Production and Distribution of Organic Fertilizers
Production and Distribution of Organic Fertilizers
Business Model Description
Invest in B2B / B2C models engaged in the manufacturing and distribution of sustainable agricultural products, specifically fertilizers produced from livestock byproducts that are usually discarded as waste. Examples of companies active in this space are:
Founded in 2014, Monpellets is producing ecological and environmentally friendly premium quality organic fertilizer (Pellets) from 100 percent Mongolian sheep wool since 2018. The company has the capacity to produce 2500 tons of high-performing fertilizers a year and is currently exporting to the EU and Australia. The production uses minimal water and the product reduces water usage in farming by 25 percent.
Tumen Shuvuut JSC is engaged in the provision of egg production, chicken meat and organic fertilizer. In 2020, the company started producing organic fertilizers with 4 percent nitrogen using chicken manure. The factory capacity is 4000 tons a year.
"PromonTrade" LLC was established in 2010 and currently owns several factories that produce oil, fertilizer, and bone meal from waste animal bones from slaughterhouses. The fertilizer factory has the capacity to produce 4900 tons of organic fertilizer using Italian technology. Factories are standardized with ISO 9001:2015.
Expected Impact
Increase the use of sustainable organic inputs and provide a means of living to the rural population while benefiting the environment.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Mongolia: Ulaanbaatar
- Mongolia: Tuv
Sector Classification
Food and Beverage
Development need
The food and agriculture sector has significant potential to accelerate the economy as it is considered one of the main priority sectors after mining. Mongolia needs to enhance access to adequate affordable, nutritious and healthy food for everyone, improve crop and livestock productivity and strengthen value chains and resilient systems. (1)
Policy priority
Mongolia's Vision 2050 and Five-Year Development Guidelines indicate the agriculture sector as one of the priority sectors for economic diversification. The relevant objectives include improving people's standard of living through a healthy and safe food supply and a positive living environment, as well as building an economy that focuses on exports. (2)
Gender inequalities and marginalization issues
32.9 percent of people in rural areas are living in poverty, with many living just above the poverty line. (4) Most rural families are also employed in the agricultural sector. Rural migrant families in poor areas including the vulnerable and those affected by the pandemic are less likely to have access to sufficient, healthy and diverse food products. (3)
Investment opportunities introduction
In 2021, the agricultural sector contributed 13 percent of Mongolia's GDP and employed one-third of the country's workforce (2). However, Mongolia only produced 60 percent of its vegetable consumption.
Key bottlenecks introduction
The prevalence of zoonotic diseases hinders the export of products sourced from animals.
Food and Agriculture
Development need
The population faces several health challenges regarding nutrition from obesity to insufficient dietary energy. (6) While many opt for healthy, organic food, domestic farmers are not meeting this increasing demand.(5) Rising input prices for fertilizers and livestock-feed remain a concern for herders and farmers.(3)
Policy priority
State policy on food and agriculture aims to introduce innovation to increase profit per animal (2) and increase the level of primary processing of livestock raw materials and the production of value-added products. (3) Recent government resolution seeks to develop agricultural clusters and increase domestic supply of food to eventually become food exporter countries. (7)
Gender inequalities and marginalization issues
32.9 percent of rural population are in poverty, much higher than the national average. While rural women in Mongolia are heavily engaged in the agriculture sector, only 49.7 percent are engaged in paid labor. (8) Smallholder farmers in rural and semi-urban areas are more likely to be women and they are struggling to make a profit from their produce. (5)
Investment opportunities introduction
Despite some supply chain constraints, the sector has a high potential for job creation, particularly in emerging and rural farming, value creation due to its extensive link to the rest of the agri economy and is also important for generating export-led growth.
Key bottlenecks introduction
Supply-chain constraints in export logistics are caused due to border closures resulting from regional geopolitical tensions and COVID-19 restrictions. Raw material price fluctuations are also a prevailing issue.
