Smart fertilizer blending heats up sharply: opportunity or gimmick?
Editor's note: In 2013, the Ministry of Agriculture, the Ministry of Industry and Information Technology and the General Administration of Quality Supervision, Inspection and Quarantine jointly issued the "Opinions on Accelerating the Promotion and Application of Formula Fertilizers," proposing the use of social resources to explore the establishment of small rural intelligent fertilizer blending and supply service outlets, carry out on-site intelligent mixing services, and meet farmers' personalized, small-batch fertilizer needs. Since 2015, along with the boom of "Internet+" agricultural inputs, intelligent fertilizer blending has heated up sharply. Among the players are large fertilizer companies such as Sinochem and Yunnan Yuntianhua undergoing business transformation, as well as Aohe Soil Testing, Cloud Farm and others relying on financial and technological advantages, and even new platforms such as Rural Taobao that have shifted over from the internet sector. Some believe this will trigger a deep reshuffle of the agricultural input supply chain, while others dismiss it as a gimmick for dealers to sell fertilizer in disguised form.
1. Optimists predict: expected to capture nearly half of the compound fertilizer market
On November 4, the 2016 China "Internet+" Agricultural Input Integration Development Conference was held in Nanjing, Jiangsu Province. Intelligent fertilizer blending replaced agricultural input e-commerce as the hot topic of the conference. Attendees called it "seizing the strategic high ground of agricultural input marketing transformation," "a marketing model transformation for the agricultural input industry in response to the land transfer trend," "a subversion of agricultural input distribution channels driven by Internet+IoT," "the path for fertilizer companies' transformation and upgrading," and "expected to change the entire agricultural industry chain," showing a strong momentum to become an internet "opportunity."
"Intelligent fertilizer blending uses the internet approach to integrate the five links of soil testing and formula fertilization: testing, blending, production, supply and application," said Liu Fenglei, marketing operations director of Beijing Aohe Soil Testing. This means establishing a modern agricultural center at the field level that can cover a certain planting area and integrates soil testing and fertilizer blending, R&D and production, warehousing and distribution, and agrochemical services, equipped with soil testing laboratories, fertilizer blending equipment, inventory of straight fertilizers, agricultural technicians and more, producing personalized and functional fertilizer products according to farmers' different requirements for products and services.
In traditional compound fertilizer production, due to the needs of large-scale production and cost control, formulas cannot be randomly adjusted for crops and plots. This has been the main obstacle for many years preventing soil testing data from the agricultural authorities from being efficiently converted into products. "The emergence of intelligent fertilizer blending not only breaks this bottleneck, but also forms a brand-new agricultural input supply chain of 'mining - straight fertilizer plant - intelligent fertilizer blending center - farmer,' greatly reducing distribution costs," said Chen Liang, deputy general manager of the Business Development Department of Sinochem Fertilizer. He added that an intelligent fertilizer blending station can also be seen as a "flexible small factory," where adding or changing formulas does not bring cost changes, which is a great advantage.
"Various brands of compound fertilizer on the market are hard to tell apart as genuine or fake, but a blending station mixes raw materials on site, so everyone can see clearly. A bag of fertilizer with the same ratio is at least 5~10 yuan cheaper than conventional products. Moreover, it uses less fertilizer, does not damage the soil and still gives high yields, so it is very popular with large growers," said Xu Gongjun, operator of an intelligent fertilizer blending station in Yongji County, Jilin City.
"Intelligent fertilizer blending has two major advantages: 'Internet+' and the supply chain. The former realizes the analytical application of traditional data in soil testing and sales, while the latter lowers terminal prices and improves fertilizer efficiency, giving it strong market competitiveness," believed Liu Huaihua, founding partner of Cloud Farm Group. He holds that this will not only impact the compound fertilizer industry chain, but may further affect or even replace straight fertilizer retailers.
Therefore, some predict that in 5 years, intelligent fertilizer blending is expected to capture nearly half of the compound fertilizer market share. By 2030, the planting area of medium-scale growers in China will account for more than 30%, and intelligent fertilizer blending may occupy 30% of the fertilizer retail end.
2. Skeptics believe: costs are too high and the profit model is questionable
In actual operation of intelligent fertilizer blending stations, a small number of enterprises directly use soil composition data provided by agricultural authorities, but more enterprises prefer to test soil themselves and use it as a lever to conduct business and enhance customer stickiness. Many enterprises now take "one soil test per household, one formula per household" as their development direction.
