Urea prices drop; diammonium fertilizers see a decline; will compound fertilizers not see price drops?

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Urea prices drop; diammonium fertilizers see a decline; will compound fertilizers not see price drops? Author/Source: China Fertilizer Network Date: 2019-08-20 Clicks: 54 In mid-August, the solar term of \"Liqiu\" had passed, and the weather in the north began to cool down. Just as the temperature dropped, the atmosphere in the fertilizer market also became more subdued. Recently, the autumn fertilizer market has not managed to break free from the previous stalemate; instead, the situation has worsened. Most companies are focusing on fulfilling orders received in advance, and the concept of \"charging interest on payments\" is essentially meaningless. There is little willingness on the part of downstream customers to make additional payments, with caution and wait-and-see attitude prevailing. 　　The reason for the deadlock in the compound fertilizer market is nothing other than a lack of demand. As is well known, the market conditions of other major types of fertilizers have a negative impact on compound fertilizers. Urine prices are fluctuating frequently, and the outlook for both the domestic and international markets remains uncertain; however, there are likely to be no significant fluctuations in the short term, with only minor changes occurring ； The situation for diammonium compounds is even more precarious: low export prices and insufficient domestic demand have led to a sharp drop in storage prices. Affected by a series of negative factors, there is no demand for compound fertilizers. Yet, that’s not all the bad news. 　　Firstly, there is low enthusiasm for procurement downstream. Over the past two years, in the fertilizer market across various seasons, the downstream sector has tended to act slowly, gradually starting to stock up only towards the end of the market period. The reason for this lack of enthusiasm on the part of downstream buyers is, firstly, insufficient agricultural incomes and low profits. Taking the main winter wheat production areas as an example, the yield per mu of wheat is fairly high, but the price remains low, resulting in an awkward situation where there is high production yet no real economic benefit ； The second reason is the frequent occurrence of natural disasters, which lead to reduced yields and even complete crop failures. The recent arrival of the powerful typhoon \"Lekima\" caused severe flooding in many areas; for example, Shouguang in Shandong Province, known as the \"vegetable capital\" of China, suffered massive losses of greenhouse-grown vegetables. 　　Secondly, low-quality fake products flood the market. Low crop prices and frequent natural disasters lead to a lack of enthusiasm among growers for planting, prompting them to cut costs wherever possible during the preparation phase for cultivation. This creates an opportunity for low-quality fake fertilizers; such fertilizers are significantly cheaper than legitimate brands available on the market, which caters to growers’ desire to purchase products at low prices. As a result, the pressure on distributors also decreases ； Secondly, there is a wide variety of fake fertilizers with numerous different brands, and it is often difficult for end-users to distinguish between genuine and fake products. Coupled with the excessive marketing tactics employed by those who sell fake fertilizers, such products can easily be accepted by farmers. However, the use of such fertilizers will inevitably affect the normal growth of crops. 　　Finally, heavy environmental pressure weighs on the fertilizer market. Generally speaking, July and August are the peak seasons for the production of autumn fertilizers, and the production conditions of enterprises show a gradual improvement trend. However, the overall operating rate of compound fertilizer manufacturers across the country has yet to exceed 50%; even during the traditional peak production periods, this rate has not managed to go above 50%. One reason for this is that starting from mid-to-late July, the second round of central environmental protection inspection teams began to arrive in various regions, resulting in increased pressure regarding environmental inspections in places such as Linyi in Shandong Province and parts of Lianghe ； The second reason is that as the National Day approaches, environmental air quality in the areas surrounding Beijing, Tianjin, and Hebei has attracted a lot of attention; it is rumored that fertilizer production enterprises in the vicinity of Beijing will limit their operations during that time. 　　In summary, unfavorable factors related to raw materials such as a weak and volatile urea market and sharp drops in the prices of diammonium fertilizers have contributed to a sluggish atmosphere in the autumn fertilizer market. Coupled with negative impacts on demand and supply, prices of compound fertilizers are also expected to remain weak on an overall basis. 　　(Feng Hongyang)