Agricultural Products
Pipeline Opportunity
Production and Distribution of Organic Fertilizers
Invest in B2B / B2C models engaged in the manufacturing and distribution of sustainable agricultural products, specifically fertilizers produced from livestock byproducts that are usually discarded as waste. Examples of companies active in this space are:
Founded in 2014, Monpellets is producing ecological and environmentally friendly premium quality organic fertilizer (Pellets) from 100 percent Mongolian sheep wool since 2018. The company has the capacity to produce 2500 tons of high-performing fertilizers a year and is currently exporting to the EU and Australia. The production uses minimal water and the product reduces water usage in farming by 25 percent.
Tumen Shuvuut JSC is engaged in the provision of egg production, chicken meat and organic fertilizer. In 2020, the company started producing organic fertilizers with 4 percent nitrogen using chicken manure. The factory capacity is 4000 tons a year.
"PromonTrade" LLC was established in 2010 and currently owns several factories that produce oil, fertilizer, and bone meal from waste animal bones from slaughterhouses. The fertilizer factory has the capacity to produce 4900 tons of organic fertilizer using Italian technology. Factories are standardized with ISO 9001:2015.
Business Case
Market Size and Environment
< USD 50 million
5% - 10%
Mongolia imported USD 36 million worth fertilizers, of which 415,000 were organic fertilizers. (9)
The European biological organic fertilizer market is projected to register a CAGR of 7.7% during the forecast period, 2021-2026. (10) The Global Organic Fertilizers Market is Expected to Reach Profits of USD 15.9 bn by 2030. (11)
The global organic fertilizers market revenue stood at USD 4.5 bn in 2019, and the market is predicted to advance at a CAGR of 14.1% between 2020 and 2030. Europe had the largest market share from 2015 to 2019, primarily because it has the largest organic arable land area in the world. (12)
According to NSO, in 2016, Mongolia had 17,415 small-scale and part-time smallholder farmers and/or vegetable growers. Monpellets mentioned smallscale farmers as their main users. (5)
Indicative Return
> 25%
Monpellets gross profit margin ranges from 25-40%, depending on raw material price incurred when they export their products.
Investment Timeframe
Short Term (0–5 years)
Based on increasing demand, Monpellets envision 4-5 years to generate returns if they continue to export their products based on their current sales.
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Business - Supply Chain Constraints
Market - High Level of Competition
Impact Case
Sustainable Development Need
All SDGs are directly or indirectly related to healthy and sustainable food. Meta-analysis suggests that organic agriculture can also contribute to zero hunger and food security (SDG2) by increasing nutritional value and reducing negative health impacts caused by agrochemicals. (14)
One of the main drivers of global biodiversity decline and habitat degradation (SDG15) is unsustainable, intensive farming practices that use various agrochemicals, including insecticides and herbicides (14). By supporting organic farming, habitat degradation can be significantly reduced.
Numerous studies suggest that chemical fertilizers pose risks to human health and contribute to the development of chronic diseases for farmers and people living in proximity to the field (14). Investment in this IOA reduce health issues caused by farming.
Gender & Marginalisation
Organic farming can improve the livelihood of rural and urban farmers. Rural women in Mongolia are heavily engaged in the agriculture sector. 32.9 percent of the rural population lives in poverty and is less likely to own properties and get paid for labor. (4)
Smallholder farmers, mostly women, residing in rural or semi-urban areas, make negligible returns. (5) Organic fertilizers can significantly increase their yield and prevent their land from degradation ensuring sustainability.
Expected Development Outcome
Increase organic fertilizer producers' and vegetable growers' income, thereby increasing the availability of organic, healthy food to meet the increasing demand that is currently supplied by import products.
Increase the proportion of sustainably farmed agricultural land by promoting the practice of sustainable farming.
Increase Mongolia's processing capacity to boost export earnings with increased value addition, thereby improving income for farmers. (14)
Gender & Marginalisation
Improve the lives of rural population (specifically farmers, women, and vulnerable communities) by offering high income in exchange for high-quality produce. Processing facilities will also create new jobs for people in rural areas.
