Thailand's reliance on fertiliser chemical imports
and plans for Isan potash mines
By Jon Fernquest
Thailand is completely dependent on imports
of the chemicals needed to make fertiliser.
These chemical imports amounted to 3.5 million tonnes last year.
This dependence on imported fertliser chemicals is a little strange because:
1. Thailand has unmined
supplies of potash
inside the country waiting to be exploited,
and...
2. Thailand is the world's largest exporter of rice and other agricultural commodities which use fertiliser as an important input (See photo on right of farmer throwing fertiliser on crops).
2. Thailand is the world's largest exporter of rice and other agricultural commodities which use fertiliser as an important input (See photo on right of farmer throwing fertiliser on crops).
fertiliser - food
for plants, chemicals or natural materials such as cow manure (waste)
put on plants to make them grow more successfully (See Wikipedia)
potash - a potassium chemical used in glass, soap and fertiliser (See Wikipedia)
X dependent on Y (verb) - X needs Y to survive or succeed
a dependence on Y (noun) - a need for Y
X amounted to Y - X had quantity Y
exploited - used, when an unused resource is used (See glossary)
a commodity - a uniform product bought in bulk (See glossary)
uniform - things that are the same
agricultural commodities - most crops grown by farmers (that are uniform and don't differ between farmers)
an input, an input into a production process - one of the things such as labour, raw materials, land, factory, machines, and electricity used to produce a good
potash - a potassium chemical used in glass, soap and fertiliser (See Wikipedia)
X dependent on Y (verb) - X needs Y to survive or succeed
a dependence on Y (noun) - a need for Y
X amounted to Y - X had quantity Y
exploited - used, when an unused resource is used (See glossary)
a commodity - a uniform product bought in bulk (See glossary)
uniform - things that are the same
agricultural commodities - most crops grown by farmers (that are uniform and don't differ between farmers)
an input, an input into a production process - one of the things such as labour, raw materials, land, factory, machines, and electricity used to produce a good
Expensive fertiliser makes for expensive farming
Potash is one important chemical used in the manufacture of fertiliser.Fertiliser production also relies on petrochemicals such as ammonia, a chemical derived from natural gas. The price of both petrochemicals and fertiliser rise and fall with world oil prices.
When oil and agricultural commodity prices soared to all-time highs earlier this year farmers received high prices for their crops but they also had to pay much higher prices for fertiliser which cut into their profits (Read Bangkok Post article).
ammonia - a gas with
a strong odor used to produce some types of fertiliser (See Wikipedia)
derived from - produced from, comes from
natural gas - (See Wikipedia)
soared to all-time highs - increased suddenly to very high levels never reached in the past
cut into their profits - reduce profits
derived from - produced from, comes from
natural gas - (See Wikipedia)
soared to all-time highs - increased suddenly to very high levels never reached in the past
cut into their profits - reduce profits
Volatile fertiliser chemical prices also causes problems for traders
Fertiliser prices, like oil prices, have been extremely volatile this year. Prices shot up during the early part of the year to record highs only to drop precipitously to current price levels. This price volatility has made it difficult for farmers to profit because they can't be sure the price at planting time is equal to the price at harvest time when they will sell their crops.Price volatility this year has also made life very difficult for traders who specialise in importing fertiliser.
The current price of imported fertiliser stocks is much lower than the price that traders paid for them a couple of months ago. Traders normally stock fertiliser in September to prepare for the harvest season. During the run-up in commodity prices earlier this year, fertiliser prices shot up 200% but have now dropped more than half of that. Traders face losses of as much as one billion baht on the expensive inventories that they currently hold.
The option of hedging the risk of price volatility using commodity futures for potash, for instance, was apparently not available to these traders or there hasn't been enough volatility in the past to warrant hedging. Now there may be.
