The price of urea dropping now is really bad timing

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The drop in the price of urea really came at the wrong time. Author/Source: China Fertilizer Network. Date: 2019-07-17. Clicks: 26. The recent trends in the fertilizer market are as unpredictable as the weather. At the beginning of the week, it was reported that urea prices in regions such as Shandong and the Two Rivers areas had dropped collectively, without any prior indication. Although the decline was within an acceptable range, given the weakening domestic demand for agricultural use and the lack of improvement in international market conditions, the outlook for the urea market ahead does not look favorable. If this downward trend continues for a long time, the consequences could be severe. At the current stage, one round of collection for compound fertilizers in the autumn period has taken place. Initially, companies collected payments at reduced prices due to policy incentives, such as time-limited discounts, rebates, and special offers; downstream buyers showed considerable interest in making payments. However, once these incentives were removed, companies started charging additional interest and setting minimum payment requirements, which led to a deadlock in the market. Currently, it is a critical period for the autumn fertilizer market. The sudden drop in urea prices will not only affect the future trend of autumn fertilizer prices but also have a negative impact on the growth of demand from downstream sectors. However, the water-soluble fertilizer market seems to be unaffected by this, with active trading continuing as usual. Firstly, prices are relatively stable. Compared to traditional compound fertilizers, water-soluble fertilizers have relatively high prices. Companies with competitive advantages do not make significant price adjustments; in the event of major changes in raw material costs, they can use favorable policies to adjust their own prices as well as those in the market. One reason for this is that the prices of raw materials for water-soluble fertilizers are also high, and these prices do not change frequently. Once companies set their prices based on the cost of raw materials and other factors, they can maintain those prices for a while ； The second reason is that the profit margin for water-soluble fertilizers is higher than that of traditional compound fertilizers; slight changes in raw material costs do not affect the price trend of water-soluble fertilizers, only the profit margin decreases, thereby reducing operational risks. Secondly, demand remains relatively steady. Climate varies from region to region, and planting practices also differ greatly. Regarding compound fertilizers, although the peak and off-peak seasons are not very distinct, there are still periods of low demand in most areas for a certain amount of time. With the development of the water-soluble fertilizer market in recent years, downstream demand has changed from its usual pattern. One reason for this is the large-scale adjustment in regional cropping patterns: since the profitability of traditional field crops is low, farmers have sought alternative approaches by expanding the cultivation area of cash crops, which in turn has led to an increase in demand for water-soluble fertilizers ； The second reason is that the rational use of water-soluble fertilizers can reduce water waste and fertilizer loss, thereby promoting crop growth more effectively and helping to achieve energy conservation and emission reduction. Finally, the market is relatively stable. The chaos in the traditional compound fertilizer market is worsening year by year, with issues such as passing fakes off as genuine products and substituting inferior goods for high-quality ones, which disrupts the normal order of the market and puts pressure on both companies and distributors. The compound fertilizer market faces difficulties in all seasons; apart from insufficient purchasing power on the part of end-users, the frequent emergence of alternative products also exerts pressure on it. Compared to traditional compound fertilizers, water-soluble fertilizers not only provide faster nutrient release, but are also easier to handle for companies and distributors; they better meet the general needs of end-users as well. With a stable market and widespread demand, water-soluble fertilizers have thus entered the scene. In summary, supported by factors such as downstream demand and market conditions, the water-soluble fertilizer market is expected to remain relatively stable in the short term. As the price of urea gradually weakens, water-soluble fertilizer manufacturers may adjust the extent of their discounts in the future. (Feng Hongyang)