Smallholder farmers will be able to increase their income through reliable affordable, organic fertilizers that will increase the value of their products and enable sustainable production, as such fertilizers have proven to have a positive impact on the soil.
Farmers who use the product and people living in the proximinity will not be exposed to toxic chemicals produced by chemical fertilizers.
Primary SDGs addressed
2.3.2 Average income of small-scale food producers, by sex and indigenous status
The average income of small-scale food producers is USD 3812.52. (2019 measured in 2011 international USD)
Information is not available as of January 2023.
8.8.2 Level of national compliance with labour rights (freedom of association and collective bargaining) based on International Labour Organization (ILO) textual sources and national legislation, by sex and migrant status
8.8.1 Fatal and non-fatal occupational injuries per 100,000 workers, by sex and migrant status 26.9 per 100,000 people.
Information is not available as of January 2023.
12.2.1 Material footprint, material footprint per capita, and material footprint per GDP
SO2 emissions embodied in imports (kg/per capita) - 2.0 (15)
Information is not available as of January 2023.
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Planet
Outcome Risks
Reduced demand for chemical-based fertilizers, and consequently have a negative impact on affiliated businesses.
If not used appropriately, biofertilizers may result in lower yields than that with conventional fertilizers, especially in the short-term.
Gender inequality and/or marginalization risk: If the price is high, small-scale, rural farmers, who are mostly women, may not be able to afford the product.
Impact Risks
If not managed properly stockpiling organic waste may pollute the environment (methane emissions). Organic waste may also produce strong odours. Dependence on imported chemical fertilizers would hamper the growth of local industries and the economy at-large, and further degrade agricultural land.
The use of non-organic fertilizers can deteriorate the health of agricultural workers due to exposure to chemicals. Every year, 9000 tons of low-grade wool is wasted and not processed, thereby resulting in a loss of value for both, herders and the country.
How much: The livestock sector will contribute to CO2 by a 16 percent reduction by 2030 in the NDC (base 2010). (16)
Impact Classification
What
Production of organic fertilizers using animal waste to create a circular economy around agricultural waste, thereby increasing profit per animal.
Risk
The supply chain is subject to regional geopolitical issues. High-priced products are not useful for meeting the demands of small, profit-driven farmers and businesses.
Contribution
With investment in marketing and raw material management, factories can work at full capacity (6500 tons) and improve per-animal income for herders and farmers.
Impact Thesis
Increase the use of sustainable organic inputs and provide a means of living to the rural population while benefiting the environment.
Enabling Environment
Policy Environment
State policy on food and agriculture aims to introduce innovation to increase profit per animal (2) and increase the level of primary processing of livestock raw materials and increase the production of value-added products (3).
Ministry of Food, Agriculture and Light Industry aims to increase the percentage of certified agricultural products up to 5 percent by 2030. (17)
Under recent government resolutions on “Food supply and safety”, the country is working to develop agricultural clusters and food production complexes. This initiative aims to secure domestic supply of food, while supporting the country to become a food exporter. (7)
Financial Environment
Financial incentives: Government-funded, consessional loans are available for SMEs from the Development Bank of Mongolia.
Fiscal incentives: Herders who provide raw materials such as sheep wool to domestic industries receive a small amount of financial incentive of USD 0.58 per kg. (19)
Wool and other agricultural byproducts are exempt from VAT. Fertilizers and other agricultural products are exempt from export tax.
Regulatory Environment
Mongolia established organic product standardization law in 2016 and standardized certification and labeling. Law is currently being reviewed with involvement from FAO.
