On the Rationality of the High-priced Urea Market in China

After another week of time, although the domestic urea price has stopped rising, from the balance of production and sales of companies, the prospect of price reduction seems to be somewhat embarrassing. This can not but make the industry very surprised, there are many questions along the way, such as the end of the northern market but did not see the company sales pressure; dealers fear the risk is still chasing high; compound fertilizer plant is still purchasing high-priced urea as raw material. All kinds of signs are very unusual. Last week, the author also made some analysis on the psychology of dealers chasing high, but the compound fertilizer enterprises have not yet said “no” to high-priced urea. Is it because manufacturers have enough confidence to sell high-priced compound fertilizers in the afternoon market? It was not until a friend reminded me that corn prices were rising. For late-stage agricultural fertilizers, the demand for corn topdressing on urea and Gaodan compound fertilizer is indeed objective. But is this the source of business confidence? I think whether the existence of high-priced urea is particularly reasonable and inexorable, and it can be analyzed from the perspective of direct agricultural and industrial fertilizers.

First of all, from the perspective of grain cost analysis: As shown in Table 1, during the April-June period of 2011, the price of domestic corn fired trucks was around 2,120 yuan/ton, and the urea price was only 1,950 yuan/ton; the corn in April of this year The price has been raised to 2380 yuan / ton, an increase of 12.3% year-on-year. However, urea increased to RMB 2250/tonne at a rate of 15.4% year-on-year. From this it can be clearly seen that the increase in urea is much higher than the increase in corn, which itself carries the meaning of hanging upside down. And it needs to be emphasized that the cost of growing grain is not only to buy chemical fertilizers. We must also consider the human cost, the cost of gasoline and diesel oil, and so on. It goes without saying that the price of oil rises, and labor prices also increase year by year. These two aspects are also part of the cost expenditure in the grain growing process. Because of this, when we consider the price of food to pull up the price of fertilizer, we must also determine the proportion of purchases and expenditure of fertilizers in the cost of COFCO. In summary, the author believes that the market has only left less than 8% price increase for chemical fertilizers. This includes not only urea but also compound fertilizers. Objectively speaking, the ton price of 2,250 yuan/ton of urea is nearly 1,500 yuan higher than that of 8%.

Secondly, from the point of view of the compound fertilizer plant procurement: based on the ex-factory price of current urea 2,250 yuan/ton, the cost of single nitrogen content is about 50 yuan; the ex-factory price of 55% monoammonium phosphate is 2600-2680 yuan/ton. The cost of phosphorus content can also reach 50 yuan; potassium chloride can be converted by 60% content of 3,000 yuan / ton. We can then apply these single-content prices to the calculation of compound fertilizer costs.

At present, the products of domestic compound fertilizer companies are mainly high nitrogen fertilizers of 40% (30-5-5), 40% (28-6-6) and 36% (30-6-0). 40% of the offer price is 2375-2400 yuan / ton, 36% content is 2200 yuan / ton. If calculated from the ratio of grain prices and fertilizer prices, the reasonable price of high-nitrogen fertilizer at 40% (28-6-6) should be around 2,260 yuan/ton, which is much lower than the current corporate price. According to the previously calculated cost of a single raw material, it can be concluded that the cost of 40% is about RMB 2200-2300/ton, while the cost of 36% is about RMB 2000-2100/ton. After comparison, it can be clearly found that the current production cost of compound fertilizer companies can only be kept at a reasonable price calculated from the formula. Virtually has placed the manufacturer at risk. Of course, this is inextricably linked with the purchase of high-priced raw materials.

In summary, high-priced urea not only brought pressure on food prices, but also indirectly pushed up the price of compound fertilizers. If the ton price for urea production drops to 2100 yuan, then the cost of 40% (28-6-6) high nitrogen fertilizer will also drop to 2,120 yuan/ton. At that time, even if the compound fertilizer company sells at a reasonable price, it will still have a profit of more than 100 yuan per ton of high-nitrogen fertilizer. Objectively speaking, urea has no absolute negative factors at this time to lower prices, and does not have the conditions to continue to increase prices. Whether the existence of high-priced urea is reasonable or not requires further evaluation.