It is understood that the National Development and Reform Commission has recently solicited opinions on the reform of chemical fertilizer price management. The main content is to liberalize the price of chemical fertilizers by the market and the government will no longer directly control the prices and directly subsidize relevant subsidies to farmers. So, can this idea be quickly put on the track of formal implementation?
Good governance is not as good as the market China's current fertilizer prices are implemented under the guidance of the government, mainly by the market to form the price of the mechanism, the integration of the main three aspects. The first is the government guidance price for chemical fertilizer ex-factory prices, and the government determines the guidance price based on the chemical fertilizer production costs and changes in market supply and demand. The medium quasi ex-factory prices and fluctuations of urea and ammonium nitrate produced by large-scale nitrogenous fertilizer companies are set by the National Development and Reform Commission; the mid-quarantine ex-factory prices and fluctuations of chemical fertilizers and phosphate fertilizers, potash fertilizers, and compound (mixed) fertilizers produced by small and medium-sized nitrogen fertilizer companies are varied. The price department is established. Second, the central government's allocation of fertilizer prices is stipulated by the National Development and Reform Commission, and local transfer prices for fertilizers are determined by the price departments of various regions. The third is to liberalize the retail price of chemical fertilizers, but if necessary, provincial price departments can implement a maximum retail price limit for some varieties of chemical fertilizers. When the price of fertilizer market fluctuates sharply and there is a significant increase, fertilizer prices are stabilized by setting the maximum retail price limit, implementing a margin or controlling profit margins.
This system has evolved from the past reforms of the planning system. The fundamental purpose is to maintain the stability of fertilizer prices and ensure the stable development of agricultural production. This system has played an important role in stabilizing fertilizer prices, especially in the sowing season, to curb the excessive increase in fertilizer prices. However, judging from the current actual situation, this kind of management system that directly controls prices as the main means faces greater and greater challenges. The most important is that it is increasingly difficult to control prices. Usually, farmers are not satisfied with the company. People concerned with the National Development and Reform Commission also stated that since the agricultural product market including fertilizers is liberalized, the price is only a comprehensive reflection of various factors in the market, so it is difficult to control prices simply by controlling prices, and new management models must be sought. The general view of the industry is that it is not easy to manage and manage, and it is better to let the market regulate, and the funds subsidized by the government in other sectors are directly supplied to the farmers.
Management problems are being explored When talking about the operational issues of price liberalization, relevant persons from the National Development and Reform Commission stated that how to manage after liberalization is a major problem. At present, it is only asking for opinions and discussions and it will certainly not be implemented this year. When it comes to implementation, it depends on the circumstances of the final solicitation of opinions. It also needs to look at the market situation, and it must also have enough means to regulate and control the market.
Releasing chemical fertilizer prices does not equal to letting prices. Maintaining stable prices of agricultural materials, including fertilizers, is still the government’s goal. However, the direct supply of funds to the peasants in the past should be a tool that can be explored. Since the beginning of last year, the government has implemented direct subsidies for grain and agriculture. Currently, it looks good and the operation is relatively easy. Therefore, this method can be used in fertilizer price reform.
Analysts in the industry believe that it is indeed very difficult to maintain stability after the price of chemical fertilizers is liberalized. The market must be regulated in a comprehensive manner and must be coordinated by multiple departments. Among them, the off-season reserve system should be fully utilized. In the off-season, the government will increase the amount of fertilizer purchased and throw it out at an appropriate price during the peak season, which will help stabilize prices. You can also start with reducing demand, such as guiding farmers to scientific fertilization and reduce waste. According to a survey in Henan province, the waste caused by improper fertilization in the province is very serious. Only the amount of nitrogen fertilizer lost in each year reaches 2 million tons, equivalent to the annual output of 10 medium-sized nitrogen fertilizer plants.
However, there are also some professionals who believe that the time is not ripe for the current release of fertilizer prices. Because there are not many control measures that the government can choose after the price is released, combined with the seasonality of farmers' sowing and the regional nature of supply and demand of chemical fertilizers, especially the rising crude oil prices, it is very likely that there will be a substantial increase in prices, which will hurt the interests of farmers. This in turn affects agricultural production. Moreover, how much money the government can use to subsidize farmers is still unknown. Therefore, the government should let go of the price if the government has sufficient control measures.
Different levels of corporate benefits Overall, opening up prices is certainly beneficial for fertilizer companies. At present, the price of urea in the international market is about 2,200 yuan per ton (cpa), and the domestic price limit is 1,650 yuan, so after the release, the domestic price is about 500 yuan per ton. However, on the other hand, the preferential policies for related companies will be cancelled after the prices are released, so the cost will also increase. It is estimated that there will still be room for profit after the two offset.
However, the impact on specific companies depends on the cost control capabilities of individual companies. Moreover, there are differences in the situation of gas heads, coal heads, and oil heads. The oil companies have largely withdrawn from the market due to the sharp rise in crude oil prices in the past two years; the coal companies are also affected by the increase in coal prices; gas companies, due to the smaller increase in natural gas prices, will benefit more after prices are released. some. In addition, the relationship between supply and demand of chemical fertilizers in different varieties in China is not the same, and there is a large gap between supply and demand for urea. Some other supplies have a balance between supply and demand, and some supply exceed supply. Therefore, after the price is released, urea companies can easily transfer the increased costs, while other varieties may not be easy.
