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Fertilizer Sector Improvement Project Fertilizer Dealer Survey Submitted by by IFDC P.O. Box 2040 Muscle Shoals, Alabama 35662, USA www.ifdc.org March 2015 Disclaimer: The author’s views expressed in this document do not necessarily reflect views of the United States Agency for International Development or the United States Government.

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  • Fertilizer Sector Improvement Project

    Fertilizer Dealer Survey

    Submitted by

    by

    IFDC P.O. Box 2040

    Muscle Shoals, Alabama 35662, USA

    www.ifdc.org

    March 2015

    Disclaimer: The authors views expressed in this document do not necessarily reflect views of the United

    States Agency for International Development or the United States Government.

  • i

    Table of Contents

    Executive Summary .................................................................................................................. iii

    Introduction ................................................................................................................................ 1 The Fertilizer Sector of Myanmar.............................................................................................. 1

    Import Supply ........................................................................................................................ 3 Total Fertilizer Supply and Demand ...................................................................................... 4 Fertilizer Distribution ............................................................................................................ 6

    The Fertilizer Value Chain......................................................................................................... 7 The Agro-Dealer Survey ............................................................................................................ 8

    Method ................................................................................................................................... 9

    Survey Forms ....................................................................................................................... 10 Survey Method ..................................................................................................................... 11 Analytical Methods .............................................................................................................. 12 Results .................................................................................................................................. 12

    Correlation Analysis ................................................................................................................ 15

    Fertilizer Sales Volume Analysis ........................................................................................ 16 Sales Volume Analysis ........................................................................................................ 17 Agro-Dealer Licensing ........................................................................................................ 19

    Total Fertilizer Sales by Dealer Size ................................................................................... 20 Total Fertilizer Sales for Ayeyarwaddy Region by Dealer Size ...................................... 22 Bago Region ..................................................................................................................... 23

    Yangon Region ................................................................................................................ 24

    Dealer Fertilizer Sales and Nutrient Ratios ......................................................................... 25 Dealer Arrangements for Purchasing Fertilizer ................................................................... 25 Supplier Support .................................................................................................................. 27

    Farmer Purchases ................................................................................................................. 29 Farmer Fertilizer Product Choice and Knowledge .............................................................. 30

    Fertilizer Quality .................................................................................................................. 31 Seed Sales ............................................................................................................................ 31 Pesticide Sales ...................................................................................................................... 32 Constraints for Agro-Dealers ............................................................................................... 32

    Training Requirements ........................................................................................................ 34 Fertilizer Quality and Control .............................................................................................. 35 Interest in Urea Briquette Sales and Production .................................................................. 35

    Scaling of Survey Data ........................................................................................................ 36

    Summary and Recommendations ............................................................................................ 36 Annex 1. Survey Form ............................................................................................................. 39 Annex 2. Ayeyarwaddy Fertilizer Sales 2014 ......................................................................... 48

    Annex 3. Fertilizer Sales in Bago Region 2014 ....................................................................... 50 Annex 4. Fertilizer Sales for 11 Agro-Dealers in Yangon Region 2014 ................................. 53 Annex 5. Seed Sales by Region and Dealer Size ..................................................................... 55 Annex 6. Pesticide Sales and Margins for All Agro-Dealers by Region ................................. 60 Annex 7. Scope of Work .......................................................................................................... 61

  • ii

    Acronyms and Abbreviations

    AS Ammonium Sulfate

    CAN Calcium Ammonium Nitrate

    DAP Diammonium Phosphate

    FSI Fertilizer Sector Improvement

    GSSP Granulated Single Superphosphate

    GTSP Granulated Triple Superphosphate

    IFDC International Fertilizer Development Center

    K2O Potash

    LUD Land Use Department

    MADB Myanmar Agricultural Development Bank

    MAP Monoammonium Phosphate

    MOAI Ministry of Agriculture and Irrigation

    MOP Muriate of Potash

    N Nitrogen

    NPK Nitrogen, Phosphorus and Potassium

    P2O5 Phosphate

    SOW Scope of Work

    UDP Urea Deep Placement

    USAID United States Agency for International Development

    Importer/Distributor A company importing fertilizer and distributing in Myanmar

    Distributor An agro-dealer distributing more than 100,000 50-kg bags of fertilizer

    at a regional level to agro-dealers with few sales to farmers.

    Agro-dealer Any company selling fertilizer and other agro-inputs at wholesale and

    retail level with annual sales of less than 100,000 50-kg bags of

    fertilizer.

    Large agro-dealer Any agro-dealer with annual fertilizer sales of between 20,000 and

    100,000 50-kg bags

    Medium agro-dealer Any agro-dealer with annual fertilizer sales of between 1,000 and

    20,000 50-kg bags

    Small agro-dealer Any agro-dealer with annual fertilizer sales of less than 1,000 50-kg

    bags.

  • iii

    Executive Summary

    Efficient and adequate supply and use of agro-inputs, fertilizer, seed and pesticides is

    essential for the Myanmar agrarian sector. This report summarizes findings from a previous

    policy scoping study of fertilizer procurement, distribution and quality control1 and reports on

    a random sample survey of 67 fertilizer agro-dealers in the Ayeyarwaddy, Bago and Yangon

    regions of Myanmar. The survey was conducted in March 2015 and was designed to

    characterize these businesses and segment them by resource level, capabilities and inputs

    knowledge. These dealers are integral to the objectives of the Fertilizer Sector Improvement

    (FSI) project funded by the United States Agency for International Development (USAID).

    The capacity of agro-dealers to provide factual technical and economic information to their

    farmer customers on the appropriate selection of agro-inputs for crops is essential to meet the

    FSI objectives.

    There are 3,093 fertilizer resellers in Myanmar registered with the Land Use Department

    (LUD) of the Myanmar Ministry of Agriculture and Irrigation (November 2014). Of these,

    1,341 are located in the three FSI project regions. A 5% random sample of these dealers were

    surveyed, segregated and proportioned by gender of the managers. Twenty-four percent of

    these businesses are owned by females, but 36% are managed by females.

    Extensive data were collected from each of the dealers interviewed ranging from education

    and business experience of the managers to business size, fertilizer storage capacity, details

    of fertilizer, seed and pesticide purchases and sales in 2014, other product activities, business

    constraints, support from the major fertilizer importing and distribution companies and dealer

    training requirements.

    Data were analyzed first by comparing management gender differences, and although the

    female-managed businesses had lower fertilizer sales than male-managed businesses and

    smaller storage capacities, there were no other significant differences in business activities.

    Of note is that female managers were asked for advice by farmers to the same extent that

    male managers were asked.

    1 Myanmar Fertilizer Policy, IFDC, Fertilizer Sector Improvement Project, USAID, August 2014.

  • iv

    Data were then analyzed by segregating based on the volume of annual fertilizer sales into

    four categories. These are: (1) area distributors with annual sales of more than 100,000 50-kg

    bags; (2) large agro-dealers with annual sales of between 20,000 and 100,000 bags; (3)

    medium agro-dealers with annual sales of between 1,000 and 20,000 bags; and (4) small

    agro-dealers with less than 1,000 bags in annual sales.2 Results are expressed by region and

    in total for the three regions.

    There were two dealers in the first category in the Bago region both with annual fertilizer

    sales of over 300,000 bags, most of which were urea, and with the bulk of sales to large- and

    medium-sized dealers and a few small dealers referred to as sub-dealers. The total income

    from fertilizer sale markups (the difference between purchase cost into store and selling

    price) is estimated at more than Kyat 67,000,000 per annum.

    The 10 large dealers with average annual sales of 25,500 bags generated annual fertilizer

    markup income of Kyat 3,341,000. The largest category of dealers, 33 medium-sized, had

    average annual fertilizer sales of 5,459 bags and a total fertilizer markup income of Kyat

    277,173. In contrast, the 22 small dealers only had average annual fertilizer sales of 263 bags

    and a fertilizer markup income of Kyat 31,688. Fertilizer markups averaged around 5.5%

    over the whole product range. The large- and medium-sized dealers rely as much on sales to

    sub-dealers as they do on sales to farmers, and this effectively increases the farm reach of

    these dealers. The small dealers located in village tract and village locations are essentially

    sub-dealers who provide a supply service to local farmers in isolated areas in response to

    local farmer demands.

    Table 1. Percent of Agro-Dealers by Size Category Selling Agro-Inputs

    Class Sample No. Fertilizer Seed Pesticides Farm Tools

    Small

    Machinery

    Animal

    Feed

    Veterinary

    Products

    Consumer

    Goods

    Distributors 2 100% 100% 100% 100% 0% 50% 0% 0%

    Large 10 100% 90% 40% 50% 20% 10% 10% 0%

    Medium 33 100% 91% 52% 58% 36% 6% 0% 9%

    Small 22 100% 82% 41% 50% 27% 5% 0% 5%

    2 Terminology: Agro-dealers are defined as any retailer of agricultural inputs (fertilizer, seed, pesticides, small

    farm tools, small farm machinery, animal feed or veterinary products). Distributors essentially supply large and

    medium dealers with very few retail sales.

