The situation regarding fertilizer production, supply, and prices this year

Thread Content

Question: Could you please explain how this year’s fertilizer production and supply efforts differ from those in previous years? Answer: Fertilizers are important agricultural production materials. Ensuring an adequate supply of fertilizers is of great significance for organizing spring plowing, maintaining farmers’ enthusiasm for growing crops, achieving a good grain harvest this year, and promoting economic development and social stability. First, ensuring a proper supply of chemical fertilizers is crucial for the overall health of the national economy. The Central Economic Work Conference clearly stated that the top priority for macroeconomic regulation this year is to prevent economic growth from shifting from a rapid pace to overheating, and to stop price increases driven by structural factors from evolving into significant inflation. Maintaining basic stability in food prices is an important foundation for preventing significant inflation. Ensuring the proper production and supply of chemical fertilizers contributes to the stable development of agriculture and the sustained increase in farmers’ incomes, helps to guarantee the supply of key agricultural products, and contributes to maintaining overall price stability. Secondly, ensuring a proper supply of fertilizers is an urgent necessity to motivate farmers to grow grain. Since the second half of last year, fertilizer prices have risen significantly. Currently, the retail prices of urea, diammonium phosphate, and triple-element compound fertilizers in the domestic market are 1,955 yuan per ton, 4,300 yuan per ton, and 2,900 yuan per ton respectively, representing year-on-year increases of 10.1%, 53.5%, and 61.1% respectively. The rise in fertilizer prices is mainly driven by increases in international market prices and raw material costs. Under these circumstances, ensuring the supply of chemical fertilizers is crucial in order to guarantee a continuous supply during the spring planting season and prevent shortages, which is vital for maintaining farmers’ enthusiasm for growing crops and achieving a good harvest. Thirdly, ensuring a proper supply of fertilizers is an important condition for restoring agricultural production. This year, China’s agricultural production is facing many unfavorable factors. Widespread low temperatures, rain, snow, and freezing conditions have occurred in the south, causing significant damage to crops such as vegetables and rapeseed. According to a survey by the Ministry of Agriculture, as of February 18, the area of crops affected across the country amounted to 202 million mu. Meanwhile, the northern regions continue to suffer from drought, with 166 million mu of arable land across the country affected by it. Organizing the supply of chemical fertilizers is an urgent need to facilitate the rapid recovery of agriculture in the disaster-stricken areas in the south and to ensure the smooth progress of spring plowing across the country. Question: Please provide an overview of the fertilizer supply during this year’s spring plowing season. Answer: The demand for fertilizers during spring plowing accounts for more than half of the annual total, representing the peak period for fertilizer use in agriculture. The key to ensuring a proper supply of fertilizers is to meet the needs for fertilizers during spring plowing. Under normal circumstances, the demand for fertilizers during the spring plowing period from January to May this year is estimated to be 26.6 million tons, while the available supply amounts to 27.2 million tons. Taking into account the strict control on fertilizer exports and the efforts to organize imports, the total supply of fertilizers in the first quarter should be sufficient to meet the needs of spring plowing activities. Looking at the whole year, in 2007, China’s apparent consumption of chemical fertilizers was 57.46 million tons (on a pure basis, the same below), production amounted to 56.96 million tons, imports were 6.43 million tons, and exports were 5.95 million tons; thus, the overall supply and demand were roughly in balance. In 2008, the production capacity for nitrogen fertilizers will increase by 2 million tons, and that for phosphorus fertilizers by 1.8 million tons; the total annual output of chemical fertilizers is expected to rise by about 10% compared to the previous year. The production of urea and diammonium phosphate will exceed domestic demand by around 5 million tons and 1.5 million tons respectively. Question: What are the difficulties in ensuring the supply of fertilizers? Answer: Although overall at the national level, the supply and demand of fertilizers for spring plowing are balanced, regional and variety-related disparities are quite prominent. First, snow, ice, and freezing disasters have increased the pressure on fertilizer supply. Due to disasters in parts of the south, power supply has been severely affected, resulting in abnormal production at some key phosphate fertilizer manufacturers and