It is not excessive for phosphate fertilizer companies to request subsidies

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For the majority of phosphorus compound fertilizer manufacturers, 2008 was a quite difficult year. The irrational rise in the prices of raw materials such as sulfur in the early stage led to a significant increase in production costs. Due to normal production demands, companies are forced to raise their ex-factory prices accordingly. The market price, which is nearly a thousand yuan higher than the usual level, is beyond farmers’ affordability, leading them to use less or no high-concentration phosphate fertilizers (the amount of fertilizer applied was reduced by 1/4 compared to the previous year). During this period, although various high-concentration phosphorus fertilizers in the international market were priced at high levels, China’s regulatory authorities implemented high tariff policies on domestic fertilizer exports in order to ensure domestic market supply. The international market is closed to them, and they cannot sell their products in the domestic market, which pushes these companies into a dead end. After August, the international financial crisis broke out, causing prices of fertilizer raw materials such as sulfur in the international market to plummet. This made the expensive raw materials and products used by domestic manufacturers of high-concentration compound fertilizers a problematic burden, leading to large amounts of inventory buildup and huge losses for these companies. According to statistics, high-cost raw materials alone caused a loss of 15.6 billion yuan for the phosphate fertilizer industry, which is equivalent to twice the industry’s total profit from the previous year. Therefore, some companies request **certain subsidies. **There are currently two completely opposing views on whether companies should be given certain subsidies, and if so, whether such subsidies can be provided. The opposing view is that, under a market economy system, businesses experience both profits and losses; if they make a profit, it belongs to the company, but if they suffer losses, then taxpayers’ money should be used to compensate them – there’s no logic in that. The author believes that this view is not entirely unfounded; however, in China, **fertilizers**, which have a direct impact on food security, were not fully marketized until last year and earlier, and various policy restrictions still exist regarding their prices as well as activities related to their import and export. Of course, there are various reasons for the huge losses in the phosphate fertilizer industry, but **the policy of strict control on fertilizer exports is one of the main causes of these losses.** To meet the demands of the domestic market and thus ensure **food security**, strict control is the original intention. Last year, huge changes in the international fertilizer and raw material markets forced companies to make significant sacrifices as a result. China National Petroleum Corporation and Sinopec suffer losses due to the sharp fluctuations in international crude oil prices, and they are entitled to subsidies; the power industry incurs losses as a result of ice and snow disasters and major earthquakes, and it is also eligible for compensation. It is therefore reasonable for the phosphate fertilizer industry to request appropriate subsidies. Of course, the phosphate fertilizer industry cannot rely entirely on subsidies; it remains uncertain whether companies will receive such subsidies and how much they will amount to. Therefore, companies must rely on self-help and mutual assistance to get rid of their inventory of expensive raw materials and products as soon as possible, so as to overcome these difficulties swiftly.