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If rising fertilizer prices are like passing a baton, are you afraid? Author/Source: China Fertilizer Network Date: 2020-03-18 Clicks: 78 Before the New Year, many people were not optimistic about the fertilizer market this spring; yet an outbreak of the pandemic led to a mismatch between supply and demand, causing fertilizer prices to rise rapidly. However, recently major fertilizer stocks have shown signs of weakening once again; although it isn’t yet very obvious, it is still something that cannot be ignored. Is this some kind of game of passing the drum? Fertilizer prices rose collectively. Before the Spring Festival holiday, the purchase price of urea by compound fertilizer manufacturers in Linyi, Shandong, was 1,700 yuan; by mid-March, this price had risen to 1,830–1,840 yuan ； Before the Spring Festival holiday, the average ex-factory price of 55% ammonium phosphate in Hubei was around 1,750 yuan, while the arrival price of 64% diammonium phosphate in Heilongjiang was around 2,350–2,420 yuan. By mid-March, these prices rose to around 1,950–2,000 yuan and 2,500–2,530 yuan respectively ； Before the Spring Festival holiday, the ex-warehouse price of 62% potassium chloride in powder form for export was around 1960 yuan; the factory price of 52% fully water-soluble potassium sulfate in powder form in Hebei was around 2550–2600 yuan. By mid-March, these prices rose to around 2100–2150 yuan and 2800 yuan respectively ； Before the Spring Festival holiday, the mainstream factory prices for 45% general-purpose series sulfur-based compound fertilizers were around 2000–2150 yuan; by mid-March, this price had risen to around 2150–2350 yuan. The above are just some prices randomly selected by the author for comparison; it is clear that as of this spring, the prices of various fertilizers and seed varieties have increased by around 100-200 yuan. Actually, this degree of increase isn’t that significant. After all, spring is the busiest season of the year, so price increases during this period are normal. The reason why people are particularly sensitive to such increases is as follows: First, in the past couple of years, there has been a clear surplus supply in the fertilizer market; the peak selling period has shortened, prices have kept falling, and there was generally little confidence in the market for this spring before the New Year, with low levels of stockpiling as well ； Secondly, the increases mentioned above are only average comparisons; in fact, some specific products have seen much higher increases, or their prices have risen very rapidly. For example, the price of large-grained potassium chloride at ports in the Northeast increased by over 200 yuan in just half a month. A similar situation exists with the price of large-grained urea in that region. Such significant and rapid price increases are one of the main drivers behind the overall rise in fertilizer prices. **Frequent preferential policies are introduced. In fact, **great efforts have been made to ensure the progress of spring plowing and to stabilize prices. Multiple notices were issued ordering all regions not to intercept vehicles transporting agricultural supplies such as fertilizers; from 0:00 on February 17th and until the end of the epidemic response efforts, tolls on highways across the country were waived ； Optimize and simplify the administrative approval processes related to agriculture, such as those for pesticides and fertilizers, during the pandemic, and encourage fertilizer and raw material companies to resume operations ； Priority will be given to ensuring the supply of raw materials such as coal and natural gas required for fertilizer production, and the electricity and gas costs for fertilizer manufacturers will be reduced for a period of 5 months ； Organize the import and export of chemical fertilizers based on the supply and demand situation of fertilizers in the domestic market ； Increase credit support for enterprises involved in the production and distribution of fertilizers; grant 5.7 billion yuan in loans for fertilizer reserves, and 3 billion yuan in loans for agricultural inputs and technologies ； Manufacturers of key supplies for epidemic prevention and control can enjoy tax incentives, and some regions provide labor subsidies to agricultural input manufacturers that resume operations on schedule. In short, one favorable policy after another has been introduced; although the price of fertilizers has still risen, the overall increase is moderate. The most important thing is that it ensures an adequate supply of fertilizers for spring plowing – otherwise, due to the impact of the pandemic, the supply volume would surely be much lower than it is now, and price increases would become even more uncontrollable. In fact, an important reason for the increase in fertilizer prices this time is a mismatch between supply and demand; the pandemic caught everyone by surprise. Now the market is gradually returning to normal, and there are signs of price declines. Inherent pessimistic factors, such as the large contracts for potash fertilizer. Whether the previous price increases were part of a game of passing the ball around, they were certainly unexpected surprises. There were objective reasons why people were not so optimistic about the fertilizer market this spring before the New Year; the discounts offered were indeed real, so now people are once again worried about future trends, and this is just a normal return to normality. Every type of fertilizer has its own inherent drawbacks; for example, with potassium fertilizers, large-scale contracts are crucial. As the low-end prices in the international spot market have dropped to 230–240 dollars, based on past experience, the prices of new contracts in our country are likely to be around 210–220 dollars, representing a drop of 70–80 dollars compared to the current prices of existing contracts. If this is the ultimate outcome, then the apparent cost of 62% white potash at the port in the future will be only around 1,800, indicating a significant theoretical reduction compared to the market price of around 2,200. In fact, there’s not much for importers to worry about anymore. The high costs associated with inventory holding in the early stages are no longer a concern, as little of that inventory remains. Even if prices drop after orders are placed, this drop happens over time, and profits will still be achieved. It are the end-users who are really under pressure; if they don’t place orders, the large contracts might continue to be delayed, and there may not even be any goods available in the future. On the other hand, if they do place orders, the sudden signing of those large contracts could put them in a vulnerable position. In business, it’s actually always like playing the game of passing the baton; there are always those who have fun, while others end up suffering as the ones who have to take on the consequences. In these past few days, the price of urea has dropped by dozens of units; the price of phosphate ammonium hasn’t changed much, while the price of potassium fertilizers has also seen a slight decline in some areas. Does this mean that spring is coming to an end? It’s better to make some preparations early! (Adu)