"Intelligent fertilizer blending stations provide personalized services to farmers based on farmland soil type (grade), crop variety characteristics and target yield, and enterprises or dealers are not encouraged to test soil. The national soil testing and formula fertilization project has already covered all agricultural counties, and the data from periodic annual soil sampling and testing is very rich. The county-level farmland quality evaluation system and the soil testing and formula fertilization expert consultation system can basically meet the query needs for soil testing and formula fertilization data," said Li Rong, director of the Soil and Fertilizer Division of the National Agricultural Technology Extension Service Center, noting that the Ministry of Agriculture is still carrying out "one round every three years" soil sampling and testing work based on the patterns of soil nutrient changes, and timely updating soil testing data and fertilizer formulas.
Guo Yuesheng, head of the Fertilizer Section of the Shandong Provincial Soil and Fertilizer General Station, believes that in theory, soil nutrients may differ from household to household, but such differences are numerical differences within one content grade. In fact, farmers can completely use one formula. Through a large number of soil tests, the agricultural system has formulated and released major formulas that can already meet production needs, and testing again household by household is somewhat wasteful of manpower and resources.
"What is more serious is that the rapid soil testing technology at blending stations is somewhat questionable. Most are qualitative or semi-quantitative tests and cannot be used as a basis for precise fertilizer blending. Nor can the scientific nature of the sampling methods and procedures of blending station personnel be fully guaranteed," Li Rong said. On the other hand, with high soil testing costs plus investment in plants and equipment, how can the meager profits obtained by reducing distribution links sustainably support the promotion and operation of intelligent fertilizer blending?
"Generally, an intelligent fertilizer blending machine has 5 hoppers. In addition to adding nitrogen, phosphorus and potassium fertilizers, what should the other 2 hoppers add? How much should be added? Will a chemical reaction occur? There are no unified standards for these, and they belong to a regulatory blank area," Guo Yuesheng worried that in pursuit of profit, some enterprises might recklessly add some worrying materials using intelligent fertilizer blending equipment, or even produce fake and inferior fertilizers that harm farmers.
The high price of intelligent fertilizer blending machines, the high cost of soil testing, and the difficulty of guaranteeing the quality of formula fertilizers have led many people to question whether intelligent fertilizer blending is just borrowing "Internet+," making a mobile app, and playing a gimmick to sell fertilizer in disguised form.
3. Let users speak: farmers can benefit and soil can gain vitality
Sang Shengxiang, a large grain grower in Tieshan Village, Shiba Town, Mingguang City, Anhui Province, has planted 500 mu of land and needs 24 tons of fertilizer over a year. "Intelligent fertilizer blending is a new option. What I care about most is how much benefit I can get," he said.
Zhou Fuhong, director of the Mingguang City Agricultural Technology Extension Center, provided data: the intelligent fertilizer blending system can directly reduce fertilizer application amount and cost input by 10%~30%, increase crop yield by more than 5%, and raise farmers' income by more than 10%, while also preventing soil acidification and increasing soil vitality.
"Dezhou is a major grain-producing area, and the per capita arable land area is very small, so the comparative benefit of agricultural production is relatively low. Therefore, we promote simple and standardized fertilizer blending machines and use soil testing data from agricultural authorities, achieving good returns," believed Xu Zhengrong, director of the Fertilizer Blending Station Management Center of the Dezhou New Cooperative Supply and Marketing Agricultural Service Company in Shandong Province. He holds that intelligent fertilizer blending should be more down-to-earth according to actual conditions.
Zou Lei, dean of Diandou Business School, however, believes that using simple fertilizer blending machines can achieve reduced fertilizer use and high yields, while intelligent fertilizer blending machines indeed have problems of relatively high prices and low market capacity. But as a new thing, intelligent fertilizer blending will have some deviation between optimistic forecasts and actual conditions. One should not focus only on immediate gains and losses, but should look to future development. In fact, intelligent fertilizer blending is not just as simple as blending fertilizer. Through the internet and IoT, it can also monitor crop temperature, humidity, pests and diseases and other growth environment indicators, thereby controlling watering, fertilization and pesticide application, and providing services in agricultural inputs, agricultural sidelines, finance, logistics and many other aspects, forming a more ecological and smarter business system.