volatile - value moves
up and down suddenly and unexpectedly by large amounts
drop precipitously - a sudden and painful decrease (like falling from a cliff)
price volatility - when a price of a good is volatile
fertiliser stocks (noun) - large quantities of fertiliser stored for future use or sale
stock fertiliser (verb) - keep and store a large quantity of fertiliser for future use
a run-up in commodity prices - an increase in commodity prices over a period of time
shot up 200% - increase suddenly by 200%, jump by 200%
an option - a possible choice
the option was apparently not available - could not choose to do this, it seems
hedging risk - reducing a risk you face (by assuming risks in the opposite direction)
risk of price volatility - the possibility of losing money in business if a price changes suddenly by a large amount
a commodity - a uniform product bought in bulk (See glossary)
commodity futures - contracts to deliver an amount of a standard commodity at a certain in the future at a certain price (used to guarantee a price for a commodity in the future, which makes doing business more predictable and easier to do)
X warrants Y - situation X makes action Y necessary and appropriate
drop precipitously - a sudden and painful decrease (like falling from a cliff)
price volatility - when a price of a good is volatile
fertiliser stocks (noun) - large quantities of fertiliser stored for future use or sale
stock fertiliser (verb) - keep and store a large quantity of fertiliser for future use
a run-up in commodity prices - an increase in commodity prices over a period of time
shot up 200% - increase suddenly by 200%, jump by 200%
an option - a possible choice
the option was apparently not available - could not choose to do this, it seems
hedging risk - reducing a risk you face (by assuming risks in the opposite direction)
risk of price volatility - the possibility of losing money in business if a price changes suddenly by a large amount
a commodity - a uniform product bought in bulk (See glossary)
commodity futures - contracts to deliver an amount of a standard commodity at a certain in the future at a certain price (used to guarantee a price for a commodity in the future, which makes doing business more predictable and easier to do)
X warrants Y - situation X makes action Y necessary and appropriate
Delayed projects to build Potash mines
Attempts have been made for over a decade to build potash mines in the northeastern Isan area of Thailand. These projects have been delayed by protests and concerns about the impact of potash mining on the envirionment (Read United Nations report on environmental impact of potash mining).The Udon Potash Project has estimated reserves of 100 million tonnes of potash from an underground mine to be built of 75,000 rai. The project is still awaiting approval of its mining lease application submitted in 2003
Asia Pacific Potash Corp (APPC) holds the concession for the potash mining project and is now a 90% owned subsidiary of Italian-Thai Development, Thailand's largest construction company.
Many hope that a local source of Potash inside Thailand could provide guaranteed and cheaper supplies of fertiliser for Thailand's farmers. It is not immediately obvious that domestic potash supplies would make a big difference. After all, the Thai owners of potash mines would want to sell their produce at the going international potash price which should be the same as the cost of importing potash (less import duties). Potash mines would however, like any other business, create more jobs and economic wealth in Thailand which is always good.
impact on the environment - the
negative effect on the environment, any damage it could do to the
environment
reserves - a supply available for future use when needed
a lease - a legal agreement allowing the use of land, a building, a car, or equipment for a period of time in exchange for monthly rental payments
mining lease - a lease to use land for mining for a period of time
a concession - a right to operate a certain type of restricted business for a period of time given by the government (e.g. telecommunications)
a subsidiary - a smaller company part of a larger company
Italian-Thai Development - Thailand's largest construction company, projects include mass transit systems, airports, buildings, dams, tunnels, highways, expressways, bridges, industrial and power plants, ports, jetties and dredging works, pipelines and utility works, railways, telecommunications (See website and Google Finance)
guarantee - promise that something will happen (See glossary)
a guaranteed supply - a promise to provide a certain amount of a good to someone
not immediately obvious - a fact that needs to be explained (because most people will not know why the fact is true)
import duties - taxes on goods entering a country
reserves - a supply available for future use when needed
a lease - a legal agreement allowing the use of land, a building, a car, or equipment for a period of time in exchange for monthly rental payments
mining lease - a lease to use land for mining for a period of time
a concession - a right to operate a certain type of restricted business for a period of time given by the government (e.g. telecommunications)
a subsidiary - a smaller company part of a larger company
Italian-Thai Development - Thailand's largest construction company, projects include mass transit systems, airports, buildings, dams, tunnels, highways, expressways, bridges, industrial and power plants, ports, jetties and dredging works, pipelines and utility works, railways, telecommunications (See website and Google Finance)
guarantee - promise that something will happen (See glossary)
a guaranteed supply - a promise to provide a certain amount of a good to someone
not immediately obvious - a fact that needs to be explained (because most people will not know why the fact is true)
import duties - taxes on goods entering a country
(Source: Bangkok Post, business, 20-11-08, Fertiliser traders push for approval of potash mine, VICHAYA PITSUWAN, link)
