two crops alone cover more than 60% of Thai farmland), together with plantings of sugarcane and oil palm; and (ii) climatic conditions, access to water and irrigation. Thus, during the 2015-2016 drought, demand for fertilizer dropped to an annual average of 4.6 million tonnes, down from 6.0 million tonnes in 2014. In 2021, higher-than-average rainfall supported an expansion in plantings (figures 15 and 16). This combined with stronger domestic and international demands that pushed up prices for almost all agricultural goods (with the exception of rice, Figure 17). This then lifted demand for fertilizer by 3.4% to a 7-year high of 6.0 million tonnes. This compares to the average annual growth in demand of 2.0% over the period from 2016 to 2020.
The outbreak of war between Ukraine and Russia at the end of February 2022 significantly added to global fertilizer prices, helping to reach a historic high in April 2022 (Figure 18). Several factors conspired to push prices to a new peak. (i) Supply was constrained by export controls by manufacturing nations including: (a) Russia (the world’s major producer of upstream inputs, especially of urea and potassium, and an exporter of ammonium and natural gas) and Belarus, which have banned the export of fertilizers including diammonium phosphate (DAP) and potassium chloride (MOP) to prevent war-induced domestic shortages (Russia had already limited exports of nitrogen-based fertilizers in December 2021 as part of its efforts to control inflation in food prices); (b) China, which is trying to increase domestic food production while limiting greenhouse gas emissions from fertilizer production and its efforts to cut the cost of food production, it has imposed limits on the export of fertilizers; and (c) Egypt, which has stipulated that 55% of domestic urea production must be distributed to the domestic market. (ii) The cost of natural gas is a major determinant of fertilizer production costs, and with the former jumping by more than 60% from its 2021 level, the latter has risen accordingly (source: World Bank), in particular for nitrogen fertilizers (e.g., urea). As such, the Norwegian producer Yara (the world’s second largest manufacturer of fertilizers) announced a cut in urea production in its Italian and French facilities. (iii) The 42% increase in crude costs in 2021 fed into a rise in freight charges. (iv) The Covid-19 pandemic has added to worries about food and energy security, and so many countries are now attempting to expand domestic food production. For example, China has set the goal of producing more than 650 billion kilograms of food annually over 2021-2025, and the US is expanding corn production for use as both an animal feed and as a source of alternative energy. (v) The baht lost 11.3% of its value against the US dollar over the year, which then added to the cost of importing fertilizers, while global prices remained elevated despite softening through 2H22 on weaker energy prices. Thus, for 2022 overall, prices for urea averaged USD 700/tonne (up 45% from 2021), while diammonium phosphate and potassium chloride averaged respectively USD 772 and USD 520 per tonne (up 28% and 147% from their level in 2021). This then pushed up wholesale prices in Bangkok for urea to THB 15,386/tonne, a rise of more than 50% relative to 2020.
Domestic demand for fertilizer strengthened in 2022 on an expansion in the total area under cultivation. The latter was driven by: (i) a 2.8% increase in yields relative to their 2021 level thanks to greater access to water (rainfall was 25% above the average); and (ii) increased demand for food and energy crops on both domestic and international markets that then pushed up prices by 11.2% YoY. The overall situation for the fertilizer industry through 2022 is described below.
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The cost of imported fertilizer increased in the year, and this translated into a sharp run-up in domestic prices. Thus, across the year, prices for straight NPK fertilizers averaged THB 24,237/tonne (up 105% YoY), while prices for mixed fertilizers averaged THB 29,368/tonne (up 87% YoY). Faced with such a swift increase in costs and the resulting prospect of fertilizer shortages, the government had little choice but to allow producers and distributors to pass on these increases to buyers, and so average retail prices of straight and mixed fertilizer increased by respectively 83% and 58% from their 2021 level. In detail, retail prices rose 93% to THB 26,168/tonne for urea (46-0-0), 78% to THB 15,450/tonne for ammonium sulphate (21-0-0), and 65% to THB 28,170/tonne for diammonium phosphate (18-46-0) (Table 5).
