Fertilizer market enjoyed a moderate recovery after the Spring Festival, thanks to farmers?
Beijing Orient Agribusiness Consultant Limited Feb. 26 2009
Independent ? Objective ? Forward Looking Page 2 of 11
preparation for spring plowing and the government? favorable policy such as raise of grain
procurement price and increase of farm material subsidy. But BOABC predicts that fertilizer price
is not likely to pick up by a big margin in the first half of this year for the following reasons:
First, fertilizer market is ruled by a growing surplus. The nation? fertilizer stock exceeded 14
million MT (product, same below) and the stock/consumption ratio was close to 25% at the end of
2008. The stock/consumption ratio of urea, DAP and NPK was all above 22%. Besides, fertilizer
export tax went up to more than 100% in Feb., which actually blocked fertilizer exports.
Second, in view of the fertilizer price decline since late 2008, traders and farmers tend to wait for
lower prices. Consequently, despite the current busy season of fertilizer preparation for spring
plowing, fertilizer sales appear dull, providing little drive to fertilizer price growth.
Third, as fertilizer raw material price is lingering at a low level or going south, fertilizer price is
prone to go steady or move lower. Particularly, there is quite some room for phosphate compound
fertilizer price to drop.
Fourth, a huge fertilizer reserve acts to curb fertilizer price growth. Commercial fertilizer reserve in
2008/2009 is about 16 million MT, doubling last year. In addition, experts propose that the
government build a state reserve of 5 million MT in 2009.
Fifth, the government? increased farm material subsidy, totaling RMB71.6 billion, should have
enhanced farmers? purchasing power, but its effect may be hampered by the local governments?
delay of allocation, embezzlement, false claim, etc.
