Market Trends of Indonesia Fertilizer Industry
Increased Arable Land
Indonesia's fertilizer market is observed to have positive growth for an increase in arable land in the country. According to FAO, the arable land in Indonesia has been increasing over the years. In 2017, the total arable land in the country accounted for 52 million hectares, which increased to 57.0 million hectares in 2019. The positive correlation between arable land and fertilizer consumption makes the Indonesian fertilizer market fluctuate according to arable land. Hence, the increase in arable land drives the growth of the fertilizer market.
Improved agricultural development in recent years, along with commercialization, industrialization, and urbanization, has led to significant changes in agricultural production systems. The adoption of modern farming methods has encouraged the use of fertilizers across various agricultural farms in Indonesia.
The strongest forces driving the demand for fertilizers include the need for crop intensification (to increase yields per acre) to close the yield gap. Therefore, the rise in arable land and the increased demand for quality fertilizers to enhance the domestic production of crops are anticipated to drive the market during the forecast period.
Support from the Government through Subsidies
Nitrogenous fertilizer application is observed to be high in the country. According to the Fertilizer Producer Association, among all the fertilizers, urea contributes to nearly 56% of the country's fertilizer demand. Improved agricultural development in recent years, along with commercialization, industrialization, and urbanization, has led to significant changes in agricultural production systems.
The most dominant fertilizer produced and used in the country is urea, followed by TSP (triple superphosphate), AS (ammonium sulfate), and KCI (potassium chloride). Farmers in Indonesia generally use urea fertilizers for food crops, estate (perennial), and horticulture crops. Urea is the most-traded nitrogenous fertilizer. There is high demand for exports of urea fertilizers from several countries, such as Vietnam, Singapore, Thailand, and the Philippines, which augments the demand for the production of urea fertilizers in the country.
Ammonium sulfate is another widely used fertilizer in the country. Rice fertilizers frequently use ammonium sulfate in flooded fields because nitrogen is present in the ammonium form, and it is the preferred option over using nitrate fertilizers to avoid denitrification losses. This signifies that there is a growing demand for fertilizers in the country, resulting in the growth of the market during the study period.