  • v

    Other agro-input sales essentially consist of vegetable seed packages for virtually all dealers

    and small containers of the three most popular rice pesticides (Phyuradan, Cyperpar and

    Cyclone) by half the dealers together with small farm tools, mainly sprayers, and one-third of

    the dealers sell some small farm machinery such as power tillers in the Ayeyarwaddy and

    Bago regions. Livestock products are sold by less than 10% of the dealers. Sales of consumer

    goods are confined to less than 10% of the medium and small dealers. Markups range from

    10% to 15% on seed and from 15% to 20% on pesticides. The limited scale of seed and

    pesticide sales with higher markups than on fertilizers by nearly all dealers adds to the limited

    profitability of agro-input marketing. A few dealers have secondary business lines such as

    construction material or fuel, and many of the small dealers also sell consumer goods. The

    larger dealers generate sufficient income to overcome the seasonal cash flow peaks associated

    with agro-input selling.

    With the exception of the distributor category, dealer constraints are essentially financial.

    Ninety percent of all purchases are for cash, with only three of the large fertilizer companies

    providing products to dealers with short-term credit facilities. This burden is, of course,

    passed on to farmers, and 40% to 50% of sales to farmers are for cash. The remaining sales to

    farmers are on a crop cycle basis, with credit extended to farmers until harvest time and

    monthly interest charges of 2-3%. As long as farmers have a good crop, dealers indicated that

    cash repayments are always made. There is an obvious need for formal affordable credit

    products matched to dealer and farmer needs.

    The second major constraint for agro-dealers is the lack of product knowledge and capacity to

    provide advice to farmers. Dealers reported that farmers obtain their information on product

    use from other farmers and through observation of neighbors fields. This reinforces the

    findings of the recent farmer survey.3 As a result, more than 70% of farmers know what they

    want when purchasing fertilizer but not necessarily the correct balance of plant nutrients. The

    lack of farmer understanding of balanced crop nutrition is apparent when one considers the

    product mix that they buy from dealers. The estimated average total fertilizer nutrient ratio of

    N to P2O5 to K2O is 5.5:1.3:1, and in the Ayeyarwaddy region this ratio is 9:2:1. In

    comparison the Department of Agriculture Research (DAR) recommends a ratio of

    3 Report on Chemical and Organic Fertilizer Knowledge, Concerns and Market in Relation to Interests of Small Holder Farmers in Myanmar, Food Security Working Group, May 2015.

  • vi

    approximately 3:2:1. The overuse of nitrogen especially as urea is very apparent, and the

    need for farmer and dealer training in this area is paramount.

    Dealers recognize their lack of product knowledge, and 80-100% of all medium and large

    dealers, respectively, requested training in this area, especially for fertilizers and pesticides.

    There is also a strong desire to receive training in agro-input marketing and business

    management. The small dealer category has a much lower desire for training.

    It is recommended that the FSI project concentrates on the large- and medium-sized agro-

    dealers in the three regions mentioned above. It is estimated that there are 600 of these agro-

    dealers, and this should be within the capacity of the project to provide training. The focus

    can be narrowed by selecting dealers with the largest number of sub-dealers. Two major areas

    of training are recommended: product knowledge, especially for fertilizers and pesticides,

    and agro-input marketing and business management. Where possible training should start

    with dealers and then follow up with both dealers and farmers in joint training sessions.

    About 20% of all dealers indicated interest in manufacturing urea briquettes. The premises of

    most dealer shops are too small to accommodate briquette manufacture, so interest was

    confined to those large- and medium-sized dealers who have warehouses. From the survey

    analysis of fertilizer sales, it would be prudent to concentrate manufacture with these dealers,

    especially those with established business relations with a large number of sub-dealers.

    The opportunity exists for the FSI project to have a considerable impact on the fertilizer

    dealer network and, by implication, on farmers.

  • 1

    Fertilizer Sector Improvement Project

    Fertilizer Dealer Survey

    Introduction

    This survey of a random sample of agro-input dealers in the Ayeyarwaddy, Bago and Yangon

    regions of Myanmar was conducted in March 2015 as a follow on to a rapid fertilizer policy

    study conducted in August 2014 under the Fertilizer Sector Improvement project (FSI)

    implemented by the International Fertilizer Development Center (IFDC) in Myanmar, with

    funding by the United States Agency for International Development under the award number

    AID-OAA-10-1100003-00 (IFDC Grant). This project is essentially designed to introduce

    balanced use of fertilizer with urea deep placement technology into Myanmar for improved

    production and income within rice-based cropping systems for smallholder farmers, and it is

    geographically confined to the aforementioned three regions.

    The purpose of this study was to survey a representative sample of agro-input dealers in the three

    FSI project regions of Myanmar in order to characterize these businesses and segment them by

    resource level, capabilities and inputs knowledge. These dealers are integral to the objectives of

    the FSI project. Their capacity to provide factual technical and economic information to their

    farmer customers on the appropriate selection of inputs, such as fertilizer, seeds and pesticides,

    for crops is essential to meet the FSI objectives. Identification of training needs is a prime output

    of the survey. In addition, identification will be made of some of these dealers who could

    produce urea briquettes for the Urea Deep Placement (UDP) market development program of

    FSI. Full details of the Scope of Work (SOW) are provided in Annex 7.

    The Fertilizer Sector of Myanmar

    Myanmar has an open competitive fertilizer market dependent on imports for over 80% of the

    total market demand, estimated at between 1.2 and 1.4 million product tons per annum. The

  • 2

    market is dominated by imports from China, entering mainly through Muse in Shan State, and is

    dominated by urea use.

    Domestic manufacture of fertilizer is restricted to urea produced in three operating plants of

    small annual capacity by modern standards of 500-600 mt per day. Annual total production is

    around 200,000 mt urea as shown in Figure 1.

    This low production is caused by intermittent natural gas supply that creates frequent plant shut

    downs and affects physical product quality. In a carry-over from previous times when all

    domestic urea was allocated to regions and states based on recommendations from Ministry of

    Agriculture and Irrigation (MOAI) officials, domestic urea is sold to permit holders that include

    contract farm groups and individuals. The system of permits is opaque and reportedly is subject

    to rent-seeking by some permit holders who re-sell either their permits or product allocations to

    dealers.

    Myanmar has no comparative advantage in fertilizer production despite having natural gas as a

    resource for ammonia production. Myanmar is geographically located next to the huge Chinese

    fertilizer manufacturing industry that can compete with fertilizer ocean imports to Myanmar to

    within 200 miles of Yangon. Also bordering Thailand with a significant manufacturing capacity,

    particularly for NPK compound fertilizer, the sector should continue to be reliant on imported

    fertilizer.

    In November 2014, there were 124 licensed private sector fertilizer manufacturers according to

    the Land Use Department (LUD) of MOAI. However, of these manufacturers, only 50 produce

    organic fertilizer and 10 produce only gypsum. Of the remaining 64 producers, only 13

    companies are both substantial manufacturers of compound and blended fertilizers and also

    importers of substantial quantities of fertilizer. One company has commenced production of

    monoammonium phosphate (MAP) in Mandalay. Another company ceased granulation of NPK

    fertilizers due to price competition from imports. The other licensed manufacturers are very

    small operations.

  • 3

    Figure 1. Domestic Urea Production and Imported Fertilizer Sites for Myanmar

    The private sector fertilizer market is highly competitive within the country and in sourcing

    imports from China and a handful of other regional countries. There are 270 registered fertilizer

    importers and distributors, of which around 80 are serious agro-input suppliers. The remaining

    numbers are general traders who opportunistically import fertilizer for resale when the occasion

    arises. The large importers are estimated to account for about 90% of all fertilizer imports. Some

    of these large companies that have established distribution networks provide advisory and sales

    services to dealers but feel threatened by the low-cost price competition from the general traders

    and have expressed desires to have them banned under the Fertilizer Law which governs the

    operation of the industry.

    Import Supply

    Fertilizer is imported in two ways: overland by truck or sea through Yangon port. The majority

    of overland imports, consisting mainly of urea, triple superphosphate and NPK compounds from

    China, enter through the border crossing at Muse in Shan State. Products from Thailand are

    imported through Myadwaey in Kayin State and fertilizer from India through various border

    crossings in the northwest.

  • 4

    There are no published data on imports by the Customs Department, and total imports are

    estimated to be almost 1,000,000 mt per annum. Approximately 900,000 mt enter the country

    from China and small quantities from Thailand and India. Approximately 150,000 mt are

    imported through Yangon port. Nearly all product is imported in bags, although some container

    shipments of bulk product are occasionally imported.

    Fertilizer supply constraints include: Yangon port vessel size restrictions and port congestion,

    high inland freight costs, international price volatility, variable quality of Chinese urea and NPK

    fertilizers, variable natural gas supply for domestic urea production and subsequently poor

    physical quality of this urea, trade credit availability and the absence of published customs data

    that creates uncertainty for importers.

    Supply advantages for Myanmar include the access to Chinese urea at border prices below

    international norms, access to a wide range of products on the international market, including

    imports from Thailand, Malaysia, Vietnam, the Arabian Gulf and India, and well-established

    major importers.

    Total Fertilizer Supply and Demand

    Official data published by the United Nations Food and Agricultural Organization4 reported a

    total nutrient market of 129,585 mt of nitrogen (N), phosphate (P2O5) and potash (K2O) for

    2011-12 based on data supplied by the Government of the Union of Myanmar.