Good governance is not as good as the market China's current fertilizer prices are implemented under the guidance of the government, mainly by the market to form the price of the mechanism, the integration of the main three aspects. The first is the government guidance price for chemical fertilizer ex-factory prices, and the government determines the guidance price based on the chemical fertilizer production costs and changes in market supply and demand. The medium quasi ex-factory prices and fluctuations of urea and ammonium nitrate produced by large-scale nitrogenous fertilizer companies are set by the National Development and Reform Commission; the mid-quarantine ex-factory prices and fluctuations of chemical fertilizers and phosphate fertilizers, potash fertilizers, and compound (mixed) fertilizers produced by small and medium-sized nitrogen fertilizer companies are varied. The price department is established. Second, the central government's allocation of fertilizer prices is stipulated by the National Development and Reform Commission, and local transfer prices for fertilizers are determined by the price departments of various regions. The third is to liberalize the retail price of chemical fertilizers, but if necessary, provincial price departments can implement a maximum retail price limit for some varieties of chemical fertilizers. When the price of fertilizer market fluctuates sharply and there is a significant increase, fertilizer prices are stabilized by setting the maximum retail price limit, implementing a margin or controlling profit margins.
This system has evolved from the past reforms of the planning system. The fundamental purpose is to maintain the stability of fertilizer prices and ensure the stable development of agricultural production. This system has played an important role in stabilizing fertilizer prices, especially in the sowing season, to curb the excessive increase in fertilizer prices. However, judging from the current actual situation, this kind of management system that directly controls prices as the main means faces greater and greater challenges. The most important is that it is increasingly difficult to control prices. Usually, farmers are not satisfied with the company. People concerned with the National Development and Reform Commission also stated that since the agricultural product market including fertilizers is liberalized, the price is only a comprehensive reflection of various factors in the market, so it is difficult to control prices simply by controlling prices, and new management models must be sought. The general view of the industry is that it is not easy to manage and manage, and it is better to let the market regulate, and the funds subsidized by the government in other sectors are directly supplied to the farmers.
Management problems are being explored When talking about the operational issues of price liberalization, relevant persons from the National Development and Reform Commission stated that how to manage after liberalization is a major problem. At present, it is only asking for opinions and discussions and it will certainly not be implemented this year. When it comes to implementation, it depends on the circumstances of the final solicitation of opinions. It also needs to look at the market situation, and it must also have enough means to regulate and control the market.
Releasing chemical fertilizer prices does not equal to letting prices. Maintaining stable prices of agricultural materials, including fertilizers, is still the government’s goal. However, the direct supply of funds to the peasants in the past should be a tool that can be explored. Since the beginning of last year, the government has implemented direct subsidies for grain and agriculture. Currently, it looks good and the operation is relatively easy. Therefore, this method can be used in fertilizer price reform.
Analysts in the industry believe that it is indeed very difficult to maintain stability after the price of chemical fertilizers is liberalized. The market must be regulated in a comprehensive manner and must be coordinated by multiple departments. Among them, the off-season reserve system should be fully utilized. In the off-season, the government will increase the amount of fertilizer purchased and throw it out at an appropriate price during the peak season, which will help stabilize prices. You can also start with reducing demand, such as guiding farmers to scientific fertilization and reduce waste. According to a survey in Henan province, the waste caused by improper fertilization in the province is very serious. Only the amount of nitrogen fertilizer lost in each year reaches 2 million tons, equivalent to the annual output of 10 medium-sized nitrogen fertilizer plants.
However, there are also some professionals who believe that the time is not ripe for the current release of fertilizer prices. Because there are not many control measures that the government can choose after the price is released, combined with the seasonality of farmers' sowing and the regional nature of supply and demand of chemical fertilizers, especially the rising crude oil prices, it is very likely that there will be a substantial increase in prices, which will hurt the interests of farmers. This in turn affects agricultural production. Moreover, how much money the government can use to subsidize farmers is still unknown. Therefore, the government should let go of the price if the government has sufficient control measures.
Different levels of corporate benefits Overall, opening up prices is certainly beneficial for fertilizer companies. At present, the price of urea in the international market is about 2,200 yuan per ton (cpa), and the domestic price limit is 1,650 yuan, so after the release, the domestic price is about 500 yuan per ton. However, on the other hand, the preferential policies for related companies will be cancelled after the prices are released, so the cost will also increase. It is estimated that there will still be room for profit after the two offset.
However, the impact on specific companies depends on the cost control capabilities of individual companies. Moreover, there are differences in the situation of gas heads, coal heads, and oil heads. The oil companies have largely withdrawn from the market due to the sharp rise in crude oil prices in the past two years; the coal companies are also affected by the increase in coal prices; gas companies, due to the smaller increase in natural gas prices, will benefit more after prices are released. some. In addition, the relationship between supply and demand of chemical fertilizers in different varieties in China is not the same, and there is a large gap between supply and demand for urea. Some other supplies have a balance between supply and demand, and some supply exceed supply. Therefore, after the price is released, urea companies can easily transfer the increased costs, while other varieties may not be easy.
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