Fert Options with Robin Boom Agronomic Advisory Services

With the upcoming elections for directors on the board of Ballance Agri-Nutrients at their Annual General Meeting at the end of this month, it’s got me thinking about how shareholders can get better value from their co-operative.

Ballance and Ravensdown have 90 per cent of the fertiliser market in New Zealand and the past couple of years both companies have rewarded shareholders with rebates averaging around $45/tonne of fertiliser purchased, so thumbs up to both companies. There are, however, some areas of unfairness that affect smaller dairy and sheep and beef farmers in the greater Waikato-Bay of Plenty-King Country regions, who effectively subsidise larger farmers and those in other parts of the North Island.

Six plants

My wife’s grandfather, Harold Wagstaff, farmed 900 acres in the hills behind Matamata, and was one of the 11 founding members of BOP Fertiliser Company when it formed in 1955 to manufacture superphosphate at Mount Maunganui. In the early-1980s there were six superphosphate manufacturing plants in the North Island: Whangarei (Farmers Fert); Morrinsville (Kiwi); Mt Maunganui (BOP); Napier (East Coast); New Plymouth (Farmers Fert); and Whanganui (Ravensdown). In 1987 BOP Fertilisers bought out Fernz-owned Kiwi Fertilisers (Farmers Fert) at Morrinsville and shut it down and Ravensdown bought out East Coast Fertilisers and shut down their Whanganui plant. In 1998 Fernz Corporation sold off their Whangarei plant to BOP Fertilisers and their New Plymouth plant to Ravensdown with the new owners shutting both plants down.

Same price

With the amalgamation, consolidation and acquisitions, both co-ops decided to offer farmers in regions, such as Northland and Taranaki, fertiliser at the same price as it was ex-Mount Maunganui and Napier by providing free cartage. This means Waikato and Bay of Plenty farmers are subsidising the freight to other regions in the North Island in the case of Balance. In the case of Ravensdown, it’s the Hawke’s Bay, Gisborne, Wairarapa and Manawatu farmers subsidising freight to upper North Island farmers. This free freight in real terms will be costing the companies $30-40/tonne. One partial solution to this would be for both co-ops to have confidence and supply arrangements, where Ravensdown agrees to supply superphosphate to all of Ballance customers in the lower North Island and Ballance to do the same for Ravensdown clients in the upper North Island. Many farmers have shares in both companies, and with both companies being 100 per cent farmer-owned, the overall winner will be the farmer shareholders. Another option would be for both companies to amalgamate into one large company, which would improve efficiencies and mean lower overall fertiliser prices.

Discounts

Another beef I have with both co-ops is that larger sheep and beef farmers and dairy corporate clients get discounts on their fertilisers compared to the average shareholder. The core base of BOP Fertilisers was small, family-owned, farmers in the Waikato, just as the core base for Fonterra was initially Waikato and Taranaki family-owned farms. If Fonterra suddenly decided to pay its larger farmers more for their milk than the smaller farms, there would be a huge protest. Yet in the fertiliser industry this differential carries on. Really there should just be a flat price for all shareholders regardless of size and volume purchased.

Private importers

With the inefficiencies in both co-ops, a plethora of private fertiliser importers have cropped up during the last couple of years such as Farm Ex, Fert Direct, Fertilisers Direct, Fert Wholesale Direct, Dickie Direct, Zealyn, Landco, Rorisons and Marsden Agri, which have been bringing in mainstream fertiliser products such as DAP up to $150/tonne cheaper than the co-ops, sulphate of ammonia up to $100/tonne cheaper, triple super up to $180/tonne cheaper, sulphur 90 up to $100/tonne cheaper, and potassium chloride up to $80/tonne cheaper. These smaller importers have forced the two big co-ops to drop their prices, and the only reason they exist is because they have seen opportunities in the marketplace between the price the co-ops charge their farmers and the international trading price on these products. The co-ops should concentrate on providing cheaper fertilisers up front rather than priding themselves on paying high rebates in my opinion, and local farmers should not be subsidising farmers in other regions.

Robin Boom, CPAg, member of the Institute of Professional Soil Scientists. Phone: 0274448764.