China's novel fertilizer growing fast

2012-2013 has been a fast growing period of China’s novel fertilizer, when not only conventional fertilizer enterprises developed a lot of novel fertilizers but also large number of pesticide enterprises stepped into the fertilizer business via release of novel fertilizers.

Why do pesticide enterprises choose the niche fertilizer to try their presence in the fertilizer industry? Small amount of investment is the main reason. A niche fertilizer requires roughly Yuan 100 million covering construction up to mass production, which is very cost-effective compared with the billions of investment on prime fertilizer plant. Marketing channel is another important reason, as the sales network of niche fertilizer may overlap one another to be shared for distribution. The third reason is that government is encouraging and promoting novel fertilizer development, for instance it is clearly stated in China’s Agricultural Development Planning that effort shall be focused on development of slow-release fertilizer, special-purpose fertilizer, fluid fertilizer and functional fertilizer.

However in the actual practice, the novelcomers to the fertilizer industry are confronted with lots of issues.

According to agrochemical enterprises that have stepped into fertilizer industry, fertilizer profitability in average is not that high as expected. In general the profitability is only slightly higher than herbicide and mostly stays the same with fungicide while investment in fertilizer is much higher than that in pesticide.

In the meantime sales network may have a problem, the originally planned use of pesticide marketing channel does not really appear to be applicable to sales of fertilizer. For example, a herbicide dealer mostly covers filed crops while novel fertilizers are mostly used for fruit tree and greenhouse vegetable. Since the target of sales is different, sales channel is different, so the sales are not smooth.

It depends on the nature and the property of product if existing sales channel can be utilized. Foliar fertilizer may relatively overlap pesticide, but for organic fertilizer 80% of the sales network needs to be re-established. Without a smooth sales network available, it requires training of existing pesticide sales representatives or establishment if a novel team dedicated to fertilizer sales, to which the input may be no small than establishment of a fertilizer company.

At present Jiangsu Rotam Chemistry and Beijing Xinhefeng Agrochemicals are the only enterprises with relatively scale-up capacity of water soluble fertilizer (WST). Jiangsu Rotam Chemistry expressed that its WST, since being launched to the market in 2007 has reached sales volume of over Yuan 100 million up to date. Due to the short years’ promotion and the limited public acceptance, there are currently only 2 or 3 WSF plants with sales volume over Yuan 100 million.