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It is said that winter reserves are not large – how much of a demand gap remains in spring? Author/Source: China Fertilizer Network Date: 2019-02-15 Clicks: 47 The Spring Festival has just ended, and most fertilizer manufacturers have resumed work with production gradually returning to normal. As the saying goes, it’s not until the 15th that the New Year is truly over. Currently, dealers have just opened for business, and sales are moving slowly. This is due to the high prices of compound fertilizers for winter storage this year; dealers do not have large stockpiles. So, just how large will the gap in demand be during spring? Let’s analyze it carefully. First, an analysis of the fertilizer preparation situation in markets across the country. The fertilizer market in Meizhou, Guangdong remains sluggish, with the grassroots markets not yet fully operational. It is understood that rice will be planted in the later stage, but most distributors are not in a hurry to purchase compound fertilizers; there is still inventory from previous stockpiles. Although there is still some demand, most distributors prefer to wait for fertilizer manufacturers to introduce some favorable policies before considering making purchases ； The urea purchased by the distributor in advance has not yet been sold out, and there is no intention to purchase large quantities of urea at the moment; purchases will be made as demand arises. From before the festival to the present, the fertilizer market in the Lianyungang area has remained relatively calm, mainly due to the limited agricultural activities in the region during winter. It is understood that due to the low prices of cash crops such as vegetables in recent years, the area devoted to planting in spring has decreased significantly locally, resulting in reduced fertilizer use. The only time when there is a high demand for fertilizer is during the summer rice planting season throughout the year. As a result, most local dealers are not in a hurry to stock up on fertilizer and tend to adopt a wait-and-see attitude. In the Taiyuan area, corn and fruit trees are the main crops grown. The demand for fertilizers for corn increases after April, yet most distributors have not yet started stocking up on corn fertilizers; only a small amount of diammonium phosphate has been stocked. The main reason is that downstream users consider the price of compound fertilizers to be too high, with a risk of price drops in the future, so they prefer to wait until the end of February or early March to stock up in larger quantities. During the Spring Festival, the fertilizer market in the Shenyang area was largely stagnant. According to most dealers, the amount of fertilizer stocked before the festival was less than half of what it was in previous years, mainly due to the high prices of fertilizers and the high risks associated with winter stockpiling ； Additionally, the recovery of overdue payments is slow, so it is necessary to consider actions after the New Year. At present, some distributors plan to enter the market gradually after the Lantern Festival; however, for now they only intend to purchase small amounts of other fertilizers, while remaining cautious and waiting before deciding on compound fertilizers and urea. From the situation of fertilizer stockpiling in these four regions, it can be seen that the amount of fertilizer stocked in markets across most parts of the country is not large; it is particularly low in the southern and central regions. Around the Spring Festival, the volume of fertilizer arriving in the Northeast region increases slightly, but the overall average level remains around 30-40%. In some individual areas, the proportion of fertilizer stockpiled can reach 50%. Therefore, theoretically, there is indeed a significant gap in the demand for fertilizers in the coming period. Secondly, heavy snowfall hit many provinces across the country, disrupting shipping progress. After the Spring Festival, heavy snowfall struck regions such as Shandong, Hebei, Anhui, and Hubei, with particularly large amounts of snow in some areas. This severely disrupted the transportation of fertilizers, resulting in slower delivery of orders that had been placed in advance by some compound fertilizer manufacturers. However, distributors still have inventory to deal with, and there is little enthusiasm among farmers to stock up on fertilizers at the grassroots level; therefore, there is no shortage of fertilizers in the short term. But in the long run, given such a large gap in the market, could compound fertilizer suppliers face difficulties in meeting demand in the future? At present, the demand for top-dressing wheat in regions such as Shandong and the Two Rivers areas in the Central Plains has emerged, and distributors have started to sell the relevant products. However, due to severe damage to wheat crops in recent years as well as certain environmental regulations, the area planted with wheat has decreased. Although fertilization is set to begin in some areas starting in March, there is no serious shortage of fertilizers. In some places, low-cost nitrogen fertilizers such as ammonium chloride are being used as substitutes for urea; as a result, urea prices have dropped slightly in recent times, while the price of ammonium chloride remains relatively stable. The ongoing Sino-US trade war has had a significant impact on crop cultivation in the Northeast region. This year, subsidies for soybean cultivation have been increased substantially, while corn offers advantages in terms of market price and yield; as a result, it remains undecided whether to plant corn or soybeans in the future. This makes it difficult to decide whether to stock up on fertilizers for corn or soybeans. Additionally, large-scale farmers in some areas have suffered heavy losses, which will inevitably lead to a decrease in demand for fertilizers this year. After the end of February and early March, demand in the Northeast region will gradually recover, but it is unlikely to reach levels of shortage. After all, companies in the Northeast region face pressures regarding inventory and funding, and the goods at the Bayuquan port are ready to be shipped. In summary, there is no need to be overly pessimistic about the demand for compound fertilizers in the coming period, but nor should one be blindly optimistic. Of course, prices may still see some decline; it will be necessary to wait and see how market demand develops and what happens with raw material prices after the 15th day of the first lunar month. (Yang Xiaomei)