    Careful estimates were made of the 2014 market based on information received from major

    importers during assessment discussions in August 2014. These estimates are presented in

    Table 2. The total market is estimated at 1.14 million product tons containing approximately

    520,000 mt of primary nutrients, a fourfold increase over the FAOSTAT for 2011-12. This is

    probably due in part to the non-reporting of customs data and other limitations in market

    information reporting. Earlier estimates of fertilizer use based on official macro data5 indicate

    4 FAOSTAT, 2012.

    5. FAO Stat 2014

  • 5

    nutrient applications per cultivated hectare at 4 to 5 kg. These current estimates indicate a much

    higher use of 26 kg per hectare. Compared to other south and south-east Asian countries, this is

    still very low use.

    The estimated market for 2014 (Table 1) is dominated by urea, which accounts for 61% of the

    total product, 87% of the total nitrogen and 62% of the total nutrients. In part, this reflects the

    dominance of fertilizer use on rice and very unbalanced fertilizer applications by farmers. Due to

    documented evidence of traders mixing granulated single superphosphate (GSSP) containing

    18% P2O5 with granulated triple superphosphate (GTSP) containing 46% P2O5 and selling as

    GTSP, the registration of GSSP was withdrawn in 2013, and its import and use were prohibited.

    Stocks were still sold during 2014.

    Table 2. Estimate 2014 Fertilizer Market in Myanmar

    Product mt Percent of Total

    Domestic urea 200,000 14.9%

    Imported urea 600,000 44.9%

    Ammonium sulfate (AS) 1,750 0.13%

    Calcium ammonium nitrate (CAN) 740 0.06%

    NPK compounds 400,000 29.9%

    Ammonium phosphates (DAP and MAP) 7,000 0.52%

    Granular single superphosphate (GSSP) 2,000* 0.15%

    Granular triple superphosphate (GTSP) 90,000 6.7%

    Rock phosphate 7,500 0.6

    Muriate of potash (MOP) 20,000 1.5%

    Foliar fertilizers 4,000 0.3%

    Gypsum 5,000 0.35%

    Organic fertilizers 5,000 0.35%

    Total product 1,337,990 100%

    Nitrogen 429,610

    Phosphate 105,945

    Potash 58,150

    Total nutrients 519,565

    *Product import banned in 2014.

    The sector is regulated through the Fertilizer Law (The State Peace and Development Council

    Law No. 7/2002), administered by the LUD. This is fairly comprehensive, but it suffers from

  • 6

    many deficiencies that need to be addressed, including poor enforcement of quality standards and

    labeling.

    Fertilizer use by farmers is insufficient for optimum yields and farmers generally have little

    knowledge of the best agricultural practices and plant nutrition requirements. The Food Security

    Working Group6 observed that farmers knowledge regarding fertilizer and fertilizer use in

    general, is limited. Farmers mentioned that the way they determine what type and how much

    fertilizer they use mainly depends on what they see around them in the village. They look at what

    other farmers are using or what they were doing in the past season.

    Fertilizer Distribution

    Distribution operations are essentially partitioned between imports entering through Yangon port

    and imports entering from China through Muse from where product is distributed either directly

    to northern area districts or to Mandalay. Most transport is by truck, and transport costs are

    relatively high. Some use of rail transport is made to move product from Muse to Yangon, and

    river transport is low cost but slow from Yangon to the lower delta region. Figure 2 illustrates a

    schematic of the distribution networks.

    Figure 2. Schematic of Myanmar Fertilizer Distribution Channels

    6 FSWG, May 2015. Op cite.

  • 7

    The Fertilizer Value Chain

    A recent survey7 provided an average value chain for urea imported from China, transported to

    Mandalay and distributed to a dealer in the Mandalay region. This is presented in Figure 3. Total

    transport costs amount to $60/mt or 13% of the retail price. More important are the margins, or

    markups, for importer, distributor and retailer. The importer and distributor each show a 4.5%

    markup, which if combined by one importer/distributor amounts to 9% total markup. By

    comparison, the retailer markup is only 2.4%. Given that the turnover for importers/distributors

    is vastly more than for a retail dealer, this is regarded as excessive and illustrates why

    opportunistic general traders are attracted to fertilizer importation.

    Multiple handling and storage of fertilizer imports cannot be avoided because stocks have to be

    built in advance to meet peak seasonal demand. However, economies of scale for the larger

    importer/distributors are available. For example, one firm reduces the transport cost to Mandalay

    down to $20/mt, and rail freight (available because of the large tonnage shipped) to Yangon is

    achieved for less than the road freight from Muse to Mandalay.

    7 Hnin Yu Lwin, Theingi Myint, Shwemar Than, Nay Myo Aung, Cho Cho San, Tin Htut. 2014. Role of Fertilizer in Transforming Agriculture in Myanmar, Department of Agricultural Economics, Yezin

    Agricultural University, Yezin, Nay Pyi Taw, Myanmar.

  • 8

    Figure 3. Chinese Urea Value Chain to Mandalay Region

    The Agro-Dealer Survey

    The survey was conducted between March 1 and April 7, 2014. The objective was to provide

    information on a representative sample of agro-dealers in the three regions covered by the FSI

    project in order to provide information on the intervention strategies that would best serve the

    agro-dealers, farmers and the FSI project objectives. The survey was conducted by an IFDC

    consultant assisted by a translator and two enumerators. Valued assistance was provided by FSI

    project team members.

    64.44%

    68.75%

    80.17%

    81.68%

    86.21%

    88.79%

    90.30%

    94.83%

    96.34%

    97.63%

    100.00%

    0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00%

    fob Cost

    Clearance Charges

    Transport to Mandalay

    Finance and Other Costs

    Margin

    Transport to Wholesaler

    Storage and other costs

    Margin

    Transport to Retailer

    retailer costs

    Retail Margin

    US $/mt11 (2.4%)

    6

    7

    21 (4.5%)

    7

    12

    21 (4.5%)

    47

    53

    20

    299

    $ 464Retail Price

  • 9

    Method

    A comprehensive list of registered fertilizer dealers in the three regions as of November 2014

    was obtained from the LUD, as summarized in Table 3.

    Table 3. Registered Fertilizer Dealers in Myanmar

    Region/State

    Number of

    Registered Fertilizer Dealers

    Katchin State 68

    Kayah State 20

    Kayin State 61

    Chin State 0

    Sagaing Region 231

    Tanintharyi Region 36

    Bago Region 421

    Magway Region 350

    Mandalay Region 474

    Mon State 206

    Rakhaine State 70

    Yangon Region 178

    Shan State 344

    Ayeyarwaddy Region 634

    Total 3,093

    Source: Land Use Department, MOAI, November 2014.

    These lists were sorted by gender of the registrant. The percent of female- and male-owned

    businesses were calculated, and the sample numbers for each gender group were derived based

    on a 5% sample and a further 5% for an additional list of spare potential participants. A 5%

    sample was chosen based on time considerations in which to conduct the survey. All male-

    owned establishments for each region were allocated random numbers using Excel software

    and then resorted in ascending random number order. This was repeated for the female-owned

    establishments. The first and second 5% samples were selected from the random number sorted

    lists of establishments for both genders, starting with the lowest random number assigned. The

    sample numbers for each region by gender are shown in Table 4.

  • 10

    Table 4. Survey Sample by Gender and Region

    Region Ayeyarwaddy Bago Yangon Total

    Gender Male Female Male Female Male Female Male Female

    Owners 560 165 307 106 147 56 1014 327

    Percent 77.24% 22.76% 72.4% 27.6% 74.3% 25.7% 75.6% 24.4%

    Sample 28 8 15 5 7 4 52 15

    Managers 24 12 6 14 7 4 43 24

    Percent 66.7% 33.3% 30.0% 70.0% 63.6% 36.4% 55.2% 44.8%

    Sample 24 12 6 14 7 4 43 24

    However, when the gender of the managers were considered there were significant differences

    from ownership gender in the Ayeyarwaddy and Bago regions. For the three regions overall,

    female managers represented almost 45% of the total managers compared to 24% for female

    ownership. It was therefore decided to select samples based on the gender of the managers. A

    total of 67 agro-dealers in the three regions were surveyed.

    Survey Forms

    Survey forms were field tested and modified to reflect the attributes of the dealers and the survey

    objectives. Questions on frequency of all official government visits to agro-dealers were dropped

    except for LUD and MOAI extension department visits related to quality control and fertilizer

    sampling. Questions on sales for 2012 and 2013 sales were abandoned when it was obvious that

    no formal records were maintained by most dealers. The final survey form is shown in Annex 1.

    Information on fertilizer, pesticide and seed sales for 2014 were recorded together with purchase

    and selling prices. Sales data for fertilizer appeared to be accurate to the nearest 10-20 50-kg

    bags, but data on pesticides and foliar fertilizers were more suspect. Seed data was infrequent

    and variable in quality. One set of questions on constraints to business were difficult to

    comprehend by most dealers who interpreted the questions as questions about constraints

    imposed by government. Elaboration of the questions had to be made by the enumerators.

    It was also obvious that the agro-dealers had little knowledge of the crop areas in their respective

    locations, and any attempt to obtain such information was abandoned and replaced by listing the

    main crop markets in the local market area for each dealer.

  • 11

    The survey questions also inquired about training wants, and after a brief presentation on urea

    deep placement technology (UDP) questions were asked as to whether the dealers would be

    interested in selling and/or manufacturing urea briquettes.

