Fertilizer prices rise instead of falling in the off-season: what is the driving force behind it?

For Zhejiang and Fujian, where cash crops are the main focus, this is currently the off-season for crop fertilizer use, but fertilizer prices have not fallen as in previous years; instead, they have risen to varying degrees.

Multiple factors drive fertilizer prices up

Previously, the industry generally believed there was no room for urea prices to rise, so most did not stockpile fertilizer. Over the past month, urea prices have risen significantly, by 300-400 yuan/tonne, which was beyond many people's expectations.

The main reasons are: first, on the producer side, not only have the prices of raw materials such as coal risen, but transport costs have also increased by 30%; second, in the sales chain, from manufacturers to distributors and then to grassroots retailers, transport costs have risen at every stage.

Urea prices are expected to remain at current levels later on, or rise on this basis. In this situation, urea sales have begun to improve, and many distributors and retailers have started stockpiling urea. Driven by the rise in urea prices, other fertilizer producers have become more inclined to hold prices firm in anticipation of increases, and some manufacturers have already made tentative price increases. Compound fertilizer prices are expected to rise later on, but the increase will not be too large.

Overloading restrictions tighten logistics

Since the strictest ever overloading restrictions took effect on September 21, there have been serious problems of insufficient transport capacity and rising transport costs. It is estimated that the increase in logistics costs alone has pushed up fertilizer prices by 70-80 yuan per tonne. For example, fertilizer in Zhangzhou, Fujian, is mainly transported by water; affected by weight restrictions, containers have been stranded at the Port of Shanghai, and transport from Wuhan to the local area also takes a month, resulting in insufficient local fertilizer supply and another price increase, greatly affecting the local market's supply-demand relationship.

Distributors strongly inclined to wait and see on winter storage

At present, overall fertilizer production capacity is in surplus. Regarding winter storage, many distributors say winter storage is inevitable, but the degree must be controlled and excessive blind stockpiling must be avoided. In addition, stimulated by the recent sharp rise in urea prices, grassroots retailers' willingness to take goods has begun to increase, but they still do not know when the lowest point will be. Especially in August last year, affected by the resumption of VAT collection, many distributors and retailers stockpiled heavily, but later fertilizer prices not only failed to rise as expected but fell severely, causing serious losses for distributors. At present, distributors and retailers are relatively worried that last year's situation will happen again, so most retailers are still hesitating. If prices remain stable or continue to rise, distributors, in order to avoid later shortages, will make up their minds to stockpile fertilizer for winter.