a decline in their operational rates. The production of diammonium phosphate and ammonium phosphate in January and February was lower than in the same period last year. Second, the inventory of high-concentration phosphate fertilizers in the northern regions is relatively limited. Due to rising prices and tight supply, some businesses are waiting to see what will happen. During last winter and this spring, fertilizer distributors reduced their stockpiling of fertilizers, resulting in a significant shortage of high-concentration phosphate fertilizers in the northern regions. Third, there is significant pressure due to rising fertilizer prices. The prices of raw materials used in fertilizer production have risen significantly. The ex-ship price of anthracite coal for domestic fertilizer production has risen by 107 yuan per ton over the past two years. 90% of the sulfur used in phosphate fertilizer production in our country is imported. At the beginning of last year, the import price was 73 dollars per ton, but it has now risen to 535 dollars, an increase of 6.3 times. This alone causes the production cost of diammonium phosphate to rise by about 1,500 dollars per ton. International market prices for fertilizers have risen sharply. In mid-February, the offshore price of urea in the Gulf of Arabia reached $380 per ton, up 20.6% on a year-on-year basis ； The FOB price of diammonium phosphate in the U.S. Gulf region is $800 per ton, up 164% year-on-year ； The FOB price of potassium chloride in Vancouver is $400 per ton, up 128.6% year-on-year. All regions should fully assess the difficulties in ensuring an adequate supply of fertilizers for spring plowing this year, take targeted measures to address regional and variety-specific shortages of fertilizers, organize proper fertilizer supply, and guide farmers in carrying out spring plowing activities. Question: You mentioned just now that there is significant pressure for an increase in fertilizer prices. Could fertilizer prices remain relatively stable during the spring plowing season? Answer: It is possible and feasible to maintain the basic stability of fertilizer prices during the spring plowing season. First, **policy measures are effective. To stabilize fertilizer prices and ensure supply in the domestic market, **a series of measures have been taken. (1) Starting from January 1, 2008, value-added tax was exempted on imported and domestically produced diammonium phosphate to support fertilizer production. (2) On January 1 and February 15, **tariff policies were adjusted twice to control the export of urea, diammonium phosphate and monoammonium phosphate, phosphorus-containing compound fertilizers, and sulfuric acid. (3) **Increase the scale of seasonal fertilizer stockpiling for 2007/2008 from 8 million tons to 10 million tons, with a focus on increasing the stockpiles of phosphate-based fertilizers.** (4) **Continue to provide price discounts on electricity and gas for fertilizer manufacturers, as well as preferential freight rates for the railway transport of fertilizers.** Second, production in the disaster area has largely resumed. At present, the power supply to fertilizer manufacturers in the affected southern provinces and regions such as Guizhou and Yunnan has been restored, and fertilizer production has returned to normal. Third, it is beneficial for manufacturing enterprises. Despite the rise in prices of coal and imported sulfur, urea producers still have room for profit, and the production of phosphate fertilizers and compound phosphate fertilizers is also profitable at current market prices. Question: Rising fertilizer prices have had a significant impact on agricultural production. **What measures have been taken to compensate farmers for the increased expenses caused by these rising prices?** Answer: To offset the increased expenses incurred by grain growers due to rising fertilizer prices, **measures such as raising the purchase prices for grain and increasing the standards for comprehensive direct subsidies for agricultural inputs are taken to maintain farmers’ enthusiasm for growing grain.** (1) Raise food prices. With the approval of the State Council, starting this year when the new harvest is available, the minimum purchase prices for grains have been increased. Specifically, the price per 500 grams of white wheat and red wheat (including mixed wheat) has been raised by 3 fen and 1 fen respectively, while the prices of japonica rice, medium-late indica rice, and early indica rice have been increased by 4 fen, 4 fen, and 5 fen respectively ； (2) Increase corn reserves. To address the difficulties in selling corn in the Northeast, **companies such as Sinograin were tasked with purchasing corn in Liaoning, Jilin, and Heilongjiang provinces at prices of 0.71 yuan, 0.70 yuan, and 0.69 yuan per jin respectively, in order to stabilize corn prices. (3) Subsidize the freight cost for rice. **By providing subsidies for japonica rice and transportation costs, efforts are made to encourage food enterprises in the south to purchase from the northeast region, thereby