    In addition, the survey recorded:

    1. Details of ownership and manager and employees by gender.

    2. Land and mobile phone numbers and e-mail addresses (which were minimal in number).

    3. Number of stores owned, storage capacity for fertilizer in stores and warehouses.

    4. Number of sub-dealers supplied.

    5. Number of farmer customers.

    6. Number of local competitors.

    7. Purchasing and processing activities of farm products.

    8. Summaries of supply companies sales terms and support provided.

    9. Farmer knowledge and sales terms to farmers.

    Survey Method

    The survey was conducted between March 3 and April 3, 2015. During the first three weeks, the

    survey team consisted of two enumerators, the IFDC consultant and a translator. Where possible

    due to the convenient location of two randomly selected survey participants, the enumerators

    conducted interviews on their own after the first week, allowing for faster coverage of the

    survey. In the final week, the enumerators completed the survey alone in the southern

    Ayeyarwaddy region. Survey forms were completed in both Myanmar by the enumerators and

    English by the consultant with translator.

    Apart from two instances where it was impossible to travel to the dealer locations in the survey

    vehicle, all randomly selected dealers were located. However, the LUD lists appeared to be

    outdated in many instances, and randomly selected dealers were found to be out of business and

    were replaced with others of the same gender from the random list of spares.

  • 12

    In the Yangon region, it became clear that the random sample included dealers located within the

    urban area of Yangon city. These dealers were small shops selling a few garden fertilizers and

    chemicals or were large regional distributors or importers. It was decided to eliminate all

    randomly selected agro-dealers registered as fertilizer sellers that were located in the city area

    and replace them with agro-dealers from the random selection of agro-dealers in rural areas of

    the Yangon region. Complete cooperation was achieved from the interviewed agro-dealers in all

    regions.

    For logistical reasons, the Bago region was split into east Bago and west Bago, but the data were

    analyzed for the whole region.

    Analytical Methods

    The data were analyzed using Excel spreadsheets with a concentration on fertilizer purchases,

    sales, margins and storage capacity. The data were sorted by gender of the managers and by

    fertilizer sales volume. Four categories were defined in this latter separation: annual sales over

    100,000 50-kg bags; sales between 20,000 and 100,000 bags; sales between 1,000 and 20,000

    bags and sales under 1,000 bags. These four categories were defined as district distributors, large

    dealers, medium dealers and small dealers, respectively. All data was summarized and analyzed

    at regional levels and in total.

    Certain correlations were tested such as annual sales volume and storage capacity, and the annual

    total markup from fertilizer sales in 2014 was estimated from the survey data for each category.

    A simple structural analysis was completed to estimate the total number of each class of dealers

    in each region.

    Results

    Gender Comparisons: Overall, the sample population of agro-dealers owned by females was

    approximately 22%, while the proportion managed by females was 36%. Data were analyzed,

    therefore based on the gender of the managers as it is postulated that the services provided to

    farmers may reflect the managers ability rather than ownership.

  • 13

    Table 5 shows a comparison of major characteristics between female- and male-managed agro-

    dealerships in the survey sample and averages for the total sample. The only significant

    differences are for annual sales and storage capacity. The male-managed group includes two

    large (over 100,000 bag sales per annum) and when these are excluded the average sales data for

    this group falls to 9,039 bags, which is 29% higher than the average female-managed agro-

    dealership. Importantly, the female-managed agro-dealers reported a similar level for farmers

    asking advice, which is interpreted as a reflection of knowledge level of the manager rather than

    any gender bias. There is no significant difference in the number of stores owned, although the

    size of stores as measured by the fertilizer storage capacity at the stores is much lower for

    female-managed stores in the Ayeyarwaddy and Bago regions. The reverse is true in the Yangon

    region. A high proportion of the dealers sell seeds (88% of the total for both genders) in addition

    to fertilizers. However, most of the seeds are small packets of vegetable seeds. Just under 50%

    sell pesticides, albeit in small volumes and package sizes, and around 55% of all agro-dealers

    sell small tools, mainly spraying equipment. Approximately one-third of the agro-dealers sell

    small farm machines, such as small cultivators, but none surveyed handle large farm machinery.

    Animal feed and veterinary product sales are limited to less than 7% of the stores. There is a

    significant difference between regions regarding the sale of consumer goods and non-agricultural

    goods such as construction materials, fuel and oil. Approximately 40% of agro-dealers in the

    Ayeyarwaddy region and 15% in the Bago region sell non-agro-inputs, and in the Yangon

    region, none of the survey respondents sold these items. The explanation may be that the

    isolation of many stores in Ayeyarwaddy provided an opportunity to stock other items, and in the

    Yangon region, competition from others and the closeness of the Yangon city markets precluded

    the opportunity to trade in these items.

  • 14

    Table 5. Major Characteristics of Agro-Dealers by Management Gender

    Characteristic

    Ayeyarwaddy Bago Yangon

    Total for

    Three Regions

    Female Male Total Female Male Total Female Male Total

    24

    Female

    43

    Male Total

    Ownership 22.22% 77.78% 100% 30% 70% 100% 27% 73% 100% 22% 78% 100%

    Manager gender 33.33% 66.67% 100% 35% 65% 100% 45% 55% 100% 36% 64% 100%

    Education (years) 11.5 12.09 11.89 12 11 11.3 13.4 12.7 13 12.04 11.82 11.89

    Business experience 15.25 9.21 11.22 10.3 13.1 12.1 6.4 13 10 11.96 10.91 11.28

    Female employees 0.5 0.3 0.37 0.3 1 0.75 1.8 1 1.36 0.71 0.62 0.65

    Total employees 1.67 1.42 1.5 0.6 3.5 2.45 2.6 1.7 2.09 1.54 2.07 1.88

    No. Stores 1.33 1.08 1.17 1 1.8 1.55 1.6 1 1.27 1.29 1.3 1.3

    Storage Capacity (bags) 348 1290 976 181 2,350 1,591 538 308 413 339 1474 1,067

    Warehouse availability 42% 21% 28% 43% 54% 50% 20% 17% 18% 38% 30% 33%

    Warehouse Capacity (bags) 1,750 1,817 1,794 771 2,646 1,990 140 500 336 1129 1884 1,613

    Re-bag in small bags 83% 71% 75% 71% 69% 70% 40% 0% 18% 71% 58% 61%

    Sell to sub-dealers 58% 46% 50% 71% 69% 70% 60% 50% 55% 54% 47% 52%

    No. of sub-dealers 3 4 3.9 5 17 12.9 22 3 11.7 7.13 3.91 6

    Sell to dealers (wholesale) 50% 29% 36% 43% 62% 55% 40% 67% 55% 38% 33% 37%

    Total fertilizer sales (bags) 9,400 7,365 8,043 4,510 61,372 41,470 4,748 4,578 4,655 7,005 23,304 17,465

    No. of farmer customers 128 160 149 226 1,023 744 2,504 337 1,322 651 446 519

    No. of competitors 9 13 11.6 7 5 5.4 3 5 4.45 7 9 9

    Farmers know wants 75% 71% 72% 82% 58% 67% 57% 77% 68% 73% 68% 70%

    Farmers ask advice 36% 34% 35% 39% 52% 47.50% 26% 31% 29% 35% 39% 38%

    Sell seed 25% 42% 36% 57% 62% 60% 100% 100% 100% 88% 88% 88%

    Sell pesticides 58% 50% 56% 57% 77% 70% 40% 50% 45% 38% 53% 48%

    Sell tools 42% 38% 39% 57% 54% 55% 60% 50% 55% 58% 53% 55%

    Sell farm machinery 8% 4% 6% 0% 8% 5% 60% 50% 45% 33% 28% 30%

    Sell animal feed 8% 0% 3% 0% 15% 10% 20% 0% 9% 8% 7% 7%

    Sell veterinary products 0% 4% 3% 0% 0% 0% 0% 0% 0% 4% 0% 1%

    Sell consumer goods 33% 42% 39% 14% 15% 15% 0% 0% 0% 4% 7% 6%

    Buy farm produce 33% 42% 36% 14% 31% 25% 0% 17% 9% 25% 30% 28%

    Process farm produce 21% 25% 22% 14% 0% 5% 0% 0% 0% 17% 12% 13%

    It should also be noted that about one-third of agro-dealers in the Ayeyarwaddy region purchased

    crops from farmers and 25% in the Bago region. Processing of crops by agro-dealers was even

    more limited and consists mainly of paddy and black and green gram seed cleaning for re-sale.

    Few agro-dealers in the whole survey accepted crops as payment for agro-inputs. In regard to

    agro-dealer opinions on farmers, it can be seen from Table 4 data that dealers think that

    approximately 70% of farmers know what agro-inputs they want to purchase, and less than 40%

    ask for advice.

    The main characteristic of the sample survey is that the agro-dealers are for the most part

    stockists and sellers of agro-inputs, and they are unable or unwilling to provide full technical

  • 15

    service to their customers. A more detailed examination of the survey data by fertilizer sales

    volume segregation reveals a clearer picture.

    Correlation Analysis

    Prior to the description of the results by this dealer, size classification correlation analyses with

    annual sales volume were conducted using data from the total sample of small, medium and large

    agro-dealers. The results of the correlation analysis are presented in Table 6. Annual fertilizer

    sales volumes were examined with:

    1. The number of sub-dealers served.

    2. The number of direct farmer customers.

    3. The multiple correlation with 1 and 2.

    4. The combined storage capacity of shops and warehouses owned by each agro-dealer.

    5. The number of local competitors.

    Table 6. Correlation Results for Annual Sales Volumes

    Sales Volume and: Correlation Coefficients

    Number of sub-dealers 0.31

    Number of direct farm customers 0.30

    Number of sub-dealers and farmer customers 0.34

    Combined shop and warehouse storage 0.72

    Number of competitors 0.003

    As would be expected, there is a slightly stronger correlation between sales volumes and the

    number of sub-dealers and farmer customers compared to the number of farmer customers alone.

