Severe impact of hike in fertiliser price

[posted 22 April 2009, 1700]

The burden of a $12 per bag (62%) hike in the price of fertiliser, coming all at once, will cause serious financial problems to the growers, says the National Farmers Union .

NFU welcomes the decision by the interim government to subsidise the cost of fertilizers to cane growers by $14 a bag.

Following a Cabinet decision the price of fertilizer has increased to $45.50 a bag of which government will pay $14.05 while the cane farmer will be required to pay the balance of $31.50. The farmer currently pays $19.50 per bag.

However, despite this government price support measure, the burden of a $12 per bag (62%) price hike, coming all at once, will cause serious financial problems to the growers. It is to be noted that this massive hike will coincide with a price reduction of 19% for sugar exports to the EU from October.

The likely consequence of this increase will be a reduction in the fertilizer intake by farmers resulting in a substantial decline in the crop size.

It will also put the future viability of the already ailing FSC in serious doubt. Its recent investment of $86m in the mill upgrade programme will likely go to waste.

On the restructuring of the South Pacific Fertiliser Ltd (SPF) to convert $14 million in outstanding loans of the Sugar Cane Growers Fund (SCGF) into equity, NFU said this was neither desirable nor lawful.

As trustees of the Fund, SCGF Board members are by law prohibited from investing funds in any undertaking which is financially unviable or insolvent. Any attempt to change the existing law to facilitate this unlawful measure will send wrong signals to the investor community.

There are other options put before the government by the industry stakeholders which it ought to seriously consider.