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18 February 2012 | Adam Leach
Fertiliser manufacturers and wholesalers are
dealing with price volatility by passing the risk down the supply chain to
The price of the commodity rose by more
than a third in the final three months of 2012, and the response from the
sector has been very different to the similar price spike witnessed in
2007-2008 which led to ‘panic-buying’ of supplies.
According to Finding Fertile Ground,
published this week by Rabobank, argued more transparency is needed in the fertiliser supply
chain to enable buyers, farmers and traders to service each other more
The report explained when commodity prices
rose rapidly in 2007-2008 buyers responded by panic buying to ensure they had
enough in stock. However, having bought too much they were left with excessive
inventories that were difficult to run down. In contrast, the sector has
adopted a more just-in-time approach during the recent volatility.
During the current crisis manufacturers
have been operating inventory cycles of around 45 days compared with a 60-day
cycle during the previous price hike period. According to the report: “When
manufacturers and wholesale traders keep fertiliser inventories low, they push
the fertiliser price risk and inventory decisions through to the farming end of
the supply chain.”
More openness between all parties would
reduce volatility, it claimed. “Increased transparency and better market
guidance across the supply chain is essential for all players, as they will
enable retailers to effectively communicate trend information to farmers and
upstream fertiliser players,” the report said.
The report proposed farmers and buyers work
more closely to fit their needs in the long-term, thus reducing the effect of
short-term price hikes which lead to panic buying.