The Chemical Fertilizer Indu

The chemical fertilizer industry has been very important to Thailand's economic development and will
continue to be in the years to come. Chemical fertilizer has played a vital role in raising agricultural
productivity. Its significance is now even more so in light of the steadily declining area suitable for
agriculture in all regions of the country as well as the increasingly strong competition in the global
market for agricultural goods. In order to improve the standard of quality of farm produce and to
ensure that supply will be able to meet the ever rising demand, chemical fertilizer remains an
indispensable factors of production in agriculture.
A study of chemical fertilizer showed that there is still plenty of room for further growth of this industry
during the next few years. The overall use of chemical fertilizer in Thailand's agricultural sector,
according to the experts, should total around 6 million tons per year. However, the actual use of
chemical fertilizer today is just over 3 million tons per year. But in spite of good future prospect,
Thailand's chemical fertilizer industry still faces many limitations. One is the dependence on imported
raw materials. Volatile rate of exchange has been a serious problem for Thailand's chemical fertilizer
producers who find themselves constantly up against higher production cost and financial liquidity
problem.
Production
Producers of chemical fertilizer, both in liquid form and pellets, basically import raw materials from
abroad to mix with what is called "mixer" to achieve various nutrient formulas that are in demand on
the domestic market. Today there are about 100 firms producing chemical fertilizer in Thailand.
However, only three have production capacity of one million tons or more per year. Two others can
produce between 250,000 and 500,000 tons a year. The rest are small producers.
The three major producers include Thai Central Chemical Public Company Limited with a production
capacity of 1,200,000 tons per year, National Chemical Fertilizer Public Company Limited, 1,000,000
tons per year and Thai Fertilizer Company Limited, 1,000,000 tons per year. The two medium-sized
producers are Rojanakasikij Fertilizer Company Limited with a production capacity of 500,000 tons
per year and Cargill Siam Company Limited, 250,000 tons per year.
Chemical fertilizer produced by these companies comprises mainly the following formulas15-15-15,
16-20-0, 16-16-8, 16-8-8 and 13-13-21.
Cost Structure of Chemical Fertilizer
Cost Structure (%) 16-20-0 16-16-8 15-15-15
Raw materials 77.1 77.3 78.4
Other costs 22.9 22.7 21.6
Total 100.0 100.0 100.0
Chemical Fertilizer Use
The decline in land area suitable for agriculture and the deterioration of soil quality in cultivated land
have resulted in a steady increase in the use of chemical fertilizer. According to the figures of the
Office of Agricultural Economics, Thailand's agricultural sector's chemical fertilizer use during the 10-
year period between 1986 and 1995 increased at an average of 10.27 per cent per year. From a total
of 1.4 million tons in 1986, chemical fertilizer use climbed to 2.6 million tons in 1990 and eventually to
3.3 million tons in 1995. For the period between 1996 and 2000, figures were not yet available but it
was estimated that chemical fertilizer use increased from 3.4 million tons in 1996 to 3.48 million tons
in 2000 and eventually will rise to 3.65 million tons in 2003. For this 8-year period, the average rate of
increase is 1.3 per cent per year.
Chemical Fertilizer Market
Thailand's chemical fertilizer market is strongly competitive. Promoting a chemical fertilizer's brand
name is very important because, if a brand name becomes well-known to customers, maintaining the
slice of the market the product has captured can be a lot easier. And it might also be possible to set
product prices higher than those of the competitors.
The chemical fertilizer market is divided into two major segments. One is the private sector market
and the other is the public sector market.
In the private sector market, suppliers can be divided into three groups. The first group is made up of
the importers of chemical fertilizer products. The second group is the mixers who mix imported raw
materials with the fillers. And the third is made up of the agricultural cooperatives. The first group
plays the most important role in supplying chemical fertilizer market. Large firms like the Thai Central
Chemical, the National Fertilizer and the Thai Fertilizer not only import chemical fertilizer products but
also do the mixing of imported raw materials with fillers as well. Chemical fertilizer is then distributed
mostly through distributors and retailers. The rest reach users via formers' associations or agricultural