    The use of sub-dealers expands the number of farmer customers served by each main dealer. The

    multiple correlation coefficient, however, is weak. The higher correlation between sales volume

    and combined storage capacity provides a guide to agro-dealer selection for effective

    development interventions. There is no correlation between annual sales volume and the number

    of local competitors, indicating that in spite of the high degree of competition individual

    relationships of agro-dealer managers with farmers and sub-dealers are as important as

    availability of products and services.

  • 16

    Fertilizer Sales Volume Analysis

    The distribution of agro-dealers in the survey by annual fertilizer sales volume of 50-kg bags is

    illustrated in Figure 4. Two survey respondents are omitted from this data as both had annual

    sales of over 150,000 bags, almost five times higher than the highest annual sales volume among

    the other 65 surveyed agro-dealers. These two agro-dealers are classified as area distributors, and

    both were located in the Bago region. The remaining 65 agro-dealers are classified into three

    groups: 22 Small annual sales of less than 1,000 bags; 33 Medium annual sales of between

    1,000 and 20,000 bags; and 10 Large annual sales of between 20,000 and 100,000 bags.

    Detailed analysis of the data segregated into these three groups plus the Area Distributors

    group.

    Figure 4. Distribution of Agro-dealers by Annual Sales Volume

    Distribution of Annual Fertilizer Sales per Agro-Dealer

  • 17

    Sales Volume Analysis

    The segregated numbers of agro-dealers in each region classified by fertilizer sales volume are

    presented in Table 7. Approximately 50% of agro-dealers are classified as medium-sized with

    annual bag fertilizer sales of between 1,000 and 20,000 bags and an average of 5,444 bags. It

    should be noted that foliar fertilizer sales are not included as the data from dealers was very

    vague, although nearly all dealers sold a quantity of these products. Details of the major

    characteristics by dealer classification are presented in Table 9 and general descriptions follow.

    Table 7. Number of Surveyed Agro-dealers per Region Classified by Fertilizer Bag Sales

    Volume

    Ayeyarwaddy Bago Yangon Total

    Distributor 0 2 0 2

    Large 6 3 1 10

    Medium 18 9 6 33

    Small 12 6 4 22

    Total 36 20 11 67

    The two distributors with average annual sales of over 153,000 bags have a small direct farmer

    clientele and the largest number of sub-dealer clients. They are able to take advantage of volume

    purchases from major importers and have established relationships with these firms. Although

    they sell a range of agro-products, the main business is fertilizer distribution in the East Bago

    region substituting for the Yangon and Mandalay fertilizer markets. They have little direct

    contact with farmers (average farmer clients 135) and regard their businesses as accumulators

    and suppliers of fertilizer to large- and medium-sized dealers and some sub-dealers.

    Large dealers are usually located in larger market towns, and with annual average sales of 25,500

    bags, they also have the largest number of farmer clients (1.200) plus sales to 10 sub-dealers on

    average. Some, but not all, have strong relationships with one or two major importers. The total

    average storage capacity for these dealers was recorded as larger than the district distributors due

    to four of the ten dealers having large warehouse capacity associated with non-fertilizer

    activities.

  • 18

    The most numerous medium-sized dealers with average annual fertilizer sales of 3,820 bags have

    a direct farmer base of 600 farmers each and also serve on average six sub-dealers. Few of these

    medium-sized dealers receive support or volume discounts from the major fertilizer importing

    and production firms.

    The small dealer classification (sub-dealers) with average annual sales of just 336 bags are

    generally small businesses in village or village tract locations who respond to local farmer

    demands and are able to contact medium and large dealers for fertilizer supplies on an as needed

    basis. They receive little or no support from the large fertilizer importer/manufacturing firms.

    When located near fertilizer markets with a concentration of regional distributors, supplies can

    be obtained from these markets rather than from other dealers. Sub-dealers just respond to farmer

    requests at a very local level, and although they are small and have little agro-input knowledge,

    they provide an essential last mile supply service to farmers in remote locations.

    Although 20-30% of large, medium and small agro-dealers sell farm machinery, the equipment

    sold is all of a small size such as small motorized cultivators. None of the agro-dealers in any

    category handled large farm machinery or were located near tractor and other large farm

    machinery stores.

    A comparison of fertilizer sales to total storage capacity for large, medium and small agro-

    dealers is presented in Table 8. It shows that the large and small agro-dealers have a sales to total

    storage capacity of around 2.8, and the medium agro-dealers have turnover twice this level with

    a sales to storage ratio of 5.4. The small dealers are entirely dependent on the storage capacity of

    their stores.

    Table 8. Storage Capacity and Average Sales Comparison

    Class

    Sample

    No.

    Store

    Capacity

    (50-kg bags)

    Warehouse

    Capacity

    (50-kg bags)

    Total

    Storage

    (50-kg bags)

    Average

    Sales

    (50-kg bags)

    Sales-to-

    Storage

    Ratio

    Large 10 4,980 8,150 13,130 36,852 2.81

    Medium 33 511 503 1,014 5,444 5.37

    Small 22 138 0 138 392 2.83

  • 19

    Agro-Dealer Licensing

    Agro-dealers selling more than 50 bags of fertilizer per year have to be licensed with the LUD.

    The licenses have to be renewed every three years for a nominal fee. In practice, most

    applications for a fertilizer retail license are approved by the local office of the MOAI extension

    service. Only minimal requirements in terms of shop space are necessary, and there are no

    guidelines on the maximum number of licensed agro-dealers in any location. This leads to a large

    number of small agro-dealers. For pesticide sales, a separate license is required, and applicants

    have to undergo a one day training program. Far more intensive guidelines should be required for

    both fertilizer and pesticide retail licenses.

  • 20

    Table 9. Major Characteristics of Survey Sample Agro-Dealers by Size Classification

    Characteristic

    2 Distributors 10 Large 33 Medium 22 Small

    Average

    for

    67 Dealers

    (Over

    100,000 bags)

    (20,000 to

    100,000 bags)

    (1,000 to

    20,000

    bags)

    (Under

    1,000 bags)

    Ownership 0% 20% 24% 23% 22%

    Manager gender 0% 40% 33% 41% 36%

    Education (years) 10.5 12.1 12.5 11.04 11.89

    Business experience (years) 7.5 16.6 9.5 11.86 11.28

    Female employees 1 1.1 0.66 0.41 0.65

    Total employees 6.5 4.2 1.52 0.95 1.88

    No. stores 1 1.8 1.3 1.09 1.3

    Storage capacity (bags) 900 4,980 511 138 1,067

    Warehouse availability 100% 80% 36% 0% 33%

    Warehouse capacity (bags) 5,000 8,150 503 0 1,613

    Total storage capacity/dealer (bags) 5,900 13,130 1014 138

    Re-bag in small bags 100% 70% 67% 0% 61%

    Sell to sub-dealers 100% 70% 52% 41% 52%

    No. of sub-dealers 21 10 6 2 6

    Sell to dealers (wholesale) 100% 80% 33% 18% 37%

    Total fertilizer sales (bags) 306,700 255,519 180,139 7,389 10,379

    Fertilizer sales per dealer (bags) 153,350 25,552 5,459 336 10,379

    No. of farmer customers 135 1,207 599 123 519

    No. of competitors 5 9 8 9 9

    Farmers know wants 88% 74% 66% 72% 70%

    Farmers ask advice 40% 43% 38% 35% 38%

    Sell seed 100% 90% 91% 82% 88%

    Sell pesticides 100% 40% 52% 41% 48%

    Sell tools 100% 50% 58% 50% 55%

    Sell farm machinery 0% 20% 36% 27% 30%

    Sell animal feed 50% 10% 6% 5% 7%

    Sell veterinary products 0% 10% 0% 0% 1%

    Sell consumer goods 0% 0% 9% 5% 6%

    Buy farm produce 50% 40% 33% 14% 28%

    Process farm produce 0% 20% 15% 9% 13%

    Total Fertilizer Sales by Dealer Size

    Details of fertilizer sales in 2014 were recorded for each dealer together with delivered prices

    into store and selling prices. These are summarized for the three regions in Annex 2, Tables 2.1

    to 2.4 for the four classes of dealers.

    The two distributors selling more than 100,000 bags had over 90% of sales as urea, only 3% as

    NPK fertilizer and smaller quantities of straight phosphate fertilizer. Surprisingly, neither

  • 21

    distributor sold muriate of potash in 2014, and no reason was given for this situation. The overall

    average markup for sales was 5.12%. This represented for each a total annual markup of K

    270,970,000, or $270,970. In addition, one business had a large animal feed business. One dealer

    purchased paddy and gram from farmers for resale but did not process these. Sales of seeds,

    pesticides and small tools rounded out the business activities, but these were minor in

    comparison to fertilizers.

    Urea sales accounted for 60% of total fertilizer sales for the ten large dealers and NPK fertilizers

    for a further 23% and 13% for straight phosphate and potash fertilizers. The overall average

    markup for bag fertilizers was 5.49%, resulting in an average annual markup per dealer of K

    30,311,817, or $30,317.

