April 24, 2019

Fertilizer prices fluctuate excessively and become the heart of the industry

Drying equipment

Excessive fluctuations in domestic fertilizer prices have been criticized by the industry for a long time. This has also caused widespread entanglements among farmers. The reason is that apart from the serious imbalance in supply and demand, it is probably due to too many interventions. These include export tariff rates, railway halving, and ceiling prices. Due to the long period of implementation of some intervention measures, it has become less adaptable to the macroeconomic and market conditions that have undergone profound changes today. Needless to say, some of the above interventions originally intended to guarantee the supply or maintenance of market stability are already difficult to achieve or even have the opposite effect.

With the deepening of China’s market economy and the increasingly close integration of the national economy with the global economy, in addition to being an important agricultural product for safeguarding food security, chemical fertilizers are still the bulk of products that participate in the international economic cycle. The strengthening of market regulation and continuous weakening of policy interventions will enable the industry to grow in a healthy and orderly manner. The author believes that the current implementation of the export tax rate range, off-season peak season definition, and railroad price reduction and transportation are all debatable. In order to maintain the stability of the fertilizer market, it is necessary to appropriately improve or cancel it.

In many unreasonable intervention policies, the issue of export tax rate mechanism bears the brunt. China's fertilizer exports are now subject to two sets of tax rates. Taking urea as an example, July-October is the off-season each year, and exports are subject to a 7% tariff rate. In the rest of the month, the export tariff is 110%. This range is obviously too disparate. In fact, it is equal to only a low limit. Because 110% of the export tax rate actually acted as a gate to close the urea export, so that the so-called peak season of domestic product is difficult, fertilizer prices naturally fall down, only intensifying competition in the domestic market. In fact, compared to domestic excess capacity of over 15 million tons, if the export tax rate is moderate during the peak season, a reasonable position between the upper and lower limits can not only inhibit large amounts of exports, but also make some advantageous enterprises profitable. Some products are conducive to ease the pressure on the domestic market and stabilize market prices.

The off-season season and peak season are not designated by policies, and artificially defined natural violations of the market rules, but the market will be chaotic, forming an unusual situation that is now commonplace in the off-season is not light, peak season is not prosperous. This kind of artificial division has a greater loss for enterprises and countries. In recent years, the facts show that whenever the so-called off-season is approaching in China, international fertilizer prices have dropped sharply. Export companies have enjoyed low tariffs, but they have not been able to sell for a good price. National taxes and companies have suffered losses. Inflow to outsiders. Obviously, the artificially defined season has not only provided an opportunity for the trapping of overseas markets, but also indirectly led domestic companies to compete for lower export tariffs. The result is that the price of fertilizer is quickly suppressed under the combined effect of internal and external forces. In fact, it should not be artificially defined but should be determined by the market.

In addition, railway tariffs should also be changed as soon as possible. In order to stabilize the prices of fertilizers and other agricultural materials for railway transportation, there is nothing wrong with this. However, in reality, this kind of preferential treatment has been difficult for related companies to enjoy. The industry generally reflects that, due to the difficulty of railroad transportation of fertilizers, the wagon plan is difficult. Waiting to wait for it often delays the company's delivery cycle. Second, some railway departments are also adding some fees in recent years. . Therefore, it is better to cancel such a subsidy than to pay a huge amount of subsidies to a place where the country should not go, and directly subsidize the fertilizer companies in the form of tax reduction.

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