Law on Ensuring food safety indicates that Good Agricultural Practices (GAP) should be introduced in the primary processing of food products. (18)
Marketplace Participants
Private Sector
Companies: Monpellets LLC, Tumen Shuvuut LLC, Mongolia Ecological Fertilizer LLC, PromonTrade LLC, TESO Investment
Government
Ministry of Food, Agriculture and Light Industry, Ministry of Health; Ministry of Environment and Tourism
Multilaterals
The United Nations Industrial Development Organization, Australian Aid, Food and Agricultural Organization, The Swiss Agency for Development and Cooperation, European Bank for Reconstruction and Development
Non-Profit
Mongolian Farmers Association for Rural Development (MFARD)
Public-Private Partnership
Billion Tree Initiative
Target Locations
Mongolia: Ulaanbaatar
Mongolia: Tuv
References
- (1) Food and Agriculture Organization in Mongolia (FAO). (2020). FAO in Mongolia Programmes in Projects. Retrieved on March 19, 2023. https://www.fao.org/mongolia/programmes-and-projects/fr/
- (2) Government of Mongolia, (2020). Vision 2050; Government of Mongolia (2020). Mongolia's five-year development plan guidelines 2021-2025
- (3) United Nations Mongolia. (2022). The United Nations Sustainable Development Cooperation Framework (UNSDCF 2023-2027) https://mongolia.un.org/sites/default/files/2022-07/SF%20Eng%20last%20version7-14.pdf
- (4) World Bank. (2020). Mongolia’s 2020 Poverty Rate Estimated at 27.8 Percent. Retrieved on March 20, 2023. https://www.worldbank.org/en/news/press-release/2021/12/30/mongolia-s-2020-poverty-rate-estimated-at-27-8-percent
- (5) Asian Development Bank (ADB). (2020). Vegetable Production and Value Chains in Mongolia
- (6) World Bank. (2021). Covid Survey https://www.worldbank.org/en/country/mongolia/brief/monitoring-covid-19-impacts-on-households-in-mongolia
- (7) Government of Mongolia. (2022). National Movement on Ensuring Food Supply and Security 2022-2027
- (8) Food and Agriculture Organization (FAO). (2019). Gender Analysis in Livestock Management and Interventions
- (9) Mongolian Customs General Administration. (2021). Customs statistics. https://gaali.mn/statistic
- (10) Mordor Intelligence. (2022). EUROPE BIOLOGICAL ORGANIC FERTILIZER MARKET - GROWTH, TRENDS, COVID-19 IMPACT, AND FORECASTS (2023 - 2028). https://www.mordorintelligence.com/industry-reports/europe-biological-organic-fertilizers-market
- (11) BusinessWire. (2022). The Global Organic Fertilizers Market is Expected to Reach Profits of $15.9 Billion by 2030. https://www.businesswire.com/news/home/20220215005892/en/The-Global-Organic-Fertilizers-Market-is-Expected-to-Reach-Profits-of-15.9-Billion-by-2030---ResearchAndMarkets.com#:~:text=The%20market%20is%20projected%20to,fertilizers%20help%20with%20water%20retention.
- (12) PS Intelligence. (2022). Organic Fertilizers Market Size and Share Analysis. https://www.psmarketresearch.com/market-analysis/organic-fertilizers-market-report
- (13) UB Post. (2022). Shinebayar: Mongolia imported only 30 of its fertilizer Needs. https://theubposts.com/sh-shinebayar-mongolia-imported-only-30-of-its-fertilizer-needs/
- (14) Food and Agriculture Organization (FAO). (2019). Organic Agriculture and the Sustainable Development Goals. Available at: https://www.ifoam.bio/sites/default/files/nm19_329_report_sdg_lr.pdf
- (15) Government of Mongolia. (2019). Voluntary National Review Report
- (16) Government of Mongolia. (2019). Nationally Determined Contribution
- (17) Ministry of Food, Agriculture and Light Industry (MOFALI). https://mofa.gov.mn/exp/blog/10/84
- (18) Parliament of Mongolia. (2012). Law on Ensuring Food Safety. https://legalinfo.mn/mn/detail?lawId=8911
- (19) Government of Mongolia. (2019). Regulation on monetary incentives for herders who sold their sheep and camel wool to domestic producers. https://legalinfo.mn/mn/detail?lawId=210140&showType=1