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Imports of fertilizer totaled 4.2 million tonnes in 2022, but although this represented a drop of -26.0% YoY, the cost of these increased 45.3% to THB 109 billion (Figure 19). Purchases from the main suppliers of Saudi Arabia, China, Malaysia and Russia (54.5% of all imports by volume) contracted -22.6% to 2.3 million tonnes, but by value these expanded 46.5% to THB 58 billion, while imports from Qatar (9.4% of the total) were up 10.5% by volume and 89.3% by value. (i) By volume, imports of straight fertilizer (69.3% of all fertilizer imports) slipped -22.4% but by value, these increased 59.1% to THB 71 billion. 64.5% of these imports came from Saudi Arabia, Malaysia, China, Canada, and Belarus, and although these fell -21.7% by volume, they increased 63.4% by value. However, imports from Qatar and Bahrain were up in terms of both volume and value. (ii) 30.7% of imports were of mixed fertilizer, of which 1.3 million tonnes were imported (-33.2%) at a cost of THB 38 billion (+25.1%). In the year, 29.5% of imports of mixed fertilizer came from China, but thanks to the imposition of restrictions on exports at the end of 2021, this was in fact a crash of -51.3% by volume and -8.5% by value. Imports from Russia (28.8% of the total) also slipped -15.3% by volume, but jumped 70.5% by value, while in response to tight supply, imports from Saudi Arabia (up to 6.6% of the total from just 0.9% a year earlier) surged 380% to 86,000 tonnes and 719% to THB 2.9 billion.
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Exports of fertilizer (just 5% of Thai output) dropped -36.8% to 0.45 million tonnes, though receipts from these sales increased 12.8% to THB 10.2 billion. Thailand’s main export markets are in the CLMV nations, with 81.2% of exports being sold into these markets. However, due to a combination of high prices and tight supply, exports to the CLMV countries declined -35.6% in the period (Figure 20).
Outlook
Over 2023 to 2025, the fertilizer industry will see improving conditions, though rates of growth will still be relatively restrained. Prices for fertilizer will tend to soften from the highs reached in 2022, but these will nevertheless remain elevated on what is expected to be continuing high global prices for crude and natural gas (Krungsri Research sees prices for Dubai Crude running in the range of USD 70-82/bbl over 2023-2025). Fertilizer prices will be lifted by several factors. (i) The prolonged Ukraine-Russia war will continue to underpin strong prices for many commodities, including major agricultural outputs (Figure 21). (ii) Restrictions on exports by Russia and China will keep the global fertilizer supply tight. In particular, China’s declared goal of reaching carbon neutrality by 2060 is causing some fertilizer manufacturers to cut back on production capacity. (iii) Many countries are acting on worries over food security, and as more land is brought into production, demand for fertilizer is rising. The World Bank thus estimates that over 2023 and 2024, prices per tonne for urea, diammonium phosphate (DAP) and potassium chloride (muriate of phosphate, or MOP) will average respectively USD 650 and USD 600, USD 750 and USD 650, and USD 500 and USD 479 (Figure 22). Nevertheless, Thai importers will tend to diversify their suppliers, and new sources of fertilizer in Turkey (for nitrogen-based fertilizers) and Brazil (for potassium fertilizers) will go some way towards offsetting price pressures and reducing the risk of supply shortages.
Krungsri Research predicts that domestic demand for fertilizer will rise by 2.0-3.0% annually over 2023-2025 (Figure 23) to reach a total of 6.2-6.5 million tonnes. This outlook will be supported by the following factors.
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The Thai economy can look forward to annual growth of 3.0-4.0% in the coming period, helped in particular by recovery in the tourism sector. The latter has been given a significant boost by the return of Chinese tourists following the reopening of China at the start of January 2023. This will then add to demand for crops for both consumption and for use as a source of bioenergy.
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Prices for major crops including sugarcane, rice, and cassava will likely remain elevated on strengthening global demand, which will move with the return of the world economy to more normal conditions. The World Bank thus sees its Food Price Index staying strong through to 2024, while many countries will continue to be focused on reinforcing domestic food security, and this will add additional pressure to the market. With favorable conditions, Thai farmers will look to build on their position as leading suppliers to global markets by expanding the area under cultivation and so raising output further. For rice, which accounts for over 50% of Thai farmland, yields are expected to remain close to their 2022 level, but output of rubber and oil palm should be up by respectively 4.5-5.5% and 3.0-4.0% annually. These 3 crops alone account for over 80% of fertilizer use, but adding to demand, yields of sugarcane and cassava are also expected to rise by 7.0-9.0% and 1.5-2.5%.
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The weather has tended to be favorable for agriculture and water storage. The National Oceanic and Atmospheric Administration (NOAA)[2] assessment is that thanks to the 2022 La Niña, Thailand received around 25% more rainfall than normal (Figure 25). Thanks to this, irrigation water is abundant through 2023, and the demand for fertilizer is strong. However, the forecast from the Rangsit University Climate Change and Disaster Center is for rainfall to return to normal in 2023 and so in 2024, agricultural areas not served by the irrigation network may see water shortages and lower yields, which will then translate into weaker demand for fertilizer through 2024 and 2025. In addition, the weather system will likely begin to transition to El Niño conditions, causing rainfall to fall below its normal level, and in 2025, this may cause more widespread drought (figures 24 and 25). Beyond this, some farmers are also cutting costs by switching to organic or biofertilizers, either wholly or mixed with chemical fertilizers, and this will also impact demand.
