Forecast of fertilizer demand in 2009

Thread Content

At present, the use of chemical fertilizers in China is shifting from continuous growth to a phase of periodic adjustment. This is because, with the acceleration of marketization, significant fluctuations in fertilizer prices have led farmers to consider the economic viability of using fertilizers. On the other hand, after years of heavy fertilizer application, the efficiency of fertilizer use has declined, and the increase in soil nutrient reserves has led to a reduction in the marginal benefits of further fertilizer input; as a result, farmers will not increase their use of chemical fertilizers significantly. Thirdly, the problem of insufficient supply of agricultural products across the country has been effectively alleviated; in some cases, there is even a surplus in supply, which reduces the incentive to invest in fertilizers. Fourth, China’s population growth implies strong demands for agricultural development; at the same time, farmers have relatively low levels of knowledge regarding fertilization techniques, so fertilizer use will not be reduced significantly as it is in developed countries in Europe and America. These four factors determine that China’s demand for fertilizers has entered a period of cyclical adjustment; it will neither increase significantly nor decrease markedly, with fertilizer usage undergoing only slight adjustments under the influence of various factors. 　　Given that the economic development trends in 2009, as well as the trends in agricultural product prices and fertilizer prices, remain uncertain, it is very difficult to accurately assess fertilizer demand. However, based on the **cyclical fluctuations in fertilizer demand, we can estimate the magnitude of these changes in fertilizer demand. Here, predictions are made for various combinations of factors, introduced separately under two scenarios. 　　In the most optimistic scenario, various measures prove effective, the economy develops steadily, agricultural product prices and fertilizer prices remain stable; agriculture continues to grow thanks to significantly increased policies supporting it, and it is assumed that weather conditions will be favorable in 2009. Under such circumstances, in line with the food production increase plan, the demand for fertilizers for the three major food crops is set to rise by 508,000 tons. However, it is estimated that the area planted with soybeans and tuber crops will continue to decline, thereby reducing fertilizer demand by 290,000 tons. As a result, the net increase in fertilizer demand for food crops will be 218,000 tons. Vegetable farms, orchards, and tea plantations are the main areas of development in some regions, and it is estimated that their area will increase. Based on past growth rates, an additional 850,000 tons of fertilizer will be needed in 2009. The area devoted to oilseeds, cotton, sugar crops, and tobacco is expected to shrink; based on past trends, fertilizer demand is projected to decrease by around 260,000 tons in 2009. China’s sectors such as horticulture, forestry, fisheries, and traditional Chinese medicine are all experiencing rapid development, and it is estimated that these sectors will require an additional 234,000 tons of chemical fertilizers by 2009. Based on the above assessments, the national demand for fertilizers in 2009 increased by 1.04 million tons, bringing the total fertilizer demand to around 51.21 million tons. The demand for nitrogen, phosphorus, and potassium was 33.59 million tons, 11.71 million tons, and 5.91 million tons respectively, representing increases of 670,000 tons, 220,000 tons, and 150,000 tons compared to the previous year. Compared to the years before 2008, both the net increase and the growth rate of nitrogen, phosphorus, and potassium fertilizers declined in 2009. 　　In the most pessimistic scenario, China’s economic development will be affected by the continued deterioration of the global economic situation. Due to factors such as declining export volumes and reduced demand, enthusiasm for production will diminish. It will be very difficult to keep agricultural product prices and fertilizer prices stable, and the demand for fertilizers could even be worse than in 2008. Taking into account the inertia in agricultural production, it is assumed that the current agricultural structure and crop planting areas remain unchanged, while the amount of fertilizer used per unit area shifts toward an economically optimal level (currently, farmers usually use the maximum amount necessary for high yields, which is often higher than the economically optimal amount). Considering China’s soil fertility levels and crop yield levels, it is estimated that the total national demand for nitrogen fertilizers will remain at the 2008 level, around 33 million tons. Meanwhile, the demand for phosphorus and potassium fertilizers is expected to decline; the demand for phosphorus fertilizers is estimated to be 11.5 million tons, while the demand for potassium fertilizers is estimated to be around 5.5 million tons.