Fertilizer Industry Under Growing Pressure After Agricultural Subsidy Adjustment

Recently, the Ministry of Finance and the Ministry of Agriculture jointly issued the "Guiding Opinions on Adjusting and Improving the Three Agricultural Subsidy Policies", adjusting and improving from 2015 the three subsidy policies: subsidies for improved crop varieties, direct subsidies to grain farmers, and comprehensive subsidies for agricultural inputs. What does this have to do with the fertilizer industry?

Subsidy Adjustment—"Whoever grows more grain gets support first"

The "Opinions" point out that all provinces, autonomous regions, municipalities directly under the Central Government, and cities under separate state planning should adjust 20% of the funds from the comprehensive agricultural input subsidies issued in advance by the central finance department, plus the pilot funds for subsidies to large grain-growing households and the incremental funds of the agricultural "three subsidies", and coordinate them to support moderately scaled grain operations. The support targets are moderate-scale producers and operators of major grain crops, with emphasis tilted toward new types of business entities such as large grain-growing households, family farms, farmer cooperatives, and agricultural social service organizations, reflecting the principle that "whoever grows more grain gets support first".

⟦NL> At the same time, the "Opinions" select 5 provinces, including Anhui, Shandong, Hunan, Sichuan and Zhejiang, from which the provinces will select some counties and cities to carry out pilot reforms of the agricultural "three subsidies". The main content of the pilot is to merge the agricultural "three subsidies" into "agricultural support and protection subsidies", with policy goals adjusted to support the protection of cultivated land fertility and moderately scaled grain operations. One increase and one decrease—pressure on the fertilizer industry is increasing

This adjustment once again emphasizes the importance of food security in China's development strategy, and highlights the guidelines of supporting the protection of cultivated land fertility and encouraging moderate-scale grain operations. Relevant persons said: in a sense, the direction of this adjustment is to increase subsidy intensity, while the corresponding fertilizer industry is reducing support intensity. This increase and decrease is precisely the national policy level smoothing out all links in the agricultural planting industry chain, changing from subsidies at the intermediate link to subsidies at the source.

Policies such as electricity prices, gas prices and transport prices for fertilizer are being gradually cancelled. "Now the price mechanism needs to be improved by the market and determined by market supply and demand; moreover, fertilizer production capacity is already excessive." Relevant persons said. Some industry insiders also called for whether tax preferences could be provided given the greater pressure that marketization places on the fertilizer industry, such as restoring the export tax rebate, to promote industry development.