    The product mix for the 33 medium-sized dealers was more balanced than for the large dealers,

    with urea sales accounting for 50% of total sales, NPK fertilizers for 30% and straight phosphate

    and potash for 11%. The average markup on fertilizer sales was 6.02% annual fertilizer markup

    income K 6,003,412, or $6,003.

    For the 22 small dealers (or sub-dealers) selling less than 1,000 bags per annum, the product mix

    was even more balanced, with urea accounting for 48% of total sales, NPK fertilizer for 22% and

    straight phosphate and potash fertilizers for 17%. The average markup on all bagged fertilizer

    was 5.66%, resulting in an average total annual markup of K 316,433, or $316.43.

    Markup income is not gross income for the agro-dealers. Finance, labor, property costs and other

    business expenses have to be met from the markup income, and these may account for up to 30%

    to 40% of the markup income.

    The markups by agro-dealers on domestic and imported urea, representing the bulk of fertilizer

    sales, varied between 5.4% and 6.1% for domestic urea and between 5.3% and 6.9% for

    imported urea, with the largest markups being made by the large dealer group and the lowest by

    distributors. These agro-dealer percent markups in the South are higher than those reported in

    Figure 3 for retail markups on imported Chinese urea in the Mandalay region, which averaged

  • 22

    around 4.0% and left an estimated net margin for retailers of 2.4%. However, the monetary agro-

    dealer markups per bag are similar to those reported in this survey.

    Total Fertilizer Sales for Ayeyarwaddy Region by Dealer Size

    The results are presented for the Ayeyarwaddy region in Annex 2, Tables 2.1 to 2.4. In each

    series of tables, the total sales and averages per dealer are presented for the total region and for

    each of the dealer size groups.

    For the region as a whole, the most popular fertilizers were urea, 15-15-15, 10-10-5, GTSP and

    muriate of potash, with 92%, 61%, 53%, 67% and 67% of all dealers, respectively, selling these

    products. On average, the markups on all these products were slightly less than 5%. Domestic

    urea was priced at 19% below imported urea reflecting both its lower ex-factory price,

    transportation costs and poorer quality. It should be noted that the ex-factory price for domestic

    urea was reported to be K 14,500 per 50-kg bag to permit holders, and the average dealer

    purchase price of K 15,832 per bag includes transport cost and in some cases, a markup from the

    permit holders who supplied the dealers. Urea accounted for 58% of all bagged fertilizer sales in

    the region in 2014, followed by 10-10-5 (5%) and GTSP (4%). The highest markup by dealers

    was on foliar fertilizers at 17%, but the quantity relative to bagged fertilizer was small and is not

    counted in the totals.

    NPK fertilizers other than those listed in the data tables were sold by 47% of the dealers,

    accounting for a mere 2% of bagged sales.

    The average fertilizer sales (excluding foliar fertilizers) for the six large dealers were 27,710

    bags compared to 5,416 bags for the 18 medium-sized dealers and 986 bags for the 12 small

    agro-dealers. Urea sales dominated the product mix in each size group, and large and medium-

    sized agro-dealers had approximately 16% of sales as NPK fertilizers compared to 20% for the

    small dealers. The average markups per bag for all bagged fertilizer sales were K 828 (5.91%)

    for large agro-dealers, K 888 (4.87%) for medium agro-dealers and K 921 (5.33%) for small

    dealers. The resulting total markup revenues for the large, medium and small dealers were

    $6,456, $4,801 and $861, respectively. Although the small agro-dealers perform a useful service,

  • 23

    they cannot be expected to develop markets. The large- and medium-sized agro-dealers servicing

    many sub-dealers offer the opportunity for FSI interventions to have an impact.

    Bago Region

    For the 20 dealers in the Bago region, urea sales comprised 82% of the total bagged fertilizer

    sales, NPK fertilizers 10% and straights (phosphate and potash) 5%. The extreme imbalance of

    fertilizer nutrients is unfavorably biased by the sales of the two distributors, where urea sales

    recorded 96% of sales, NPKs only 3% and straights 1%. Essentially, these two dealers are

    distributors of urea in the greater Bago region. Markups for urea averaged around 5.5% and over

    all products 5.12%. Markups on single superphosphate sales averaged almost 17% and may

    reflect the shortage of this product after the ban on its further importation.

    The distributors reported markups on NPKs ranging from negative 0.6% on 16-16-16 to zero on

    15-15-15 but made up for this with other NPKs and GSSP and GTSP. It may be that they were

    unable to obtain good purchase prices on NPKs from the major importers compared to favored

    dealers who obtained volume discounts from suppliers, although this was not substantiated. In

    spite of this, the annual total markup on fertilizers is estimated at $271,122 each.

    The three large dealers in the Bago region with average annual fertilizer sales of 53,333 bags had

    a far more balanced product mix, with urea sales averaging 39% of total sales, NPKs 26% and

    straights 23%. Imported urea markups of 2,000 Kyat per bag averaged 11.1% and were the

    highest recorded in the survey. Dealer and farmer preference for imported urea and distance from

    domestic factories may have been factors. Again, a high markup on GSSP (17%) and above

    average markups on other NPKs, straights, gypsum and organic products resulted in an average

    markup of 9.0% and a total annual markup per dealer of almost $29,928.

    The nine medium-sized dealers with average sales of 6,000 bags had an even more balanced

    product mix. Urea accounted for only 33% of total sales, NPKs 49% and straights 5%. Overall

    markup on all bagged fertilizer products was 6.4%, with high levels for SSP, gypsum and

    organic fertilizers.

  • 24

    The six small dealers with average annual sales of only 325 bags each sold proportionately less

    urea (31% of total sales) and more NPKs (53%) and straights (7%). These small dealers in more

    remote areas sell products based on local farmer demand, and it appears that a lot of the demand

    is for NPKs, especially 15-15-15, in spite of the fact that there is no real agronomic basis for this

    nutrient ratio. Overall, these dealers made on average a markup of 4.9% and annual total

    markups of only $291.85 per dealer, hardly sufficient to cover operating costs.

    Yangon Region

    The 11 dealers surveyed in this region averaged 4,655 bags of fertilizer sales each in 2014. The

    product mix consisted of 49% urea, 28% NPKs and 17% straights. Average markups ranged

    from 4.48% on 16-16-8 to 9.0% on other NPKs and 12.9% on GSSP. Markups on gypsum and

    organic fertilizers were 11-12%, and overall the average bag fertilizer markup was Kyat

    1,235/bag or 6.5%.

    The one large dealer with sales of 21,000 bags in 2014 had a small product range consisting of

    urea, three NPKs and GTSP. On all products, a markup of Kyat 600/bag was made, so the

    average was only 3.19% markup. This dealer kept markups low specifically because he thought

    that his farmer customers were poor and deserved a break. The fertilizer business was run in

    conjunction with a large fuel station, and it was not considered important to make a large income

    from fertilizers.

    The six medium-sized dealers had the normal extensive range of fertilizers for sale and average

    annual sales of 4,767 bags each, with a product mix that consisted of 33% urea, 39% NPKs and

    19% straights. Average markup per bag was Kyat 1,359, or 5.75%, resulting in annual markup

    income of $6,479 each.

    The four small dealers with average sales of 403 bags only generated an annual markup income

    of $548 from a markup of Kyat 1,362/bag, or 6.65%. Their average product mix was urea 44%,

    NPKs 28% and straights 32%.

  • 25

    Dealer Fertilizer Sales and Nutrient Ratios

    Calculating from the average sales of all medium and small dealers, which better reflect actual

    sales to farmers, the average nutrient analysis ratio for N, P2O5 and K2O in 2014 was 5.5:1.6.5:1.

    This ratio reinforces the case that excessive nitrogen is being used by farmers. Table 10

    illustrates these ratios for the separate regions.

    Table 10. Average Nutrient Ratios Based on Fertilizer Sales by Medium and Small

    Dealers

    Region

    Average Fertilizer Nutrient Ratios

    Nitrogen Phosphate Potash

    Ayeyarwaddy 9 2 1

    Bago 3.8 1.3 1

    Yangon 4.1 2.5 1

    All regions 5.5 1.7 1

    Global rice data 4.2 1.3 1

    These ratios illustrate the excessive use of nitrogen on rice in the Ayeyarwaddy region. In the

    Bago and Yangon regions, the larger proportion of legume crops reduces the nitrogen

    applications relative to phosphate and potash, although excessive use of nitrogen on rice in these

    regions is also partially reflected in the data. A recent farmer survey8 found that although most

    farmers use fertilizer on rice, less farmers use chemical fertilizer during the rainy season when

    they have access to irrigation; only 70.6% as compared to 98% of farmers who dont have access

    to irrigation. During focus group discussions, farmers explained that rice production during the

    rainy season is risky, and they dont like to invest too much in rainy season rice because they

    have more reliable return on their investments in the dry season. The survey also reported that

    99.1% of farmers using fertilizer use urea, 59.3% use GTSP, 9.7% use potash and only 5.3% use

    compounds. The lack of soil testing services and appropriate fertilizer recommendations based

    on agro-economic benefits is woefully absent for farmers.