boosting the sales of rice there and stabilizing its prices. (4) Raise the standard for comprehensive direct subsidies. In 2008, the comprehensive direct subsidies for agricultural inputs for grain growers were further increased, with an average rise of 13 yuan per mu across the country. In addition, subsidies for farmers in the form of subsidies for high-quality seeds, subsidies for purchasing agricultural machinery, and subsidies for soil-testing-based fertilization have also seen a significant increase. It can be said that by raising grain prices and increasing subsidies for farmers, the support provided to them should be greater than the additional expenses incurred by farmers due to rising prices of agricultural inputs such as fertilizers. Question: **What other measures are taken to ensure a stable supply of fertilizers? Answer: All regions and departments will intensify their efforts to effectively implement the various measures put forward by the State Council to ensure the supply of fertilizers and stabilize prices, thereby guaranteeing an adequate supply of fertilizers for spring plowing. The following tasks should be prioritized at present: (1) Earnestly implement various preferential policies to support the production and distribution of fertilizers. All regions should earnestly implement policies such as offering price discounts on electricity and natural gas used in fertilizer production, providing preferential freight rates for the railway transport of fertilizers, exempting it from railway construction fees, and waiving value-added tax on fertilizer production, in order to support fertilizer production, reduce production and distribution costs, and stabilize fertilizer prices. (II) Make efforts to increase fertilizer production. Regions such as Yunnan, Guizhou, Anhui, and Jiangxi should take advantage of the fact that power supply has been restored to the power grid and step up efforts to increase fertilizer production. The Phosphate Fertilizer Association should work together with the local authorities to restore phosphate fertilizer production to normal levels as soon as possible, striving to achieve a significant increase in the production of diammonium phosphate in March and April compared to January and February. The development and reform commissions as well as the economic and trade commissions in various regions must organize the supply of raw materials and fuels such as electricity, gas, and coal required for fertilizer production. CNPC, Sinopec, and CNOOC must ensure a supply of natural gas for fertilizer production enterprises. Coal enterprises should earnestly fulfill the supply contracts signed with fertilizer enterprises. (III) Strengthen the organization and allocation of resources. The railway authorities must continue to make every effort to ensure the transportation of supplies urgently needed for spring plowing, by allocating more transport capacity to items such as fertilizers and pesticides. Priority should be given to these shipments in terms of scheduling, allocation of air space, loading onto trains, scheduling of departures, and clearance for transit, so as to fully meet the demands related to the transportation of supplies for spring plowing. The supply and marketing cooperatives in the three northeastern provinces should organize enterprises to increase phosphorus fertilizer purchases in order to cover the regional supply and demand gap. The Phosphate Fertilizer Association plans to organize key phosphate fertilizer manufacturers such as Guizhou Hongfu and Yunnan Yuntianhua to sell the phosphate fertilizers they produce specifically to the regions in the ’Three Norths’, particularly the Northeast region. **300,000 tons of fertilizer from the disaster relief reserves will be deployed to assist the affected provinces in the south in restoring agricultural production. The development and reform commissions of the relevant provinces, along with the China National Agricultural Group Corporation, must ensure proper supply of this fertilizer for disaster relief, delivering it to the areas most severely affected and to the farmers there. The railway authorities should continue to treat fertilizers as priority goods for transportation, and by the end of March organize the urgent shipment of fertilizers such as diammonium phosphate, as well as raw materials for fertilizers like phosphate rock and anthracite. Special attention should be given to transporting phosphorus-based fertilizers needed for spring plowing from production areas such as Yunnan and Guizhou to consumption areas in the northeast. Development and reform departments as well as finance departments in various regions should urge the enterprises responsible for storing fertilizers during the off-season to meet the prescribed storage levels as outlined in the storage agreements, and to release these fertilizers into the market in a timely manner during the spring planting season, thereby ensuring an adequate supply in the market. (IV) Strictly control the export of chemical fertilizers. Close attention should be