Hot report: What are the reasons for the use of fertilizer winter cake?
As the critical season for fertilizer winter storage approaches, it's surprising to find that neither producers nor distributors are showing much interest in the practice. Despite the introduction of the "Administrative Measures for the Reserves of Chemical Fertilizers Off-season" and its supplementary provisions, the reality on the ground tells a different story. In Henan, a major agricultural and fertilizer-producing province, reporters found that even farmers, who constantly complain about high fertilizer prices, are not eager to store fertilizers for the winter. Why would they buy now when they might get a better deal later?
Manufacturers are reluctant to tie up capital in winter storage. The government has been actively managing fertilizer prices by removing export tax rebates and imposing tariffs on urea exports. These measures have significantly reduced domestic supply, leading to lower exports and impacting manufacturers' profits. Companies believe that price controls will continue next year, so they prefer to keep their funds rather than risk holding inventory at controlled prices.
One Henan-based fertilizer producer told the reporter that storing large amounts of fertilizer would mean tying up capital and facing high interest costs. Selling at the capped price could lead to losses, which is not sustainable for low-margin businesses. Some companies are choosing to suspend production instead of investing in winter reserves.
Meanwhile, some producers with export capabilities are focusing on overseas markets, particularly Southeast Asia, to offset domestic challenges. With limited profit margins at home, they see exporting as a more viable option than storing fertilizers domestically.
For dealers, the situation is also challenging. In previous years, off-season storage was profitable due to lower prices and ample supply. But since 2005, with stricter price controls, many dealers lost money last year. This year, they are more cautious, with most opting for spot purchases rather than stockpiling. Only a few large distributors are engaging in winter storage, offering storage fees and priority access to goods in return.
Farmers, too, are hesitant. With urea prices dropping in some areas—such as Zhumadian, where prices fell below the national limit—many are waiting for further declines. Last year’s experience, where prices dropped sharply after purchase, has made them wary. Some farmers believe the government will ensure adequate supplies during planting season and are not worried about shortages.
With the government planning direct subsidies for farmers, the incentive to store fertilizer has only decreased further. Despite numerous policies encouraging winter storage, the lack of participation raises concerns about market stability and future fertilizer availability.
In conclusion, while the policy intentions are clear, the current market dynamics show that without stronger incentives or adjustments, the winter storage initiative may not achieve its goals. It’s time for policymakers to rethink their approach and find a way to align the interests of all stakeholders in the fertilizer supply chain.
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