Players will look to broaden their income base and to put their businesses on a stronger long-term footing by developing the range of marketing channels that they use. This will include the following:
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Expanding the customer base by offering “custom-made fertilizer mixes”: By investing in the technology required to analyze soil samples, it will be possible for operators to produce fertilizers that are designed according to the needs of particular sites. This will allow manufacturers to customize fertilizers so that they have the qualities desired by individual farmers, and in the process, players will be able to add greater value to their products. As well as helping farmers access products that are tailor-made to the particular environments in which they will be used, developments such as this will also support the wider uptake of smart farming. Moreover, unlike the traditional indiscriminate application of nutrients, custom-made fertilizers target the particular needs of crops and locations, so these allow farmers to simultaneously increase yields and cut applications, which with fertilizer prices likely to remain strong is a proposition that has considerable appeal. Indeed, research by Betagro shows that using the appropriate fertilizers and applying these at the right time and in the right quantities helps to raise yields by up to 17%. To help increase sales and reduce costs related to stockholding, players will also likely extend the use of e-commerce distribution channels that began during the Covid-19 pandemic.
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Increasing exports to the CLMV nations: The CLMV countries are trying to expand their agricultural sectors by increasing the area given over to the main cash crops (i.e. rice, oil palm, rubber, maize, and cassava) and then either exporting these improved yields or using these as inputs into other agro-processing industries, including rubber processing and the production of animal feedstuffs. This will naturally stoke additional demand for fertilizer, and over 2017-2020, Thailand’s share of all imports of fertilizer to the CLMV zone rose to 6.8%, up from an average of 3.7% in the period 2014-2016. In the case of Lao PDR and Cambodia, Thailand’s 2021 market share (by value) edged up to respectively 38.2% and 32.7% from 37.9% and 24.2% a year earlier. Although Thailand’s main competitor in this market is China, Thailand is benefitting from the fact that the Chinese authorities have tightened fertilizer exports, and so China’s share of the CLMV market has slipped from close to 50% over 2014-2016 to 36.7% now. Given the only limited number of manufacturers active in the CLMV market and the fact that the fertilizer production process is relatively straightforward, new players are likely to enter the market in the coming period, and so with competition expected to multiply rapidly, Thai players will need to establish strong brands if they are to secure their share of the CLMV market.
Going forward, challenges likely to affect the market will include the following. (i) As a result of uncertainty surrounding the ongoing Russia-Ukraine war, the cost of both energy and imports of straight fertilizer will likely remain elevated, and this will continue to trouble the industry. At the same time, because fertilizer costs have a major impact on the price of food, these are controlled by the government and so it is difficult for manufacturers to pass on these costs. As such, profits are likely to come under pressure. (ii) Rising consumer concerns over health and wellness are adding to the interest in organic farming[3] , the application of which may help farmers both cut costs and raise output. The total area of farmland recognized as meeting official organic standards[4] thus rose from 0.23 million rai (36,800 hectares) in 2017 to 1.3 million rai (208,000 hectares) in 2023, thanks principally to an expansion in the farming of organic rice. The government’s organic farming action plan for 2023-2027 has also set a target for this to increase to 2.0 million rai (320,000 hectares) by 2027. (iii) Some farmers are cutting costs by switching to a greater reliance on biofertilizers, while the Board of Investment (BOI) is also promoting investment in bio-, organic, and nano fertilizers as a way of increasing the domestic supply of these and of cutting the cost of imports. Fertilizer manufacturers will thus need to more rapidly expand the range of biofertilizers that they produce if they wish to respond fully to future market demand.
[1] Thailand has the potential to produce potassium-based fertilizers since an estimated 407 billion tonnes of potassium reserves are located in the northeast of the country in Udon Thani, Sakhon Nakhon, and Nakhon Ratchasima provinces. These reserves have the potential to be commercially viable and to produce around 600,000-800,000 tonnes of fertilizer annually, but as yet measures have not been found to protect against the negative impacts of mining, while the costs of extraction and production are somewhat high.
[2] Data from NOAA dating back over the past 60 years indicate that strong EI Niño (lower rainfall) and La Niña (higher rainfall) conditions occur roughly every 12-15 years. The last strong La Niña was in 2010-2011, while the most recent strong El Niño was in 2015-2016.
[3] Organic farming involves the use of organic inputs, such as manure, compost, green manures, and biofertilizer. In theory, this helps to produce healthier crops that are better able to fight off disease and pests themselves.
[4] Registered by Organic Agriculture Certification Thailand as per the regulations of the International Federation of Organic Agriculture Movements.