Fertiliser cost, which represents 40% of local oil palm planters' total cost of production, is likely to trend higher this year, a source close to the industry said.
He said: “Depending on the various types of fertilisers, prices could scale higher from 4% to 20% this year on surging demand for food crops amid tightening supply due to bad weather conditions.”
For murate of potash (MOP) the most popular fertiliser among local planters many fertiliser companies were expecting a price increase of about 5.8% to RM1,500 per tonne this year from RM1,417 per tonne last year, the source added.
“News that fertiliser prices in the overseas markets have been creeping up steadily over the past few months were much to the dismay of planters globally, but many still do not expect a significant increase in 2011 even though the price of crude oil is on the rise again.”
Despite the increasing cost, the source expected the buoyant crude palm oil (CPO) prices to still be good enough for oil palm plantation companies to stay profitable in 2011.
“Many are still optimistic that the spike in fertiliser prices this year will not likely revisit the abnormal record price of RM3,000 to RM4,000 per tonne experienced in 2008,” he added.
United Malacca Bhd chief executive officer Dr Leong Tat Thim concurred that prices of fertilisers were on the rise based on the estimates derived from several fertiliser suppliers for this year. He told StarBiz yesterday that his company would opt for a one-year fertiliser contract.
“Local plantation companies would normally open tender for their fertiliser supply depending on when their financial year (FY) ends.
“For United Malacca, since our FY ends on April 30, we will start tendering for our fertiliser supply in February and March,” he added.
Local fertiliser suppliers import almost 90% of the country's fertiliser requirement from international markets at global market prices.
Malaysia annually imports about four million tonnes of fertilisers. Of the total, MOP accounts for about 1.4 million tonnes. Other major plant nutrients imported include nitrogen, phosphorus and potassium, better known as NPK among planters.
Malaysian Estate Owners Association president Boon Weng Siew said bigger estate and plantation groups would usually call for open tender, lock in prices for a period from six months to a year.
The fertiliser prices were also locked-in by the local fertiliser importers with their overseas principals, he added.
“I believe some big estates have already called for tender from as early as September last year given the rising trend in fertiliser prices especially for MOP,” said Boon.
“One consolation amid the rising fertiliser prices was that many plantation companies had already finalised and secured their one-year fertiliser supply contracts while many others had secured a six-month supply contract for 2011.”
As at press time, the outgoing Fertiliser Industry Association of Malaysia (FIAM) president Ali Sabri had refrained from making any comments as the FIAM exco members were due to hold a meeting to appoint a new president.