    Dealer Arrangements for Purchasing Fertilizer

    Fertilizer marketing is working capital intensive for agro-dealers due to the need to accumulate

    stocks at point of sale to meet peak seasonal sales volumes and accommodate mainly cash

    8 Op cite.

  • 26

    purchase terms from distributors. Most sales to agro-dealers are on a cash with order or cash on

    delivery basis. Formal short-term credit which accumulates interest at 2% to 3% per month is

    rarely used by agro-dealers. These situations are reflected in the survey data, and there are

    differences between the dealer size groups and regions and the supplying companies. Table 11

    illustrates that 90% of all purchase transactions by dealers were on a cash basis, and only five of

    the larger companies provided credit terms to some of the dealers surveyed.

    The main importing/distribution companies are aware of this situation and provide various but

    limited purchase and incentive programs for selected agro-dealers. These include volume in-kind

    discounts of around 3%, where typically when the dealer orders 100 bags on a cash basis he or

    she is supplied with an extra three bags for the same price. Some companies provide stock on a

    consignment basis for up to 30 days so that the dealer can sell the product within that time and

    then pay the supplier from the proceeds. Some companies provide cash terms that are based on

    paying the full account within seven to 21 days, which again provides the opportunity for dealers

    to re-sell the product before paying the supplier. All of these arrangements are based on the

    credit-worthiness of the individual dealers and from the survey not that common.

    Table 11. Sales Terms for All Dealers Surveyed

    Companies Bought From

    Number of Transaction Types

    Total Cash Credit Commission Cash % Credit % Comm %

    Awba Group 27 22 5 0 81.48% 18.52%

    Golden Lion 13 11 2 0 84.62% 15.38%

    Golden Dragon 14 12 2 0 85.71% 14.29%

    Diamond Star 30 27 3 0 90.00% 10.00%

    Shu San Trading 13 13 0 0 100.00% 0.00%

    Soe Moe Mine 6 6 0 0 100.00% 0.00%

    Golden Gey Co. 1 1 0 0 100.00% 0.00%

    Taung Paw Thar Yeshin Co. 0 0 0 0

    Marlarmyaing Company Ltd. 9 9 0 0 100.00% 0.00%

    Shwe Arhar Moe Company Ltd. 0 0 0 0

    Golden Key Company Ltd. 10 10 0 0 100.00% 0.00%

    Other 13 12 1 0 92.31% 7.69%

    Total 136 123 13 0 90.44% 9.56%

    Table 12 illustrates differences between dealer size groups and regions. Whereas over 90% of all

    transactions are for cash in the Ayeyarwaddy and Yangon regions, only 80% were for cash in the

    Bago region. This is still a high proportion but may indicate more willingness of suppliers to

  • 27

    provide credit to the medium and small agro-dealers in the region. The large dealer group in the

    Bago region averaged over 90% cash transactions. In all regions, the larger dealers with greater

    financial resources paid cash to avoid the high interest charges charged for short-term credit.

    Table 12. Summary of Purchase Terms by Dealer Size and Region

    Region Ayeyarwaddy Bago Yangon

    Dealer size All Large Medium Small All Large Medium Small All Large Medium Small

    Cash % 94 92 90 70 80 93 67 58 92 100 100 70

    Credit % 6 8 10 30 20 7 33 42 8 0 0 30

    The higher proportions of credit purchases by small dealers in all regions reflects their lack of

    financial resources and closer ties as sub-dealers to local agro-dealers, which results in credit

    being extended by agro-dealers to some sub-dealers based on knowledge that the sub-dealers

    have immediate sales prospects and can repay quickly. The higher purchase prices paid by small

    dealers compared to medium dealers is also evident in the survey data for many products (see

    Annex tables).

    There are no specific formal credit products for agro-dealers, and with over 50% of sales to

    farmers made on a crop cycle basis with repayment at harvest time, specific 180 day credit

    facilities would be very beneficial for agro-dealers and farmers.

    Supplier Support

    A simple index of major supply company support was constructed based on the number of

    services each company provided to dealers in the forms of technical literature, technical staff

    visits, sales visits, farmer meetings and field demonstrations. Some major importer/distributors

    such as Shu San Trading Enterprises, the largest importer and distributor of Chinese fertilizer,

    provide no support other than sales representative visits, while the five other major

    importer/distributors AWBA Group, Golden Lion, Golden Dragon, Diamond Star and Golden

    Key provide the most support to dealers. The ranking order does not imply any quality rating,

    just the number of survey respondents statements of the type of each of the listed services.

    Farmer meetings organized by the companies are seen by the dealers as effective promotions and

    are more numerous than field days at demonstration plots, although the surveyed agro-dealers

  • 28

    reported both an equal number of times. There were virtually no mentions of companys support

    by the small dealers in any region. Awba Group, Golden Dragon, Diamond Star Golden Lion

    companies provided the most support to medium and large dealers. The large number of services

    provided by other companies reflect the situation in the southern Ayeyarwaddy region, where

    distance from Yangon and difficult access ensures that local distribution companies provide

    localized services to dealers mainly as farmer meetings, some field days and technical materials.

    Table 13. Simple Ranking Scores of Company Promotion Services for Dealers

    Technical

    Mat. Tech. Rep

    Sales

    Rep

    Field

    Days Meetings Index Rank

    Awba Group 14 13 14 14 14 69 1

    Golden Lion 3 3 4 3 5 18 5

    Golden Dragon 8 8 8 7 7 38 2

    Diamond Star 6 6 5 6 4 27 4

    Shu San Trading 1 0 0 0 0 1 8

    Soe Moe Mine 0 0 0 0 0 0

    Taung Paw Thar Yeshin Co. 0 0 0 0 0 0

    Marlarmyaing Company Ltd. 0 0 0 0 0 0

    Shwe Arhar Moe Company 2 1 1 1 1 6 6

    Golden Key Company Ltd. 1 1 1 0 0 3 7

    Other 8 7 6 6 6 33 3

    Actual fertilizer procurement and sales for these major companies can only be estimated. The

    estimates are as follows:

    Shu San Trading Enterprises 400,000 mt

    AWBA Group 300,000 mt

    Soe Moe Mining Company 170,000 mt

    Diamond Star 100,000 mt

    Golden Lion 100,000 mt

    Golden Dragon 80,000 mt

    Estimated total annual sales 1,150,000 mt

  • 29

    Farmer Purchases

    Overall, the 67 dealers surveyed reported that 63.2% of all farmers paid cash, only 1.9% used a

    short-term credit facility from the dealers and 32.9% bought fertilizer on crop terms, repaying at

    harvest almost exclusively in cash. Dealers commented that crop term repayments were good as

    long as the farmers had a good harvest. When harvests are poor, repayments suffer and farmers

    start to incur interest of between 2% and 4% per month. Details of the structure of farm

    payments by dealer group and by region are presented in Table 14.

    Table 14. Fertilizer Purchase Arrangements by Dealer Size and Region

    Region Purchase Form Large % Medium % Small % Average %

    Ayeyarwaddy Cash 49 41 45 45

    Short-term credit 0 5 3 3

    Crop cycle terms 51 54 52 52

    Bago Cash 67 30 39 63

    Short-term credit 0 0 2 1

    Crop cycle terms 33 60 59 36

    Yangon Cash 100 67 46 70

    Short-term credit 0 3 18 4

    Crop cycle terms 0 30 36 26

    This partially reconciles with a recent farmer survey9 report that found 73% of farmers in the

    Ayeyarwaddy region borrow money for wet season rice and bean production without irrigation

    and 99% where access to irrigation is available. Borrowing sources for Ayeyarwaddy farmers

    mainly came from Farmer Associations and the Myanmar Agricultural Development Bank

    (MADB). Only 1.6% of wet season farmers borrowed from dealers and 5.4% of those with

    irrigation. Short-term credit sales by dealers was consistently low across dealer size groups and

    regions, with the exception of small dealers in the Yangon region. However, dealers reported that

    between 26% and 52% of fertilizer sales were on crop cycle terms. No interest is paid under

    these terms until seven to ten days after harvest. Only at that time is interest charged at 2-4% per

    month. Farmers may not interpret these conditions as credit, which would account for the low

    farmer survey results for dealer credit. Further clarification is needed on this.

    9 FSWG, 2015. Report on Chemical and Organic Fertilizer Knowledge, Concerns and Market in Relation to Interests of Small Holder Farmers in Myanmar.

  • 30

    Farmer Fertilizer Product Choice and Knowledge

    It was consistently reported by agro-dealers that farmers get most of their advice on fertilizer use

    from their peers and from their observations of fertilizer crop performance. As a result, it was

    reported that around 70% of farmers know what fertilizer they want and only 30% buy on the

    basis of lower price. What they want is not necessarily what is best. These observations by

    dealers are consistent with the findings of a recent farmer survey.10 In that survey, farmers placed

    only a medium level of importance on advice from fertilizer companies. It is not known

    whether this characterization includes agro-dealers. In this dealer survey only around one-third

    of farmers reportedly asked dealers for advice on fertilizers, and this was consistent in all

    regions. This situation reflects both the lack of knowledge by farmers and dealers and that

    farmers wants are not necessarily needs.

    Compound NPK fertilizer sales in 2014 by medium and small agro-dealers account for only

    10.3% of their total fertilizer sales. Data from the FSWG report implies that farmer use of

    compound NPK fertilizer on rice accounted for 11.3% of their total fertilizer use.11 The actual

    choice of compound NPK fertilizer by farmers from medium- and small-sized agro-dealers is

    shown in Table 15. 10-10-5, 15-15-15 and 16-16-16 were the most popular, each accounting for

    approximately 20% to 22% of the total compound sales.

