Fertilizer price is about 20 ~ 30% higher in 2008 than last year on average. During spring plowing
in 2008, fertilizer price was 30 ~ 50% above the same period of last year and potassium price was
100% higher. But farm product price in 2008 merely move up less than 10% against last year. The
wholesale prices of wheat, corn and paddy are 9.1%, 9.4% and 6.9% higher than last year
respectively. Soybean and cotton prices are below last year.
The returns from farm production are less this year than last year, mainly attributable to the
fertilizer price hike, especially the price hike in the first half of 2008. The added cost of farm
production cannot be offset by limited grain price growth, yield improvement, government’s
increased farm material subsidy, etc. The grain/fertilizer price ratio tumbled to a record low in the
third quarter of 2008. As high fertilizer price hampered farmers’ purchasing power, fertilizer
consumption, especially DAP and potassium, went down significantly in the second half of 2008.
Thanks to fertilizer price slump and the government’s policy to prop up grain price, grain/fertilizer
price ratio picked up markedly in the fourth quarter of 2008, conducive to the recovery of fertilizer
consumption.
Fertilizer price is predicted to linger low in the first half of 2009. The prices of urea, DAP, NPK, etc.
are presumed to drop during spring plowing next year on the year-on-year basis. Farm product
price is predicted to keep climbing under policy support. It is anticipated that wheat/urea price ratio
and wheat/DAP price ratio may rise above 0.36 and 0.28 ~ 0.3 in 2009 respectively. In addition,
farmers are expected to receive a fertilizer subsidy of RMB700 ~ 800/ha. in 2009.
