Fertilizer production and sales are caught in a "dilemma"

After the Spring Festival, the spring plowing season is about to begin across the country, from south to north. This year, 21 provinces in the southern region have been hit by severe ice and snow disasters, disrupting agricultural activities and creating an urgent need for self-reliance and production support. To stabilize the prices of agricultural products and ensure a steady supply, the government has made the development of agriculture and the protection of food security top priorities this year. One of the most critical tasks is maintaining stable fertilizer prices and ensuring adequate supply to keep farmers motivated to grow grain. However, the situation is challenging. Fertilizer companies are caught between rising raw material costs, transportation disruptions caused by the heavy snowfall, and strict government price controls. If they reduce production, it could lead to shortages during the busy spring planting season. But if they continue operating at full capacity, high input costs combined with low selling prices may result in financial losses. In response, the National Development and Reform Commission issued a notice before the Spring Festival, reiterating that local authorities must strictly implement preferential pricing policies for fertilizers and ensure the smooth operation of electricity and gas supply for production. The government also emphasized enhanced price supervision and strict penalties for violations such as exceeding price caps or failing to report price adjustments. Additionally, export tariffs on key fertilizers like diammonium phosphate and monoammonium phosphate were increased to 35%, aiming to restrict exports and prioritize domestic demand. Industry leaders, including representatives from the China Nitrogen Fertilizer Industry Association, urged major fertilizer producers to comply with national pricing policies and ensure stable supply. They called for responsible production, controlled exports, and efforts to maintain affordable prices. Many companies have pledged to absorb rising costs and avoid passing them on to farmers. Despite these measures, the domestic fertilizer market remains under pressure. Rising coal, natural gas, and imported sulfur and potassium prices have made it difficult for manufacturers to offset costs. In addition, the 2008 snowstorm disrupted transportation and production in several regions, further complicating the supply chain. Provinces like Guizhou, Yunnan, and Sichuan faced power outages and production halts, while northern nitrogen fertilizer plants struggled with energy and coal shortages. As a result, many fertilizer distributors are hesitant to purchase large quantities, fearing that prices may drop if the government continues its regulatory efforts. Farmers, who are ultimately bearing the cost, are also cautious, buying less or opting for cheaper alternatives. This behavior could encourage more scientific use of fertilizers, offering an opportunity for agricultural technicians to promote soil testing and precision fertilization. Experts suggest that high fertilizer prices during the spring planting season are likely to persist, especially for phosphorus-based and compound fertilizers, where raw material costs have surged significantly. While the government aims to control prices, the current economic environment makes this a difficult challenge. Overall, the situation highlights the complex interplay between supply, demand, and policy, with farmers and manufacturers alike facing significant pressures. Yet, it also presents an opportunity for more sustainable and efficient agricultural practices in the long run.

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