    Table 15. Sales of NPK Fertilizers by Medium- and Small-Sized Agro-Dealers

    Medium and Small Dealers

    Products Bags Price/Bag

    15-15-15 12,292 33,142

    15-7-7 2,300 9,403

    10-10-5 12,547 17,251

    16-16-16 11,100 26,313

    16-16-8 5,675 27,574

    15-15-6-S 300 10,104

    10-10-12 1,450 8,917

    Other NPK 9,480 19,865

    Total NPKs 55,144

    10 FSWG, 2015. Op cite. 11 Derived from Table 4 FSWG, 2015.

  • 31

    It should be noted that 16-16-16 has an average price per unit NPK of K 1,096 compared to an

    equivalent price for 15-15-15 of K 1,473, which is 34% higher per kg of nutrient. This is

    indicative of the lack of understanding of fertilizer prices by both farmers and dealers.

    Soil fertility is declining in Myanmar, and the need is paramount for farmers to use balanced and

    economic nutrient applications. Soil testing services for the private sector and dealer in addition

    to farmer education are essential improvements that are needed.

    Fertilizer Quality

    Dealers were asked how many times either the MOAI extension service or Land Use Department

    officers visited their stores annually and how many fertilizer samples were taken. The average

    number of MOAI visits was one per year in the Ayeyarwaddy and Bago regions and two in the

    Yangon region. No LUD quality control visits were reported. On average, one fertilizer sample

    per year was taken with some agro-dealers reporting up to three samples and many reporting nil.

    The LUD is understaffed12 and unable to provide inspection services below the district level.

    Laboratory facilities are limited for fertilizer analysis and lacking altogether at Muse, the main

    entry point for imported fertilizer. Generally, the agro-dealers in all size categories do not have

    the facilities to adulterate fertilizer, but almost all sell small quantities of small packs of fertilizer

    for home use, and this repackaging into polyethylene bags is not controlled or monitored.

    Seed Sales

    Apart from small vegetable seed packages, which are mainly imported, there is no formal seed

    marketing system through the private sector. Between one-third and a half of all dealers sell

    vegetable seed packages. Other seed sales are restricted to less than 10% of all dealers, and the

    quantities of rice, beans and maize are very limited. The markup on vegetable seed packages

    varies from as low as 10% to as high as 25%. For all other seeds, the markups vary between 5%

    and 10%, with the exception of hybrid maize which was marked-up 15%.

    12 IFDC Myanmar Fertilizer Policy Report 2014.

  • 32

    Given the limited quantities sold and the range of markups, seeds do not contribute a great deal

    to ago-dealer markup income for most dealers, adding less than 1% to the fertilizer markup

    income.

    Pesticide Sales

    Almost 45% of dealers surveyed are selling pesticides. Each dealer was asked to provide

    information on sales and prices for the four most popular pesticides: Phyuradan, Cyperpar,

    Ahweindo and Cyclone. In some cases, there was lack of knowledge on quantities sold and

    prices and frequent reference to certain companies providing discounts of up to 35%. Overall, the

    markups averaged between 14% and 22% as shown in Annex 3. Ahweindo sales were the lowest

    of the four products, and in the Yangon region, pesticide sales were significantly lower than in

    the other two regions. The total markup income on average ranged from Kyat 2,484,000 in Bago

    to Kyat 341,000 in Yangon, and in all regions less than 1% was added to the fertilizer markup

    income.

    Pesticides are sold either by the kg or by the liter or half liter. Dealers have to undergo a one day

    training on pesticides to obtain a license to sell pesticides. There appeared to be little

    enforcement of secure and safe storage of pesticides, and dealer knowledge of pesticide use and

    safety was limited. The markup income from pesticide sales was less than 10% of the fertilizer

    markup income, except for the small dealer group where pesticides markup income added

    between 12% and 23% to the fertilizer markup income.

    Constraints for Agro-Dealers

    All dealers were asked what constraints they had on their business, and for the most part, this

    caused confusion in that the dealers interpreted the question as meaning government imposed

    constraints, and explanations of what was required were given together with a list of possible

    constraints. However, no priority was given to these lists, and the number of positive opinions

    have been expressed as the percentage of total agro-dealers for each constraint recorded. These

    are presented in Table 16. The largest proportion of responses are associated with product

    knowledge, funding and credit, while approximately one-third of all dealers in all regions listed

    low fertilizer margins as a constraint, and this reflects the level of competition in many areas as

  • 33

    referred to later for the Ayeyarwaddy region. In the Yangon region, there were generally fewer

    recognized constraints than in the other regions.

    Table 16. Summary of Agro-Dealer Constraints

    Constraints

    Total Ayeyarwaddy Bago Yangon

    (Percent of Total Sample)

    Low demand 25 31 30 0

    Limited supply 22 33 15 0

    Low margins 34 36 30 36

    Lack of fertilizer knowledge 61 64 65 45

    Lack of seed knowledge 37 33 50 27

    Lack of pesticide knowledge 40 39 50 27

    Lack of funds 51 53 60 27

    Lack of affordable credit 51 50 70 18

    Lack of storage 27 31 30 9

    Lack of government promotion 24 19 40 9

    Sample size (No.) 67 36 20 11

    Around one-third of dealers in Ayeyarwaddy and Bago cited low demand and low margins. In

    part, this may be due to intense competition in these regions due to the practice of registering

    dealers frequently by the MOAI extension service and the LUD. This situation is a positive for

    farmers, because prices are kept in check and greater choice is available, but the low overall

    profitability of small agro-dealers restrains any efforts at their marketing agro-inputs by

    providing services as well as products and indicates the need for business planning by the agro-

    dealers.

    When examined by dealer size group, as illustrated in Table 17, lack of funds, credit cost and

    availability are most important for large, medium and small dealers. Lack of product knowledge

    on fertilizers also rates high, and the lower concerns on seed and pesticide knowledge reflect the

    lower proportion of dealers that handle these products compared to fertilizer and their relatively

    small contributions to agro-dealer incomes.

    The lower financial constraints for small dealers reflects the fact that most of these order and pay

    on an as needed basis. The financial constraints for large- and medium-sized dealers reflect that

    the suppliers programs for extended payment terms or consignment sales are limited in scope and

  • 34

    that most dealers pay cash for supplies. Formal affordable financial packages suitable for dealers

    are required. Such trade credit products would allow dealers to borrow funds at a low interest

    rate for one to three months. This would allow dealers to accumulate inventory to meet peak

    demand periods.

    Table 17. Summary of Agro-Dealer Constraints by Dealer Size Groups

    Constraints

    Total Distributors Large Medium Small

    (Percent of Each Sample)

    Low demand 25 50 37 23 23

    Limited supply 22 0 25 20 27

    Low margins 34 50 34 23 34

    Lack of fertilizer knowledge 61 50 37 71 42

    Lack of seed knowledge 37 0 37 51 26

    Lack of pesticide knowledge 40 50 25 49 28

    Lack of funds 51 0 62 54 45

    Lack of affordable credit 51 0 75 51 45

    Lack of storage 27 50 12 26 32

    Lack of government promotion 24 50 37 23 18

    Sample size (No.) 67 2 8 35 22

    Training Requirements

    Over 90% of all dealers are interested in receiving training, and most (80%) are willing to make

    a small cost contribution for the training. The least interest is shown by the small dealers and the

    most by the large- and medium-sized dealers as presented in Table 18.

    The major topics selected for training subjects are fertilizers, marketing and business

    management. The lower interest in seed and pesticide training probably reflects the lower

    number of dealers handling these inputs. It is noted that both large and medium dealers have a

    high interest in pesticide training. FSI training programs aimed at large- and medium-sized

    dealers should include fertilizer and pesticide product knowledge, use and safety. In addition,

    combined training on business management and marketing are required and in demand.

    Dealers rely on farmers to make product selections but farmer knowledge on fertilizer use is

    limited. The objective of dealer training is to ensure that dealers become recognized as

    knowledgeable enough to provide advice to their farmer clients and sub-dealer clients. It is

  • 35

    therefore recommended that the FSI project training should involve dealers first, followed by

    dealers together with their small sub-dealers and finally joint dealer and farmer training.

    Table 18. Dealer Interest in Training Topics

    Topic

    Total Distributors Large Medium Small

    (Percentage of Sample)

    Fertilizers 74 100 100 80 52

    Seeds 55 100 37 57 52

    Pesticides 45 50 75 51 29

    Marketing 62 50 100 66 43

    Agronomy 44 50 37 46 29

    Business

    management

    68 0 75 83 46

    Crop marketing 45 50 50 49 30

    Sample no. 66 2 8 35 21

    Fertilizer Quality and Control

    The survey asked how many times either the extension service or LUD visited each year and

    how many fertilizer samples were taken. The answers were that there were on average only one

    visit per dealer by the extension service and none by the LUD. The number of fertilizer samples

    taken averaged one per dealer per year. As reported previously, the LUD is under-staffed to

    provide quality control activities, and these are a low priority for the MOAI extension service. In

    addition, the laboratory services available are inadequate.

    Interest in Urea Briquette Sales and Production

    After a brief description of urea deep placement technology and farmer and dealer benefits, the

    dealers were asked about their interest in both selling and producing urea briquettes.

    Approximately 40% of all dealers were interested in selling briquettes once the benefits have

    been demonstrated to farmers, and around 20% indicated interest in manufacturing briquettes.

    The premises of most dealer shops are too small to accommoda