How Has the Organic Fertilizer Market Evolved

Industry Overview- Nepal

Green revolution of 1960s tremendously enhanced the agricultural production mainly due to the abundant use of chemical fertilizers and pesticides. However, unilateral use of chemical fertilizers and pesticides, devoid of organic sources led to gradual deterioration of soil health, putting agricultural productivity at risk. Nepal, predominantly, is an agrarian country. It contributes one third to gross domestic product (GDP) and provides employment to two third of country’s population. Fertilizer is expected to contribute up to 75% of the total envisaged agriculture growth target in Nepal which shows that it is a significant contributor towards macroeconomic development. As the state-owned Agriculture Inputs Company Limited (AICL) and public corporation Salt Trading Corporation Limited (STC) have not been able to supply and distribute adequate fertilizers, farmers have continuously faced the challenges of suffering from inflated fertilizer prices dominated by illegal imports from India. It is essential for the government to keep the fertilizer prices at subsidized levels as low prices directly leads to better agricultural revenues for farmers.

The utilization of organic manures reduces environmental pollution, caused by the use of chemical fertilizers, and helps to create healthy soil and environment which leads to sustainable crop production eventually enhancing household economy and reducing the rural poverty. With the advent of green revolution, use of chemicals has increased in Nepal over the years. The overuse of chemical fertilizers has resulted in decreased agriculture productivity and possess a threat to future agriculture output. Increased use of chemicals has increased the soil pH and deteriorated the soil health. In 2010, the average soil organic matter content in Terai region was found to be only 1%, well below the government target of 4% which indicates dangerously low levels of soil organic matter, threatening future agricultural growth.[1]

Considering the damaging effect of inorganic fertilizers on men, plant and soil health, Ministry of Agriculture and Livestock development has launched various organic intervention programs to enhance soil health and decrease inorganic fertilizer dependency also trying to reduce cost of production. Among these, vermi-composting, cattle shed improvement, organic fertilizer plant establishment and price subsidy programs are implemented in different FYs within the country. The dependency in the chemical fertilizers can also be attributed to the insufficient supply of organic fertilizers to be used in large scale in commercial farming. Similarly, to promote organic fertilizers produced from the subsidized plants, MoAD is providing price subsidy to the farmers purchasing the organic fertilizers. MoAD provides NPR 10 per kg or 50 percent of the sales price whichever is less, as subsidy on purchase of organic fertilizers. Similarly, the organic fertilizers production plant is also subsidized by providing 50% of the cost.[2] However, challenges persist as local manufacturers and farmers face multiple challenges to obtain the subsidy amount.

Some small-scale farmers locally produce organic fertilizers themselves and use it, most medium to large scale farms have increasing turned towards purchasing readily available organic fertilizers due to convenience. This trend has resulted in increased local production and import of organic fertilizers to sell in the market. Most organic fertilizers come from local organic fertilizer companies. Only a very small amount is imported. In the case of locally manufactured organic fertilizer, around 80% is supplied through cooperatives and the remaining 20% through agro-vets, company dealers, or the District Agro-Input Corporation (DAIC). In the case of imported organic fertilizer, 60% is supplied through local suppliers and dealers and 35% is through agro-vets. Very little is supplied through cooperatives (around 5%).[3]

Although farmers now have realized the disadvantages of chemical fertilizers and pesticides and are trying to adopt healthy agricultural practices, the lack of quality assurance from the local producers pose a lack of confidence in using them and succumbing to the purchase of chemical fertilizers in the black market at elevated prices. As raw materials to sustain many organic fertilizer producers at a constant level is challenging, importing organic fertilizers from neighboring countries having high levels of nutrition can be an ideal strategy to benefit the agriculture sector in Nepal. Direct imports will shorten the supply chain network and increase access to organic fertilizers for farmers conveniently. Similarly, imported organic fertilizers will help to gain farmer’s confidence in organic fertilizers as quality can be assured. The organic fertilizer industry should not be overlooked as it is developing at a rapid pace in Nepal. Therefore, the organic fertilizer industry in Nepal can be grown by solving the supply chain issue through public-private partnership.

[1] Ministry of Agricultural Development

[2] Journal of Agriculture and Environment, Nepal (2017)

[3] Practical Action, Nepal (2016)

Organic Fertilizers Trends- International

The organic fertilizers market was valued at $8.3 billion in 2020 and is anticipated to generate $15.9 billion by 2030. The market is projected to experience a growth at a CAGR of 5.9% from 2021 to 2030.[4] The increasing global demand for organic fertilizers are driven by many factors and market opportunities. Catalyzed by a strong growth in the global population over the next five years, food demand is also expected to exhibit a strong growth. Conversely, as a result of increasing urbanization levels, available arable land is expected to decrease, where organic fertilizers are expected to play a key role to increase average crop yields per hectare when mixing with chemical fertilizers. Many government and non-government campaigns organized by various stakeholders to educate farmers and consumers on the benefits of organic fertilizers is also expected to drive global growth of organic fertilizers.

Similarly, international trend of organic living and healthy lifestyle approach of many consumers is also expected to drive the demand for organic fertilizers. Countries and companies around the world are leveraging the ‘organic’ brand and establishing a robust preference for organic fertilizers starting from the start of the food supply chain. Increased rural income in many developing nations along with improved credit facility for farmers will help to drive the organic fertilizers market in many countries worldwide. New and improved technology along with active participation of stakeholders in improving the supply chain process is also aiding in improving the organic fertilizers market.

Another major factor that is expected to fuel the growth of organic fertilizers in the skyrocketing prices of chemical fertilizers due to global political instability. Farmers and governments are pivoting utilizing local resources to fuel agriculture growth which is a boon for the organic fertilizers market. Overall, the organic fertilizer market is expected to grow more than chemical fertilizers market globally with the help of consumer demand driven by preference for organic food, favorable government participation, supply chain improvement, and price volatility of chemical fertilizers.

[4] Statista Organic Fertilizers Report (2021)