paid to changes in international market prices for fertilizers, and measures should be taken promptly to control the export of fertilizers and their raw materials. Fertilizer manufacturers should consider the overall situation, enhance their sense of responsibility, and take proactive steps to reduce the volume of fertilizer exports. Until the end of April, the railway authorities will not arrange transportation for enterprises to export fertilizers. For individual enterprises that use raw materials and energy supplied at preferential prices to export large quantities of fertilizers, the provinces may levy a fee on such fertilizer manufacturers equal to the difference in price between the energy and raw materials supplied at preferential rates and their market price. (5) Stabilize fertilizer prices. During the spring plowing season, all major urea manufacturers must strictly adhere to the established price policy and are not allowed to sell at prices that exceed the upper limit set for factory output prices. The ex-factory prices of fertilizers managed at the local level should also remain basically stable; in principle, they must not be increased during the spring plowing season. Manufacturing enterprises that need to adjust prices due to significant increases in the costs of raw materials such as sulfur must carefully examine their production costs and strictly control the extent of these price adjustments. During the spring plowing season, the ex-factory price of diammonium phosphate should generally not exceed 4,100 yuan per ton. For those fertilizer ex-factory prices that are already subject to market-based pricing, it is necessary to strictly implement the systems for submitting applications for price increases and registering such changes, while also controlling the frequency and extent of price adjustments. Measures such as implementing differential rate controls on the distribution of chemical fertilizers must be earnestly implemented to curb the unreasonable rise in fertilizer prices. (VI) Strengthen the supervision of fertilizer prices, quality, and the market. Price regulatory authorities at all levels shall, in accordance with the unified arrangements of the **Development and Reform Commission, organize special inspections on fertilizer prices. Strictly investigate and deal with cases where relevant enterprises fail to comply with the preferential pricing policies for electricity and gas used in fertilizer production, as well as those that use electricity and natural gas at preferential prices to produce products other than fertilizers ； Strictly investigate and punish illegal acts by fertilizer manufacturers such as selling fertilizers at prices above the set upper limit, as well as failing to follow the procedures for reporting price increases and registering price changes ； Strictly investigate and punish illegal activities by fertilizer distributors that fail to comply with regulations regarding purchase-sell price margins, wholesale-retail price margins, and maximum prices. Agricultural, industry and commerce, and quality inspection departments at all levels should strengthen quality supervision in the agricultural inputs market, crack down severely on illegal activities such as the production and distribution of fake and substandard fertilizers as well as adulteration, so as to maintain normal order in the production and distribution of fertilizers. Cases of price violations that are particularly serious and involve repeated offenses, as well as cases involving the production and distribution of fake or substandard fertilizers or products that have been adulterated, must be investigated thoroughly and made public. (7) Strengthen the monitoring of the fertilizer market and prices. All regions should strengthen monitoring of production, market supply and demand, and prices, fully keep track of changes in fertilizer production, inventory, and cost prices, and promptly study and implement measures to ensure basic stability in the market and prices. Relevant departments should strengthen information exchange, and promptly identify, study, and resolve new situations and problems that arise in the production and distribution of chemical fertilizers. (8) Guide farmers in applying fertilizers scientifically. The agricultural sector should vigorously promote soil-testing-based fertilization, strengthen training for farmers, and improve the efficiency of fertilizer use. At the same time, farmers should be encouraged to use more organic manure. Supply and marketing cooperatives at all levels, commerce departments, fertilizer associations, and large-scale fertilizer production and distribution enterprises should also enhance agricultural technical services, guide farmers in the scientific use of fertilizers, and reduce excessive fertilizer use. Currently, the supply of diammonium phosphate in the northern regions is tight; it is necessary to encourage farmers to use more other low-concentration phosphorus fertilizers and compound fertilizers in order to reduce the pressure on the supply of diammonium phosphate.